In anticipation of the pre-Budget report ePolitix.com stakeholders give their take on what they hope to see delivered by the chancellor on November 24.
Stakeholder response: Council of Mortgage Lenders
A spokesman for the Council of Mortgage Lenders told ePolitix.com: "For the housing and mortgage markets, the priorities should be to mitigate the impact of the economic downturn through the benefit system for those facing repayment difficulties, and to underpin and stimulate housing transactions in order to help restore the market conditions in which it makes sense for lenders to lend and borrowers to borrow.
"In practical terms, this means that the government should extend eligibility for Income Support for Mortgage Interest to a wider group of borrowers, and ensure homeowners who lose their income are not disadvantaged compared to tenants as they are at present. It should also make further cuts in stamp duty.
"The government should rightly expect to see the range of mortgages on offer improving incrementally as market conditions improve, but should stop expecting lending to homeowners to return to '2007 levels'.
The government's intentions on any policy measures arising from the long-awaited Crosby review of the mortgage funding markets should also finally emerge as part of the PBR. We wait with interest but little expectation to see whether these will help create a further additional flow of funding to support new mortgage lending."
Stakeholder response: ACCA
Chas Roy-Chowdhury, head of taxation at ACCA (Association of Chartered Certified Accountants) said: "Stimulating the economy will be the main driver behind this year's pre Budget report (PBR). Measures need to be bold and the measures need to be big enough to do the trick. It must also be co-ordinated to have a wide impact and multiplier effect on the economy."
Tax
- ACCA wants to see more certainty, simplicity and transparency in the UK's tax system – for businesses and for personal taxpayers.
- VAT cuts – this is a possibility, but any cuts would be hugely expensive for the government. This would have to be a general cut across goods and services.
- The prospect of subdued demand creates expectations of poor business profitability. This discourages the creation of new jobs and new businesses and makes it harder for firms and individuals to obtain credit. How can the government put more money in people’s pockets so they spend? Perhaps by reinstating the 10p tax band for the lowest paid; also by increasing tax credits and by increasing personal allowances so that 40 per cent ratepayers have more to spend.
- A stamp duty land tax holiday for all property transactions – rather than just those of £175,000 or less.
- In Spring 2008, the government deferred the 2p fuel tax to October 2008. ACCA believes a further delay would be welcomed, despite petrol prices falling recently.
- There is also a possibility to reduce national insurance contributions (NICs) for employers and employees, which would help put money in the pockets of individuals.
Small and medium-sized enterprises (SMEs)
- A pledge of renewed support for the regulatory reform agenda - cutting unnecessary costs to business is a great way to increase employment and economic activity among SMEs, and it's free.
- Late payment needs to be tackled so that businesses' problems are not magnified as they are passed down the supply chain. The government’s latest initiatives on prompt payment of government contractors are impressive, however, government commitment to enforce prompt payment will be welcome and government itself needs to set an example to the private sector.
- A prompt reaction to the Glover Review's recommendations on opening up the public procurement market to SMEs and the Anderson Review of regulatory guidance.
- Reallocating skills funding to small and micro businesses - current plans are based on assumptions of growth, but large employers are clearly looking to substantially reduce their headcount, for example, by divesting skills.
- A demand-led system of skills provision should now focus on those areas of demand that are still healthy.
- A review and extension of the small firms loan guarantee scheme to target more established businesses and shorter-term debt. ACCA would particularly like to see the government's two per cent premium waived, at least for partnerships and sole traders.
Stakeholder response: Construction Product Association
There are a number of things that the chancellor has to achieve on November 24 from our point of view.
On public spending:
He has to do something to help reinvigorate the housing market. In terms of liquidity and interest rates, he is already along the right lines, so where his priority on the 24th should be is to increase the government commitment to buy more of the vacant and unsold private new build housing for use as social housing.
This will help the housebuilders cash flow and also help maintain the number of social houses that are being provided – numbers are well down on the government's own targets.
We would also like to see the government speed up the building of its own social housing programme. This has been held back because the private sector housebuilders are not providing the houses anticipated via the Section 106 agreements because they are not building the private sector element on a site.
Government therefore needs to move into doing more itself through the new Homes and Communities Agency. Currently, new social housing starts are running at just over 20,000pa and need to reach 45,000pa by March 2011 if the government's target is to be met. There is therefore much to do.
We look for some positive steps in terms of the announcement three weeks ago that the government would try to bring forward spending from later in the CSR to help minimise the impact of the economic downturn.
Whilst we welcomed that announcement, we think it is going to be very difficult given the problems they always seem to have with the delivery of major capital programmes.
What they should really focus on therefore are steps to ensure that they actually deliver the programmes in the CSR – it would make a significant and positive difference if they just kept to their plans for schools, health facilities and infrastructure by improving the delivery mechanism for these programmes.
If the government wants to make a real impact, however, it should introduce time-limited grants to encourage people to invest in energy efficiency improvements to their houses. This would allow them to replace old boilers, install double glazing, increase insulation etc.
The benefits of this would be spread around the country, would help SMEs who are facing the brunt of the downturn, and meet a key government policy objective of reducing energy emissions as part of our climate change agenda.
On tax:
We think it is bizarre that you pay the full rate of VAT on products that will improve energy efficiency, and yet you pay a reduced rate on the energy itself. We would therefore like to see a much wider range of products that will help improve energy (and water) efficiency in the home brought into the lower five per cent VAT band which already covers some products.
Stakeholder response: Age Concern
Older people must not be forgotten in the pre-Budget report. Our evidence suggests that the poorest pensioners are being hit hard by the rising cost of living. With pensioner poverty rising, older and vulnerable people are at risk of becoming the hidden victims of the economic downturn and must feel the benefit from any fiscal stimulus announced in the pre-Budget report.
- Older people are being hit hard by the rising cost of living; the oldest and poorest pensioners are currently experiencing an inflation rate of around nine per cent, significantly higher than the rest of the population.
- Older people are at risk of becoming the hidden victims of the economic downturn and, along with those on low incomes, must feel the benefit from any fiscal stimulus.
- Pensioner poverty increased from 1.8 million 2.1 million households in 2006/07 and one-in-three pensioner households will be living in fuel poverty this winter.
- The pre-Budget report must promote 'fairness' by providing much-needed support for pensioners.
Background
While the official inflation rate in August stood at 5.4 per cent, new research carried out independently by the Institute for Fiscal Studies (IFS), and supported by Age Concern, revealed that inflation for the oldest and poorest pensioner households has rocketed to nine per cent.
The report shows that the official inflation rate‚ published by the ONS‚ does not always reflect the reality facing many households‚ particularly pensioner households who tend to spend a much higher proportion of their income on food and energy, the commodities responsible for driving much of the recent inflationary surge.
Our research also shows that half of pensioners are cutting back on essentials and one-in-ten of the poorest pensioners have been forced into debt by the rising cost of living.
Fuel poverty has escalated to the extent that over five million UK households are currently fuel poor, half of whom are pensioner households. This means that one-in-three pensioners will be in fuel poverty this winter.
Meanwhile, benefit take-up levels among pensioners remain stubbornly hard to shift. Up to £5bn in benefits goes unclaimed by older people every year, with 1.8 million pensioners failing to claim pension credit alone.
The only way to ensure that older people claim the benefits to which they are entitled is to introduce a system of automatic payments.
Fiscal package
Current financial turbulence and the economic downturn have caused the government to rethink many of its fiscal projections. With a package of fiscal measures to stimulate the economy looking set to be the centrepiece of the pre-Budget report, it is critical that older people do not miss out.
Any proposals to cut taxation must consider older people and those on low incomes. Reducing income tax would have no impact on most pensioners - if income tax is reduced, pensioners should therefore be supported in other ways, for example, through an additional increase in the winter fuel payment or an above-inflation increase to the basic state pension. In contrast, a reduction in VAT would benefit pensioners.
Age Concern's key proposals for the pre-Budget report to promote fairness and ensure that older people are protected from the impact of the economic downturn are set out below.
Fighting pensioner poverty
Age Concern's key calls to boost the income of pensioner households in the pre-Budget report are:
- An emergency payment of a minimum of £100 to all pensioners entitled to benefits and an increase in the winter fuel payments of £50 to all pensioners to reflect recent increases in energy bills.
- A commitment to increase pension credit in line with the level of 'pensioner inflation' or earnings, whichever is higher.
- A high profile campaign to promote benefit take-up and a commitment to pilot automatic benefit payments and roll out a national scheme as soon as possible.
In addition, with one-in-three pensioners likely to be fuel poor this winter, we are calling for the following measures to tackle fuel poverty:
- Government action to deal with unfair energy pricing by tackling overcharging for those paying their bills by cash, cheque and pre-payment meter and introduce mandatory social tariffs to ensure the poorest and most vulnerable do not pay more for their energy.
- An increase in the maximum grant available under the Warm Front scheme and changes to its eligibility criteria to ensure that the poorest households living in the most energy inefficient homes can benefit from the scheme.
- A new fuel poverty strategy supported by a fair funding formula that recognises the windfall gains to the energy companies from the EU Emissions Trading Scheme and increased VAT receipts accruing to the Treasury as a result of increases in prices.
Improving health and social care
The key priority for the reform of the social care system must be to improve the quality of care people receive. This is the key theme of our Big Q campaign, which has heard the views of more than 700 older people at 47 listening events around the country. We look forward to a green paper on reforming the care and support system in the new year.
However, in the short term, the pre-Budget report should include additional funding to prevent further deterioration in quality and reductions in access to care services. We are therefore calling for an immediate injection of £1bn, a measure that would also create thousands of new jobs in the sector.
With many care home providers reporting financial difficulties, we are also proposing an independent review of the financing of the care home sector. To improve the dignity of care home residents, we are calling for an increase in the personal expenses allowance for care home residents to £40 a week.
We would also like to see further funding to implement health prevention measures for older people, including an extra £200m for foot care services.
Recession-proofing the workforce
Although the rising unemployment has not so far disproportionately affected the over-50s, with a recession now looking increasingly likely, previous experience suggests that older workers are likely to bear the brunt of large scale redundancies which often target early retirement.
It will be particularly important that the skills and abilities of older workers – including those who leave employment – are maintained and renewed as the economy will depend on those people to boost both labour supply and consumer demand as the economy moves out of recession.
In the early 1990s, the male 50+ employment rate fell seven points and did not recover for nearly 10 years. Labour supply in the subsequent upturn was suppressed by the premature exit of more than 300,000 older workers.
- Intensive support should be made available to over 50s on benefits and out of work after three months; after 6-12 months out of work, very few return to work.
- There should be no further increase in conditionality for people out of work long-term over 50 for the time being.
- Mandatory retirement ages should be scrapped.
Age Concern will continue to campaign on these issues as we move forward into the new parliamentary session in December. The Bank of England has forecast the recession will continue 'well into 2009' so it is imperative the needs of the poorest pensioners remain at the top of the political agenda.
Stakeholder response: Which?
The chancellor will deliver his pre-budget report amidst continued turmoil in the banking system and massive consumer concern about the state of the economy. If widespread predictions are correct, we can expect to see tax cuts targeted at those on low incomes, funded through higher borrowing, and the publication of the Crosby Review on mortgage finance.
But as well as short-term measures to boost the economy and policies to tackle some of the problems in the mortgage market, Which? also wants to see fundamental reforms to the banking system to make sure the current crisis does not happen again.
Each UK taxpayer has contributed £1,200 towards the banking bailout. Which? believes the government now needs to take a long hard look at how the banking sector can be made to work in the consumer interest.
The chancellor should therefore establish a independent review of the banking system at the pre-budget report that will look at what went wrong, but, more importantly, consider ways in which we can make radical reforms in the public interest. Consumers support us.
Our recent research found that eight out of ten people had been worried about one aspect of their finances during the current crisis. Sixty-seven per cent blamed the banks for the situation, and a massive 81 per cent want to see fundamental reform of the banking sector. That's why we've set up a new campaign at www.weownthebanks.co.uk to allow the public to email the chancellor to press him to take action.
Which? understands why the government set aside competition law to facilitate the merger of Lloyds TSB and HBOS to help preserve financial stability.
But we also know that large financial institutions with massive shares of the market tend to capitalise on customer inertia and act against the consumer interest. The quid pro quo for the bank bailout and downgrading of competition concerns must involve changes to bank remuneration policies and reform of the current account market to encourage transparency and consumer switching.
We also need structural change to the Financial Services Authority and consumer representation throughout the structures the government has created to deal with the economic crisis. More immediately, banks must pass on base rate cuts to hard-pressed borrowers trapped on standard variable rate mortgages.
The PBR is a golden opportunity for the chancellor to seize the initiative and drive forward banking reform - if you agree with us, tell him yourself at www.which.co.uk/emaildarling
Stakeholder response: RICS
The Royal Institution of Chartered Surveyors (RICS) recognises that the current financial market crisis will dictate the government's spending decisions for some time to come and that there will be a severe limit on revenue and available funds.
In this submission we set out a range of short-term measures for inclusion in the pre-Budget report which we believe will play a part in addressing the current difficulties in the residential, commercial, construction and property sectors. The proposals are based on our current policy priorities: housing, planning, skills and climate change.
Whilst we recognise that these proposals carry a substantial cost, we believe that they are essential in terms of the twin priorities facing the government: addressing climate change and tackling the effects of the credit crunch and likely recession we now face. We believe that funds must be diverted to address these priorities now, however difficult that may be as delay will only exacerbate the situation.
A summary of our key recommendations:
Housing
This budget year:
• Convert the current stamp duty holiday into long-term reform of residential stamp duty land tax, replacing the 'slab' structure of the tax with a 'marginal' structure. It is essential to avoid a further disruption to the residential market by ending the holiday without replacing it with longer-term reform. The effect produced at the end of the holiday in the early 1990s was disastrous for the public and the market.
Future years:
• Introduce a mortgage saving scheme to enable first-time buyers to save sensibly for a deposit.
• Review the REIT regime to enable the formation of Residential REITs for long-term institutional investment in housing models such as 'build to rent'.
Climate Change - low carbon built environment
This budget year:
• Reduce the rate of VAT to five per cent on building work covering the repair, maintenance and improvement of housing and historic buildings.
• Exclude from rateability plant and machinery installed solely or mainly for the purposes of reducing pollution or complying with environmental standards.
Future years:
• Simplify and promote the enhanced capital allowance scheme to encourage uptake and reduce carbon emissions of businesses.
• Extend tax relief for land remediation expenditure to all taxpayers.
Planning reform/skills:
This budget year/future years:
• Increase government funding to address skills shortages amongst planning, project management and construction professionals.
• Allocate funds to keep the construction industry active during the downturn. Further measures should be made specifically for house building to ensure steady supply as the housing market picks up again.
• Provide long-term commitment on infrastructure planning.
Business:
This budget year:
• Double void periods to 6 and 12 months to reflect the time needed to assemble sites and enable regeneration and re-letting of buildings.
• Reduce the level of empty rate liability from 100 per cent to 50 per cent.
Future years:
• Review the business premise renovation allowance to increase its application
Stakeholder Response: Campaign to Protect Rural England
Greening the road to recovery needs more than just good intentions
On Monday, the Government is expected to announce its Pre-Budget Report (PBR). CPRE says that measures to beat the credit crunch must take into account the coming 'carbon crunch' as the UK faces its first carbon budget in spring 2009.
CPRE believes the Chancellor has a golden opportunity to tweak taxes to stimulate investment in healthy low-carbon communities and green collar jobs. By comparison, borrowing to spend on carbon-hungry industries and cutting motoring taxes will force the country to pay back twice in the future. First to pay back for the increased cost of borrowing, second to pay for catching up to meet the carbon reduction target.
Small Shops:
CPRE is calling for the PBR to signal increased business rate relief for rural and small businesses and support for Post Offices.
Tom Oliver, Head of Rural Policy, said: "We really need to help small shops and businesses weather the recession. Seeing small shops closed down and boarded up on local streets would sap consumer confidence as well as destroying the heart of many communities. It is time for joined up thinking so people can reach shops healthily by walking and cycling not just carbon-hungry car trips."
Transport
CPRE is concerned that the government is bringing forward spending on road and airport expansion to beat the recession.
Ralph Smyth, Senior Transport Campaigner, said:
"Spending on expanding roads and airports would be two steps backward and none forward. Such schemes are likely to be very difficult to deliver quickly and would increase high carbon journeys when we need to move towards a low carbon future."
"Last year fuel duty was not increased as fuel prices had increased unexpectedly sharply. For the first time, car traffic on rural roads decreased after having increased more than all other types of roads. With an unexpectedly large drop in fuel prices since the summer, it makes sense for the planned 2p rise in fuel duty to go ahead. The money raised should be used to help low-income households and provide new alternatives to private car ownership, such as car clubs and demand responsive transport."
Instead of propping up the overcapacity in the car industry, CPRE believes that there needs to be investment in new rail carriages and bus services. Together with long-needed investment in maintenance of local roads and footways, which would particularly help people walking and cycling, these measures would create jobs across the country and create more attractive alternatives to driving.
Housing:
CPRE welcomes the government bringing forward funding for affordable homes and the use of a fund to enable housing associations to buy homes from developers as a small start. However, a reduction in VAT on building repair and maintenance would encourage owners and occupiers to care for their properties, upgrade them to higher environmental standards and secure their effective use.
Kate Gordon, Senior Planning Campaigner said: "Rather than seeing homes decay as owners cut back on maintenance, reducing VAT rates on maintenance would stimulate jobs in local communities as well as making more efficient use of housing stock."
