Budget 2020: Chancellor Rishi Sunak announces funding boost

Budget 2020: Chancellor Rishi Sunak announces funding boost

By Property News Team

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Rishi Sunak pledged a £600 billion boost in spending on infrastructure, including new affordable housing.

The Government has unveiled its first Budget since the General Election, amid increasing coronavirus pressures.

The Budget came hours after the Bank of England's announcement of an emergency cut in the base interest rate to shore up the economy following the outbreak. 

The cut, from 0.75 per cent to 0.25 per cent, takes borrowing costs back down to the lowest level in history, and may help the housing market.

Just 27 days after taking over the Treasury, the new Chancellor, Rishi Sunak, announced a dramatic increase in infrastructure spending, including new housing. 

Stamp Duty

A Stamp Duty surcharge of 2% will be introduced for overseas non-residents who buy residential property in England and Northern Ireland. This will start from April 1 2021.

The Government said the measure "will help to control house price inflation and to support UK residents to get on to and move up the housing ladder".

There were no other changes to Stamp Duty charges; a disappointment to many potential buyers. 

Richard Donnell, Director of Research & Insight at Zoopla, said: "With Stamp Duty Land Tax lining the Treasury’s coffers to the tune of £8.3bn as of March 2019, up from £2.7bn 10 years’ ago, it was always unlikely that the Chancellor would consider a significant Stamp Duty reform - particularly without an alternative source of revenue.

Stamp Duty has become a Southern tax, and is widely regarded as one of the biggest inhibitors to market liquidity in London and the South East - from which 61% of Stamp Duty receipts are generated.

"In keeping the tax bands unchanged and not in line with price inflation, 2.7m homes have been pushed into the 5% band since 2015.

"The additional 2% Stamp Duty surcharge for non-UK resident buyers represents the latest in a long series of tax reforms, and may have a short-term impact on demand in higher value markets once it is introduced. For those who are looking at a longer-term hold, the additional upfront purchase cost will diminish in significance over time.

"In the interim, however, there will likely be some increased activity among non-UK residents looking to purchase before the new rules come into force.

Who does it affect?

Dani Dennison and his girlfriend Sophie Kaitcer are looking to buy their first home together.

Dani, 28, an account director at a computer software company, and Sophie, 26, a press officer for a high street retailer, are currently renting a one-bedroom flat in St Johns Wood, London for £1,650 a month.

They are viewing potential two-bedroom period flats to buy, and have honed their search areas to Kensal Rise in north west London and between Highgate and Muswell Hill in north London. 

Dani Dennison and Sophie Kaitcer who plan to buy a property in 2020

 Dani says: "It would have been fantastic if Stamp Duty had been reduced. But when we first started property searching, we factored in Stamp Duty.

We're looking at flats priced around £550,000, so we'll have to pay Stamp Duty of £17,500.

"Our budget stays the same but we're going to wait and see what happens with coronavirus and the effect on the economy. 

"For the last two years I've been saving 25% of my gross income into my company's share scheme, which I was planning to put towards our deposit. I wouldn't want to sell those just when the global economy is crashing. 

"In the meantime we'll just keep looking for the perfect place to live and put down foundations for the future."

Clio Wood and her husband Bryn Snelson, a marketing director, sold their three-bedroom semi-detached cottage in Hertfordshire in August 2019. Since then, Clio and Bryn, both 37, have been renting in Stratford, East London with their five-year-old daughter Delphi. Clio is the founder of & Breathe wellbeing retreats.

Clio and Bryn are searching for three or four-bedroom properties within a radius of Delphi's primary school in Hackney Wick, as they're keen to avoid disruption.

"We're looking for homes priced up to £850,000, so Stamp Duty will cost us an extra £32,500. It would have been great to have been able to use that money for something real, like refurbishing a bathroom.

"But we've just got to knuckle down and get on with buying. We sold our old house because being in a chain was just getting so complicated, and I'm missing being in my own home." 

Low interest rates

Commenting on the Bank of England's interest rate cut to 0.25 per cent, Donnell said: "The reduction in the bank rate will benefit homeowners on variable rate mortgages; however, these represent a minority with over 90% of new mortgages now fixed rate.

"For those on variable rates, it normally takes up to two months for the change in bank rate to filter down, but the Government will put pressure on financial institutions to implement it faster.

“It’s important to remember that it is up to the banks’ discretion as to how much of the cut they pass on to consumers, which could stymie potential benefits."

Spending on housing and infrastructure

In his Budget speech the Chancellor said more than £600 billion will be spent on roads, rail, broadband and housing by the middle of 2025. 

In the wake of the Grenfell tragedy, a £1billion fund is to be set up to remove all unsafe combustible cladding from all public and private housing higher than 18 metres. 

He also announced a spending package of £650 million to tackle homelessness, providing an extra 6,000 places for rough sleepers. 

The Affordable Homes Programme, intended to 'help more people into homeownership and help those most at risk of homelessness', will be extended with with a new multi-year settlement of £12 billion. 

This marks a £3bn increase on the current five-year Affordable Homes Programme, which is worth £9 billion and is due to end in 2021.

The Chancellor also announced £1.1 billion worth of allocations from the Housing Infrastructure Fund to develop almost 70,000 homes in nine different areas, including Manchester, South Sunderland and South Lancaster. This was announced in addition to a new £400m for new housing on brownfield sites.

What's the background?

Our finances, both nationally and individually, are significantly affected by what the Chancellor outlines in his annual Budget speech.

The Budget updates us on the financial state of the country and outlines the government's plans for tax and spending for the next financial year, starting in April.

This is the Budget that was scheduled for November last year, but was postponed because of the General Election. 

This 2020 Budget is the first post-Brexit and a platform for Boris Johnson's Government to set out its vision for the economy detail of how it will be delivered. 

Following the outbreak of coronavirus, the Chancellor's speech and spending plans would have had to focus on softening the economic impact caused and announcing a £30 billion extra package of spending. 

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