The government is extending the VAT relief available for the installation of energy saving materials (ESMs). The government will also increase the relief further by introducing a time-limited zero rate for the installation of ESMs. A typical family having roof top solar panels installed will save more than £1,000 in total on installation, the chancellor said.

Industry lobbying for a delay in the red diesel ban for construction fell on deaf ears. The switch to white diesel still goes ahead next week. Minor consolation comes from a cut in the duty on petrol and diesel by 5p per litre for 12 months.

National Insurance starting thresholds will rise to £12,570 from July. The Employment Allowance – a relief which allows smaller businesses to reduce their employers National Insurance contributions bills each year – increases from £4,000 to £5,000. This is worth up to £1,000 for half a million smaller businesses, the Treasury reckons, and starts on 6th April this year.

There will be no business rates due on a range of green technology used to decarbonise buildings, including solar panels and batteries, while eligible heat networks will also receive 100% relief. Together these will save businesses more than £200m over the next five years, according to Treasury estimates.

The basic rate of income tax will be cut by 1p in the pound in England, Wales and Northern Ireland from 20p to 19p from 2024. (Income tax rates are devolved in Scotland.)

The economy is forecast to grow by 1.8% in 2023 and 2.1% in 2024. The annual inflation rate was 6.2% in February 2022 and is forecast to rise to 8.7% later in the year, to give an average of 7.4% for the year.

Mr Sunak said that, ahead of the end of the super-deduction, the government would work with businesses and other stakeholders to consider cuts and reforms to best support future industrial investment. And with UK employers spending just half the European average on training their employees, the chancellor said he would examine how the tax system - including the operation of the Apprenticeship Levy – might be used to encourage employers to invest in adult training.

From responses received from across the construction industry, it is fair to say that the chancellor has not impressed too many people this time....

INDUSTRY REACTION

Bradley Tully, Royal Institution of Chartered Surveyors senior public affairs officer:

“Our findings from the market suggest that the biggest barrier to improve the energy efficiency of homes is cost – 85% of respondents in fact.

“However, the road to achieving Net Zero always required the retrofitting of thousands of existing homes across this country to make them greener, and discounts for homeowners looking to support these ambitions have been a long time coming, so we’re delighted the chancellor has finally listened to our call and taken action to cut VAT for families to retrofit their homes and drive down carbon emissions.

“Looking at the wider economic picture – including rising inflation – this poses a significant pressure for businesses, and while the business rate cut being maintained will help our highstreets, it does fall short from the widescale reform that they need to flourish.”

Graham Harle, chief executive of surveyors Gleeds Worldwide:

“Today we saw a chancellor playing for time, offering thin gruel for business when what we wanted at this time of uncertainty was the full English. He is gambling that business confidence, corporate deposits and consumer savings are robust enough for him to sit on the fence and wait until the Autumn Statement to announce new investment stimulus. This is a mistake when we see rampant inflation, record materials and energy price increases impacting construction investment which is beginning to slow. We saw a cautious chancellor focused on short term headlines, offering 5p off a litre, VAT being cut to zero on energy saving devices, changing the threshold for NI payments, business rates cut for SMEs and future income tax reductions. All good things but I was hoping for a creative and impactful budget at a challenging time, aimed at supporting a sector which has been told to “build back better”. I didn’t get it.”

Matthew Pratt, chief executive of house-builder Redrow:

“We welcome the chancellor’s focus on boosting growth and supporting consumers with the rising cost of living. As the UK moves toward net zero, it is positive to see tax breaks to help consumers install energy efficient technology to reduce their bills and energy usage in the long-term. As a responsible housebuilder, we are undertaking a range of research projects and pilots across our business and on our developments in order to build better, more sustainable communities for our homeowners and local stakeholders.

 “While Redrow has a resilient business model, a healthy housing market is in everyone’s interests and improving consumer spending power will help to keep people moving and ensure appropriate housing is available for all purchasers.

“Teaching people the skills today to deliver new homes is vital for ensuring new communities can be successfully delivered to meet demand in the future.  It is really encouraging that apprenticeships and technical skills have been spotlighted in today’s Spring Statement. Anything that makes it easier for construction businesses to deliver the right training to boost productivity and attract a diverse range of talent to deliver vital new homes is very welcome.”

Steve Radley, Construction Industry Training Board strategy and policy director: 

“The inclusion of insulation in the statement today is of real interest for us and industry. Meeting Net Zero in construction is demand-led and the removal of VAT on energy saving materials is likely to cause a significant increase in the need for low-carbon skills. 

“This tax cut will help to create the confidence industry needs to invest in retrofit training.

“The chancellor said the government will be looking at the issue of employment training in the private sector, which will be reviewed as part of the government's new tax plan, including assessing whether the Apprenticeship Levy is "doing enough".

“CITB will continue to work with the government on apprenticeship levy reform as apprenticeships are the main route for employers in our industry to get the skilled workforce they need in recovery. Apprenticeship starts are recovering but it’s vital that we continue to drive numbers up. Critical to this will be building on recent reforms of the Apprenticeship Levy Pledge Service to ensure unspent levy funds from larger companies can be accessed by small employers to provide more apprenticeships.”

Richard Beresford, chief executive of the National Federation of Builders (NFB):

“The NFB, along with many others in the industry, has repeatedly, over many years, called on the Treasury to remove the VAT on measures which improve energy efficiency. To us it always seemed like a ‘no-brainer’ to help incentivise the public to ‘green’ their homes and meet our country’s Net Zero ambitions and today we can finally welcome the decision the chancellor has taken, it is long overdue but at last it is here.”

“However, the NFB was disappointed that the chancellor did not take the opportunity to postpone the changes to the construction sector’s entitlement to use red diesel. As inflation is set to go above 7% this year, and the government confirmed its intention to levy a further 1.25% of national insurance contributions on employers, the cost pressures on construction businesses are unprecedented. While the fuel duty cut is welcome for the country at large, the reality is that in construction, the effective rate of duty is set to rise by 47p per litre because of the removal of entitlement to use red diesel. The decision not to delay this will hurt businesses at the time when they most needed respite from rampant inflation.”

Brian Berry, chief executive of the Federation of Master Builders:

 “With 29 million homes in the UK, of which many are leaky and energy inefficient, decarbonising our existing housing stock represents an important piece of the net zero puzzle. Historically, consumers have not been properly incentivised to commission green upgrades to their homes. This VAT cut will help householders insulate their home at a time when energy bills are escalating. It will also provide a much-needed boost to local builders operating in the retrofit market. The government now needs to build on the VAT cut and implement a long term national retrofit strategy to provide business certainty.

“The commitment from the chancellor to improve the UK’s skills system is encouraging, notably the push for greater numbers of employers to train up staff. This is particularly true for construction, a sector that has suffered long-term skills shortages. Smaller firms in the construction sector already conduct the bulk of the training, with 71% of all construction apprentices being trained by them. Measures should focus on providing long-term solutions that incentivise more businesses to play their part in training the next generation of tradespeople. The FMB therefore welcome the chancellor’s commitment to enhance this system.

“Unfortunately, the chancellor made no reference today to the impact of the planned end to the red diesel rebate on many smaller construction firms, already suffering from rising costs. While the cut in fuel duty will support builders in their travel to and from jobs and make buying regular diesel for machinery cheaper, delaying the end of the red diesel rebate would have made a much more positive impact on builders’ wallets. This is precisely the wrong time to heighten costs for building projects, with an additional need for there to be greater alignment in ensuring that green alternatives, such as bio fuels, are affordable and accessible for construction firms.”

Clive Docwra, managing director of construction consultancy McBains:

“At a time when inflationary pressures are impacting heavily and confidence is dipping, there was little direct help for the construction sector.

“Cutting VAT on energy-saving products like solar panels and home insulation will help lower energy bills for the consumer, but also support retrofitting work for the construction sector.

“The 5% cut in fuel duty will also be of some consolation to the industry, although we would have liked to have seen the NI increase paused, as this would have allowed firms to invest more to recover from the pandemic and increase staff wages to help cover inflationary pressures.

“Training schemes could also have done with a boost right now – the most recent figures show the construction industry had 48,000 vacancies, the highest for 20 years, as a result of an ageing workforce, EU workers leaving since Brexit, and bureaucratic apprenticeship schemes, but all we heard was that this will be tackled in the Autumn budget.”

Melanie Leech, chief executive of the British Property Federation:

 “We welcome the move to cut VAT for the installation of energy efficient materials such as solar panels, but we would urge the chancellor to consider more radical action. The energy crisis has placed households across the country under severe pressure and has brought into sharp focus the need for homes that are more efficient and resilient. Cutting VAT on all home improvements would have a more meaningful impact, incentivising home owners to modernise their homes and make them more energy efficient. We all need to fully commit to the decarbonisation of the built environment if the UK is to achieve its net-zero ambitions.

 “The BPF has campaigned hard for business rates relief for energy efficient plant and machinery, and we are pleased to the chancellor bring forward this relief encouraging early investment into making commercial buildings greener. The business rates relief for small businesses is welcome, but once again an opportunity has been missed for more decisive action. The move to annual revaluations and an end to transitional phasing would deliver a really meaningful saving to thousands of businesses, but instead government chooses to tinker around the edges.  High streets and town centres are the heart of communities and support diverse employment and must be protected for future generations.”

Stephen Marcos Jones, chief executive of the Association for Consultancy & Engineering:

“Rising inflation is the backdrop to the chancellor’s update with the official forecast from the OBR peaking at around 9% in 2022. The resulting impact – coming after what have been two extremely challenging years – means difficult times ahead for all businesses in all sectors.

“Whilst our members may not be as directly exposed as those working in other sectors, inflationary increases affect every single company which is why we would have expected more proactive, immediate and targeted moves to mitigate current inflationary pressures on UK plc.

“The review of UK’s approach to R&D investment, with a wider scope and promise of increased relief is welcome. Of course, the devil is in the detail, but this has the potential to stimulate more innovation from the private sector whilst contributing to higher productivity. Furthermore, we welcome the moves to review how the tax system and apprenticeship levy can be used more effectively to encourage greater investment by employers in adult training.

“We would like to have seen more targeted measures to support government ambitions on Net Zero and Levelling Up. The Statement was a missed opportunity to drive progress in these areas and use them as catalysts for both economic growth and recovery.”

Mike Foster, chief executive of the Energy & Utilities Alliance:

“The chancellor has clearly not heard the outcry over rocketing energy bills faced by millions. He has done nothing in the spring statement to help the vast majority of consumers who face bills doubling this year.

“His VAT cut on solar panels and heat pumps will be welcomed by those who make them and by those who can afford to fit them, but a VAT cut on energy bills would have helped everyone. Frankly, consumers waiting to hear good news on their energy bills will be left asking, ‘is that it chancellor?’”

Phil Hurley, chair of the Heat Pump Association:

“The spring statement comes with great news for the heat pump industry and households today. The HPA has been working hard behind the scenes calling for financial incentives to tackle the barriers to heat pump uptake, and the decision to cut VAT from 5% to zero on energy-saving measures is an important step forward. Whilst this decision alone will not be enough to enable all households to access technologies such as heat pumps, we are confident that it will play a role in helping to accelerate the switch to low carbon heat. But we must remember that more steps still need to be taken to support the rollout of heat pumps, including the removal of illogical environmental levies on electricity.”

Colin Wood, chief executive of Aecom Europe and India:

“As expected, the chancellor’s statement was light on any significant new investment and fiscal measures. Removing VAT on energy saving materials and wind and water turbines for homeowners is welcome. Earlier this week we joined industry in calling for measures to kick start a large-scale home upgrade effort. The benefits of tackling energy efficiency are far-reaching, from delivering energy security to tackling the climate emergency and addressing fuel poverty. While VAT relief is a promising start, we still need more funding and financial incentives if we are to deliver on the promises we made at COP26 six months ago.

“Given rising energy costs, it was disappointing there were no measures to support the acceleration of energy security. We now look to the much-anticipated energy security strategy for a clear, long-term plan for the UK’s future energy mix that will decarbonise and improve the security of supply. Political acceleration for renewable energy projects and a strong role for wind farms, which are relatively quick to get up and running, will be important first steps.

“The measures announced in today’s statement quite rightly focused on alleviating the cost of living crisis. Given these challenges hit hardest the people in the UK’s left behind areas, the important role of the private sector in helping to deliver the government’s Levelling Up agenda is becoming increasingly clear. The proposed reforms to capital allowances could go some way towards creating the right conditions to help boost private sector investment. We stand ready to work with local authorities to help them achieve the full benefits of the projects and initiatives that will rebalance the country.”

John Newcomb, chief executive of the Builders Merchants Federation:

“The chancellor offered two rays of hope in his Spring Statement, with a temporary reduction in fuel duty and the removal of VAT on energy saving materials for the next five years.  We have long supported zero-rated VAT on these materials, both to promote energy efficient upgrades to our existing housing stock and support the drive to net zero, and welcome the chancellor’s announcement.

“However, the potential impact of these positive measures must be considered within the broader context of building materials supply, where the outlook is much less certain. Even before the war in Ukraine, rising energy, freight and labour costs were reflected in price increases for many essential building products, with many manufacturers already announcing increases of 4-10% this year and energy intensive products increasing by as much as 20%.

“With continuing disruptions to global supply chains, particularly in oil and gas, the Office for Budget Responsibility (OBR) already expects inflation to rise to 7.4% this year, with further increases to come.   I am sure a lot of building materials manufacturers, and their customers, would have been looking for more support."

James Talman, chief executive of the National Federation of Roofing Contractors:

“I am delighted to see that the government has listened to our calls as an industry to promote the installation of energy efficiency measures by slashing VAT to zero per cent, on technologies including rooftop solar and roof insulation. It is encouraging to see the government invest in minimising heat loss and creating clean energy to power our homes.

“However, we need to go further to deliver significant emissions reductions and achieve net zero by 2050. Our homes account for 35% of the UK’s energy use and emit 20% of its carbon dioxide emissions. We urge the government to adopt the Construction Leadership Council’s national retrofit strategy, which offers a comprehensive long-term plan to make our homes greener and get on track to reach net zero.

“The chancellor has also promised that his autumn budget will include a cut to tax on capital investment by businesses. In order to support UK businesses to invest whilst delivering on net zero targets, we urge him to create a Green Annual Investment Allowance, which would allow investors and building owners to reclaim the tax on any green investment in commercial and industrial buildings, such as improving the energy efficiency of roofs. The longer we take to retrofit our existing building stock, the harder that task becomes—we need to see the chancellor take leaps towards greener buildings.”

Kevin Minton, chief executive of the Construction Plant-hire Association:

“Regrettably our calls for the super-deduction allowance (SDA) to be extended were not acted upon in the chancellor’s spring statement. We are also disappointed that there has been no acknowledgment of the hardship, and no relief given, for companies in our sector adversely affected by the change from red diesel.

“The chancellor recognised the need for business investment in the UK to rise. However, UK plc cannot wait for government action or plans in the autumn budget – we need to see that now.”

Callum Mackintosh, president of the  Scottish Plant Owners Association:

“This is yet another blow to the construction sector. Over the last few weeks, and since the Russian invasion of Ukraine, the price of fuel has skyrocketed. We have come together as an industry to reason with the Chancellor to delay the removal of red diesel entitlement for the construction industry. Whilst the fuel duty cut of 5p per litre is welcome and does represent a reduction in duty of 8.63% on both red and white diesel, the reality is that the construction industry faces an increase of fuel duty of 42.77p per litre from 1st April.

“With cost pressures on construction at unprecedented levels, the spring statement should have been the chancellor’s opportunity to inject confidence into the construction and associated industries but instead the industry was disappointingly overlooked.

“Furthermore, the Chancellor could have taken the opportunity to put some of the projected £1.28bn revenue raised over the next 12 months from red diesel rebate removal to good use. 2021's red diesel replacement competition of £40m can be seen as nothing more than virtue signalling by our members now.

“We were told red diesel rebate was a tax relief on pollution, but this government has done nothing to incentivise uptake on greener alternative fuels instead choosing to tax them at the same rate of duty. I am afraid to say that the consensus in the construction industry is that the removal of red diesel entitlement is simply a tax grab.”

Legislation removing the red diesel entitlement comes into force on 1st April. The price of red diesel and white diesel sitting at 122p per litre plus VAT and 143p per litre plus VAT respectively. Alternative fuel HVO Green D+ is 190p per litre.

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