The CIOB Policy Team Newsletter - February 2021

We would love to hear any feedback or thoughts you have, so please do get in touch at policy@ciob.org.uk.

One thing you need to do... Prepare for IR35

The IR35 rules for off-payroll working will change on 6 April for contractors and clients working in the private sector. To help members prepare, we have written a blog outlining who will be affected, what you must do in order to comply to the new rules, how you can prepare and some considerations to make.

As IR35 will be new for many, the CIOB is holding a free webinar on 29 March to explain the changes, as well as the VAT Reverse Charge which came into effect on 1 March.

1. The 2021 Budget

On Wednesday (3 March), the Chancellor of the Exchequer delivered his 2021 Budget, promising a three-part plan to protect jobs and livelihoods, strengthen public finances and begin to build the future economy.

Opening his statement, Rishi Sunak MP noted that the Office for Budget Responsibility (OBR) is forecasting a “swifter and more sustained recovery” than they were expecting in November, predicting that the economy will grow by 4 percent this year, then 7.3 percent in 2022.

The Budget announces multiple measures intended to support businesses and stimulate the economy and was accompanied by the publication of the Government's plan for growth, called Build Back Better, which details capital spending plans for the next year.

Key measures announced for construction include:

• The expansion of Covid-19 support measures including: an extension of the Coronavirus Job Support Scheme (‘furlough’) to September 2021; fourth and fifth grants under the Self-Employment Income Scheme (SEISS) to extend the scheme to September, and its expansion to include the newly self-employed; a new Recovery Loan Scheme for businesses; and a VAT Deferral New Payment Scheme to allow businesses to pay deferred VAT in up to 11 instalments.
• Increases to corporation tax from April 2023 to 25 percent. A new small profits rate will mean that profits under £50,000 will continue to be taxed at the current 19 percent rate, and businesses with profits under £250,00 will receive relief so that they still pay less than the main rate.
• An extension of the Stamp Duty Land Tax (SDLT) holiday to 30 June for homes under £500,000, and the nil-rate band extended to homes under £250,000 until 30 September 2021. The CIOB has joined the Construction Leadership Council (CLC) in calling for the holiday to be extended and have therefore welcomed this announcement.
• A ‘super-deduction’ of 130 percent for companies investing in qualifying new plants and machinery. This tax incentive will see taxes cut by 25p for every pound invested in new equipment.
• Increased funding for apprenticeships and training including: £126 million for traineeships for 16–24-year-olds; an increase in payments to employers who hire new apprentices until 30 September 2021 to £3,000 per hire; a £7 million fund to help employers set up portable apprenticeships; and a new Help to Grow scheme to offer businesses access to digital training and discounted productivity software.
• A mortgage guarantee scheme to be introduced in April 2021, offering government-backed guarantees to lenders who offer 95 percent mortgages on homes with a value up to £600,000.
• The creation of eight new freeports where businesses will receive more substantial tax reliefs, simplified customs procedures and wider government support. Freeport zones will benefit from an enhanced 10 percent rate of structures and buildings allowance for constructing or renovating non-residential structures and buildings, as well as an enhanced 100 percent capital allowance for investment in plant and machinery for use in freeports, and complete relief from SDLT and business rates until 30 September 2026.
• A Modern Methods of Construction (MMC) Taskforce to be established by the Ministry of Housing, Communities and Local Government (MHCLG) in Wolverhampton and backed by £10 million seed funding. The Taskforce will focus on accelerating the delivery of MMC homes, with an emphasis on collaboration with local authority and City Region Mayors.

The CIOB has responded to the Budget, welcoming the extension of the Covid-19 support schemes which have been a vital lifeline to many construction businesses throughout the pandemic. We are especially pleased to see that the Stamp Duty holiday will be extended until September, following calls by CIOB and the CLC for the continuation of this measure to provide essential support for the residential construction sector.

However, we have expressed concern that the Government has missed an important opportunity to strengthen the impact of its investment in these schemes, by failing to suspend the implementation of the VAT reverse charge. Coupled with changes to IR35 which will significantly increase the administrative burden placed on construction businesses, this change threatens to severely restrict cash flow to those lower in the supply chain, hitting small and medium-sized firms the hardest. We will continue to work with other leading built environment organisations to advocate for the withdrawal of this charge.

Disappointingly, while the Budget pledges £12 billion initial capital for a new UK Infrastructure Bank, it makes no mention of the environmental impact of the existing building stock or of key elements of the net-zero strategy, including retrofitting. CIOB has long called for an ambitious national retrofit strategy to provide a clear direction of travel for the construction industry and the certainty that businesses need to create stable, green jobs beyond 2022. We are therefore urging the Government to use the new Infrastructure Bank to prioritise funding for a national retrofit strategy, to demonstrate global leadership on climate change as it prepares to host COP26.

We will be continuing to raise these points with Government and engage with Budget debate over the coming days and weeks.

2. Environmental Audit Committee – Greening the post-Covid recovery report

On 17 February 2021, the Environmental Audit Committee (EAC) published their report, ‘Growing back better: putting nature and net zero at the heart of the economic recovery’, following their inquiry into Greening the post-Covid recovery.

The CIOB submitted a response to the Committee as it heard evidence, highlighting the significant opportunities around upgrading the energy efficiency of existing homes through repair, maintenance and improvement (RMI) work and building on the Green Homes Grant (GHG) to implement a long-term national retrofit strategy as a key infrastructure priority.

The Committee’s report warns that if the economic recovery from Covid-19 is not used as an opportunity to ‘grow back better’, climate change and biodiversity collapse may deliver an even greater crisis – with no vaccine against runaway climate change.

While the Prime Minister’s Ten Point Plan for a Green Industrial Revolution points in the right direction, the report argues the UK’s broader approach to the economic recovery from Covid-19 cannot be labelled completely ‘green’. The report states that the strategy behind the Plan needs to be published quickly to give industry confidence and front-load investment in energy efficiency, in order to produce short-run economic multipliers, stimulate the economy and create jobs.

The report makes several recommendations on fiscal and financial interventions including bringing forward proposals to reduce the rate of VAT on repair services and products containing reused or recycled materials to increase economic circularity. We support calls from the Committee to reduce VAT on green home upgrades to incentivise more people to install low-carbon technologies and improve the energy efficiency of existing homes. Cuts to VAT on green goods have long been advocated by green campaigners, but VAT exemptions were limited under EU rules. Now the UK has separated from the EU, it can set its own VAT rates.

Although the EAC report does not explicitly recommend a national retrofit strategy. It welcomes the intention behind the Government’s £2 billion GHG, the administration and delivery of the scheme has fallen short. The Committee recommends that the GHG scheme be urgently overhauled and extended to provide greater long-term stimulus to the domestic energy efficiency sector. We await further information on the future of the GHG, having failed to see detail about the scheme in the Budget on 3 March.

The Committee also recommends that the Government introduce embodied carbon targets for the construction of new homes, helping stimulate demand for low carbon materials and supply. Other proposals include:

• Government establishing clear and ambitious statutory targets for the state of nature, waste minimisation, water quality and air quality under the Environment Bill once enacted.
• Government to undertake a full evaluation of the potential economic and social benefits of Sovereign Green Bond insurance.
• Government must publish a hydrogen strategy as soon as possible, setting out the mechanisms to support the development of green hydrogen systems in the UK.

The Government will now consider the recommendations proposed and formally respond. The CIOB continues to push for change in the sector, ensuring construction is at the heart of the green recovery. We will continue to update you on the work that we are doing on sustainability as we prepare for COP26 in November.

3. What do we need from the next Mayor of London? – 11 March web event

Londoners and non-Londoners are warmly invited to join a panel discussion the CIOB is co-hosting on 11 March about the challenges affecting the built environment in London. From pandemic recovery to Brexit to climate change, we discuss what the built environment needs to tackle these obstacles and ensure a brighter future for London

The event is being held in collaboration with the RTPI, RIBA, London Property Alliance, London First, London, BPF, Landscape Institute, Centre for London, Urban Design Group, The London Society, BCO, NWEC, Heart of London, Federation of Master Builders, HBF, NRLA, Urban Design London, Place Alliance, and Academy of Urbanism. As a collective representing over 100,000 individuals working across the built environment in London, we have established an expert panel to discuss what London needs of its next Mayor.

If you wish to register for this free event, you will need to make an account over at NLA through the following link. Booking details will then be issued through Eventbrite. Full details of the times and speakers can also be found on the website.

Should you wish to submit any questions ahead of the debate, please contact Felicity Handley, Public Affairs Officer, at fhandley@ciob.org.uk.

4. Devolved & Regional news – Northern Ireland

Two key stories have arisen in Northern Ireland this week including details in the UK Budget 2021 on 3 March that the Northern Ireland Housing Executive (NIHE) will no longer have to pay the tax levied on businesses.

Corporation Tax exemption for Northern Ireland Housing Executive

The measure provides an exemption from Corporation Tax for the NIHE, the Northern Ireland body which provides state funded housing ensuring consistency of tax treatment for the provision of state funded housing across the whole of the UK.

Communities Minister Deirdre Hargey MLA welcomed the Corporation Tax exemption for the Housing Executive that will result in millions of pounds of additional investment in their homes each year. The exemption has been a long-standing issue and one the Minister has been committed to resolving. Minister Hargey said:

"I very much welcome that the Housing Executive will no longer be liable to pay Corporation Tax. This ends the position where the Housing Executive were unique amongst social landlords in having to pay the tax liability…The decision to exempt the Housing Executive realises a key commitment given in New Decade, New Approach, and is a result of my Department's significant efforts, with the support of colleagues in the Department of Finance, to press for a resolution."

The policy will have retrospective effect from April 2020, meaning the saving for the NIHE will be £20 million in the next financial year.

Stormont Minister halts construction work on Brexit inspection posts at NI ports

Northern Ireland’s Agriculture Minister Gordon Lyons MLA has halted construction of permanent inspection facilities for post-Brexit checks on agri-food goods arriving from Britain.

Minister Lyons also stopped further recruitment of inspection staff for the port facilities and said charges would not be levied at the ports on traders bringing goods from Britain into Northern Ireland.

Ongoing Irish Sea trade checks, which are taking place at existing repurposed port buildings and other temporary facilities, will continue. Minister Lyons’s decision relates to ongoing work on new purpose-built inspection facilities at ports like Belfast and Larne.

Ministers - including Minister for Infrastructure, Nichola Mallon MLA – have questioned whether Minister Lyons could make the decision without the consent of the Stormont Executive. The Social Democratic and Labour Party (SDLP) has called for an emergency Executive meeting following the decision.

If you would like to subscribe to the CIOB Ireland Policy Bulletin please email JKilroy@ciob.org.

5. Fire Safety Bill debated in the Commons

The Fire Safety Bill 2019-20 is entering its final parliamentary stages, and will return to the House of Lords for consideration of Commons amendments on 17 March, before going on to receive Royal Assent and passing into law.

Five Lords amendments were considered during a House of Commons debate on 24 March, concerning discharge of duties under the Fire Safety Order, a public register of fire risk assessments, Grenfell Tower Inquiry recommendations, and leaseholders and cladding remediation.

Opening the debate for the Government, Minister of State for the Home Office Kit Malthouse MP said that the Government would move Lords amendments 1 and 5, to do with duties under the Fire Safety Order, following advice from fire safety operational amendments. Regarding amendment 3, concerning a public register of fire risk assessments, Malthouse said that this would engage financial privilege and raises two concerns. First, the initial estimate of cost to the public purse would be £2 million per annum. Secondly, these costs would be broadly commensurate with the expenditure of maintaining a database of energy performance certificates. Malthouse sympathised with the intent behind the amendment, which would not be ruled out in future, but said this was the wrong time to include this in primary legislation.

On Lords amendment 2, which would place requirements on the owner or manager of buildings that contain two or more domestic premises in line with recommendations from the Grenfell Tower Fire Inquiry, Malthouse said that Bill is the first step, but is a short and technical piece of legislation "designed to clarify that structure, external walls and flat entrance doors should be included within the fire safety order." He announced that additional measures will be included in the Building Safety Bill.

On Lords amendment 4, which would protect leaseholders and tenants from paying for remediation of unsafe cladding, he said that the Government had already committed to £3.5 billion additional funding to remove unsafe cladding, to give leaseholders peace of mind. He said that the amendment would be impractical to implement and could result in delay to interim measures to protect residents while remediation is being brought forward, meaning that fire rescue services would have to evacuate residents. Malthouse concluded that these amendments were based on good intentions, but they were not the appropriate means to solve these complex problems. He assured members that the Government schemes to address these issues would be launched as a matter of priority.

Responding, Shadow Policing and Fire Minister Sarah Jones MP said that the Labour Party supports the Bill but added that it is only a small piece of concrete legislation and the first since the Grenfell Tower fire. On the details of the Bill, she said that the Government has rejected many attempts to amend the Bill. She said that the Draft Building Safety Bill places various requirements on the "responsible person" and refers to the Fire Safety Order to establish the definition of this person, yet the Fire Safety Order does not provide any definition. She emphasised the need for clarity on this point.

On Lords amendment 2, she said if the Minister had concerns about the way it was worded, then he could have amended it, and that this amendment is a straightforward way of implanting the Grenfell Phase 1 Inquiry recommendations in full and without delay. On Lords amendment 4, Jones said that the Government have not committed to saying that leaseholders should not have to foot the bill, and that while there has been much talk there has been no action to put this principle into law.

The House voted on amendments 2 and 4, which were disagreed by 345 to 226 and 340 to 225 respectively.

Coming up in March

The UK Budget took place on 3 March and is covered in detail above. Following on from the statement, the Government will also publish a number of tax-related consultations and calls for evidence on 23 March.

The Government’s response to the Housing, Communities and Local Government’s (HCLG) pre-legislative scrutiny of the Building Safety Bill is expected imminently, as well as their much-anticipated Heat and Buildings Strategy which is expected to be published sometime in March.

Finally, the Department for Education (DfE) will publish its review of Building Bulletin 100 (BB100), the design guide for fire safety in schools. We will be responding in line with our campaigning work on this issue.

If you made it this far...

For a global perspective, take a look at our latest blog on the role the construction sector is playing in economic stimulus packages around the world. We explore ways that the industry is helping to build back better, from China to the UAE and South Africa to Hong Kong.

Thank you for reading this month’s update from the CIOB policy team. We will be back in your inbox next month with more information about what the team is up to, what is going on in Parliament and built environment news to look out for. 

All the best,

The CIOB policy team

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