By Daniel Hunter
The CBI is today (Monday) urging the Chancellor to use the Budget to boost the housing market to build confidence among businesses and consumers.
Given its social and economic benefits, the CBI is arguing that housing should form the main plank of this month's Budget. Among its proposals are measures benefitting first and second-time buyers, support for householders refurbishing homes and for smaller house builders struggling to access finance.
The CBI says the proposals should form part of a fiscally-neutral Budget which would shift £2.2 billion from current spending to high-growth areas. This would include £1.25 billion on capital investment - including housing - and £950 million on high-growth business tax measures, such as a 2% cap on the planned increase in business rates and the removal of Stamp Duty on equity finance for mid-sized companies.
“The Government must stick to its fiscal plan but now is the time to kick-start confidence," John Cridland, CBI Director-General, said.
“Our measures will provide another boost for the housing market and will benefit first-time buyers, those trapped in negative equity and those looking to refurbish their homes.
“To boost the construction sector, we are calling for 50,000 new affordable homes to be built, incentives for refurbishing empty homes and the housing guarantee scheme to be extended to all types of housing.
“We must supercharge the NewBuy scheme to allow second-time buyers struggling to get on the next rung of the property ladder.
“With its relatively short lead-in times, house building offers the most bang-for-buck in growth terms - unleashing pent-up demand, while creating jobs and growth.”
The CBI is also calling on the Government to bring forward its road spending and repair programme, as well as strengthening support for exporters and for smaller firms struggling to access finance.
Looking at the CBI's housing proposals in more detail, it is calling on the Chancellor to:
- Fund a further 50,000 affordable homes directly by injecting £1.25 billion of capital investment through the Affordable Homes Programme, generating £18 billion within the wider economy and creating 75,000 jobs;
- Encourage refurbishment of existing houses though tax cuts or subsidies on renovation and repair work. This has the potential to create 80,000 jobs at a cost of no more than £500m, and would bring empty homes back into use;
- Accelerate public sector land release for new housing on “build now, pay later” terms by moving all responsibility to the Homes and Communities Agency;
- Review measures to increase institutional investment to encourage pension funds to invest in housing;
- Explore expanding the NewBuy mortgage guarantee scheme to those with limited or negative equity looking to step-up to their second home, making more properties available for first-time buyers;
- Introduce a housing deposit ISA to encourage saving. Combined with proactive marketing of the FirstBuy and NewBuy Government schemes, this would help overcome the perception among first-time buyers that they are unable to get a foot on the housing ladder;
- Extend the housing guarantee scheme to cover all housing tenures to support smaller house builders access finance.
High-growth business tax measures
On the business tax regime, the CBI is calling for the Government to make the UK more internationally competitive by:
- Introducing a capital allowance for new infrastructure spending to incentivise businesses to upgrade the quality of privately-owned infrastructure;
- Capping business rates at 2% instead of pressing ahead with the planned rise to 2.6% in 2013 at a cost of £140m. This would help safeguard jobs on the high street;
- Taking further action to ensure that equity finance is attractive to high-growth firms by removing Stamp Duty on shares listed on the Alternative Investment Market - a key source of non-bank equity finance for mid-sized businesses;
- Freezing Air Passenger Duty (APD) in nominal terms at a cost of £50m.
Delivering on wider infrastructure promises.
The CBI is also calling on the Government to:
- Press ahead with its roads repair, maintenance and improvement programme;
- Fast-track spending on crucial roads, such as the A63 in Yorkshire and Humber, and the A38 junction in Derby;
- Ensure the major infrastructure planning system delivers on time.
Measures to help high-growth firms access finance
The Government should also take steps to ensure that those firms with the capacity to invest and export can do so. There also needs to be a greater commitment to delivering an industrial strategy that champions key sectors, while protecting investment in research and development. The Government must:
- Deliver the Business Bank to act as a one-stop shop for exporters and a source of patient capital for growing firms, while supporting the development of alternative sources of finance;
- Get direct lending to exporters up and running;
- Address the effect of mispriced pension deficits on finance.
“With news of the loss of our AAA credit rating, it is crucial this budget injects confidence, while delivering investment and growth," Katja Hall, CBI Chief Policy Director, added.
“Although the Chancellor has limited room for manoeuvre, there are some things he can do that will pack a punch.
“The benefits of the Funding for Lending scheme are starting to feed through, which will help businesses grow. But we also need to rebalance more towards exports. That’s why we want to see the various export and finance schemes up and running quickly and brought under the roof of the Business Bank.”
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