The Budget 11th March 2020, Summary and Initial Comments by Accessible Retail on Matters Relevant to the Retail industry

Notes for use in reading:

• The numbers in brackets are the paragraph numbers in the Budget paper.
• Accessible Retail comments are in Italics

High Streets
Infrastructure
Tax
Sustainability
Devolution
Research and Innovation
Planning

High Streets (2.261)

The Government confirmed it will reintroduce crown preference for certain tax debts to be implemented on 1 Dec 2020 and be extended to include Northern Ireland.

This is not good news for efforts to rescue struggling retailers and their landlords.  It means a greater share of the pain in insolvency will now have to be divided amongst the remaining unsecured creditors and struggling firms will be less able to raise funding as a result.  Accessible Retail will consult with partner trade associations to press for a reconsideration including if the decision stands some accompanying mitigation measures.

Areas Designated for Significant Future Growth (2.120), (2.129)

The corridor of land connecting Oxford, Milton Keynes, Bedford and Cambridge (the OxCam Arc) has been selected as a key economic priority growth area. The preferred route for the new railway line between Bedford and Cambridge has already been announced and the Government plans to build a new rail station at Cambridge South, improving connectivity to the research facilities of the Cambridge Biomedical Campus (2.120).

Alongside this, the Budget announces plans to develop, with local partners, a long-term Spatial Framework to support strategic planning in the OxCam Arc to support the area’s future economic success and the delivery of the new homes required by this growth up to 2050 and beyond.  This includes plans to explore the case for a New Town at Cambridge, to accelerate new housing and infrastructure development.

We have drawn attention to this as new growth areas will create significant demand for new retail provision and our industry will want to factor this and other similar announcements into the drawing up of their future business plans.  However, there is further significance.  As we report later in this summary of the Budget, the Government has announced other measures which show the it is set on a programme of widespread infrastructure works and economic growth accompanied by proposals to devolve further decision-making powers to the regions. This continues the gradual reversal of the centralisation of power away from local government by the Thatcher Governments and means more big infrastructure, land use and planning decisions will be made locally away from Westminster.  AR believes; therefore, our members will need to engage more in the future with City Mayors and other local government bodies to identify, exploit and influence growth opportunities which such decisions will offer up.  Responding to this, AR will be reviewing how it interacts with its members in the regions to ensure we give the right support to increased localisation of important land use planning and infrastructure decisions.

Local Infrastructure Rate lending (2.58)

The Government will provide an additional £1.15bn discounted lending at 60 basis points above gilts via the Public Works Loan Board (PWLB) to support specific local authority infrastructure projects for England, Scotland and Wales.

This further evidence the comment made above. These proposals will help promote capital spending on these areas.

Infrastructure (1.126)

Later in the spring the government will publish a National Infrastructure Strategy which will set out plans for a once in a generation transformation of the UK’s economic infrastructure.

Capital Allowances: Structures and buildings allowance (SBA) rate (2.198)

The annual rate of capital allowances available for qualifying investments to construct new or renovate old non-residential structures and buildings will increase from 2% to 3% to take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax. The increased rate of relief will provide businesses who invest with over £1bn in additional relief by the end of 2024-25.

AR welcomes this increase as a boost to cash flows for those looking to invest in new buildings or renovate old ones in the UK.

Business Rates Retail Discount (2.191), (2.195)

The government has already announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50% and will be expanded to include cinemas and music venues. To support small businesses in response to COVID-19

the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses for 2021 (2.191) Local authorities will be fully compensated for the loss of income as a result of these business rates measures (2.195)

See next item below for AR comment.

Business Rates Review (2.196)

The government is launching a fundamental review of business rates to report in the autumn.

AR welcomes the review.  AR will participate fully in the review and seek to ensure that our principal concern that the problems caused by too high business rates extends to the retail parks and warehouses sector and not just high streets and that Government acknowledges this and takes it into account when formulating its proposals. AR will restate that retailing has undergone a permanent restructuring which has established our sector as one of the key providers of retail services in the eyes of customers.  The long-held view that we are a part of the problem of town centres and high streets is anachronistic and has to change. Online competition has changed conventional bricks and mortar retailing for ever and ensuring the on-going health of our sector is vital for the future of retailing and its customers.

Valuation Office Agency (VOA) business systems transformation programme 2.197)

The government will invest an additional £11.5m in the VOA in 2020-21 to support the modernisation of VOA systems and processes, to increase efficiency and improve customer service in the future.

AR welcomes this investment to improve customer service in the future, and a have allocated additional funding for this.

Review of the UK funds regime (2.208)

The government will undertake a review of the UK’s funds regime during 2020. This will cover direct and indirect tax, as well as relevant areas of regulation, with a view to considering the case for policy changes. The review will begin with a consultation, to be published at the Budget, on whether there are targeted and merited

tax changes that could help to make the UK a more attractive location for companies used by funds to hold assets. The review will also consider the VAT treatment of fund management fees and other aspects of the UK’s funds regime.

The funds industry is an important component of the ownership and development of retail property and we will monitor this review and contribute accordingly.

Digital Services Tax (DST) (2.205)

The Government will introduce a new 2% tax on the revenues certain digital businesses earn from 1 April 2020. This will ensure the amount of tax paid in the UK reflects the value these businesses derive from their interactions with, and the contributions of, an active user base. Legislation will require businesses to pay the DST on an annual basis, consistent with the draft legislation published in July 2019. The Government will continue to give consideration to how the legislation applies to marketplace delivery fees and whether that application is consistent with the policy rationale of the DST. The government remains committed to developing

a multilateral solution to the challenges digitalisation has created for the corporate tax system and will repeal the DST once an appropriate global solution is in place.

AR welcomes this move which will help to create a more equal playing field for our industry.

Corporate Capital Loss Restriction (2.207)

From 1 April 2020, the government will restrict the proportion of annual capital gains that can be relieved by brought-forward capital losses to 50%.  Following consultation on the detailed design of the rules, the government will also exclude certain companies in liquidation from the scope of the restriction.

This is disappointing. These measures will unfairly penalise industries where gains and losses happen to arise in different accounting periods as is the case for real estate investment.

Climate Change Levy (1.243)

To encourage businesses to operate in a more environmentally friendly way, the

government is raising the Climate Change Levy on gas in 2022-23 and 2023-24 (whilst freezing the rate on electricity) and reopening and extending the Climate Change Agreement scheme by two years.

AR recognises the need to respond to climate change and will keep the proposals under review to try and ensure new measure are implemented in a sustainable way for businesses.

 Access to high quality, convenient charging infrastructure (1.246)

The Government is providing £500 million over the next five years to support the rollout of a fast-charging network for electric vehicles, ensuring that drivers will never be further than 30 miles from a rapid charging station. This will include a Rapid Charging Fund to help businesses with the cost

of connecting fast charge points to the electricity grid. To target spending from this fund effectively, the Office for Low Emission Vehicles will complete a comprehensive electric vehicle charging infrastructure review.

AR welcomes this proposal.

Devolution (1.155)

The Government has agreed a devolution deal with West Yorkshire to establish a Mayoral Combined Authority with a directly elected Mayor from May 2021. This deal will provide £1.1bn of investment for the area over 30 years, as well as devolving significant new decision-making powers on transport, planning and skills. It also underpins the agreement of a long-term intra-city transport settlement for the region starting in 2022-23.

This devolution deal is an important step in delivering on our levelling up agenda by giving power and investment to local areas.  

See AR comment earlier concerning the need to ensure AR evolves to ensure it can meet the needs of its members as these changes evolve.

Where the Government Makes Decisions (2.127)

The government will relocate a minimum of 22,000 civil service roles out of central London, the vast majority to the other regions and nations of the UK. This will take place over the next decade via the Cabinet Office and its Places for Growth programme. HM Treasury, alongside DIT, BEIS and MHCLG,

will establish a new economic decision-making policy campus of over 750 roles in the north of England. HM Treasury will also establish representation in Northern Ireland and Wales, adding to its existing presence in Scotland.

See AR comment earlier concerning the need to ensure AR evolves to ensure it can meet the needs of its members as these changes evolve.

The Transforming Cities Fund (1.130)

Building on the Transforming Cities Fund, the government will also provide £4.2bn

from 2022-23 for five-year funding settlements for eight Mayoral Combined Authorities (in West Yorkshire, Greater Manchester, West Midlands, Liverpool City Region, Tyne and Wear, West of England, Sheffield City Region and Tees Valley). While it will be for elected Mayors to put forward ambitious plans, the government would welcome the opportunity to support a range of schemes, such as the renewal of the Sheffield Super tram, the development of a modern, low-carbon metro network for West Yorkshire and tram-train pilots in Greater Manchester. As a first step, the government will open discussions with Greater Manchester, Liverpool City Region and the West Midlands in the coming months.

See AR comment earlier concerning the need to ensure AR evolves to ensure it can meet the needs of its members as these changes evolve.

English Devolution White Paper (2.120)

The Government will publish an English Devolution White Paper in the summer, setting out how it intends to meet its ambitions for full devolution across England.

See AR comment earlier concerning the need to ensure AR evolves to ensure it can meet the needs of its members as these changes evolve.   AR will respond accordingly to the White Paper.

Research and Innovation (1.220)

The Budget sets out plans to increase public R&D investment to £22bn per year by 2024-25. This landmark investment is the largest and fastest ever expansion of

support for basic research and innovation, taking direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations – ahead of the USA, Japan, France and China. This unprecedented increase in investment will support a range of objectives, including backing businesses to invest and innovate so that they can compete in the global technology-driven economy

AR welcomes this proposal.

HM Land Registry (HMLR)

HMLR will be provided with £392m to transition from a Trading Fund into part of central government. This funding includes £350m that will be offset by HMLR returning its income to the Exchequer, and £42m of funding to allow HMLR to

continue with its ongoing project to digitise land registration in England and Wales,

and enable further innovation in the property market and the wider UK economy.

AR welcomes this proposal.

Digital connectivity (2.78, 2.79, 2.80, 2.81)

The Budget commits £5bn to support the rollout of gigabit-capable broadband in the most difficult to reach 20% of the country; announces that DCMS will shortly publish a consultation response which will confirm the government’s intention to legislate to ensure that new build homes are built with gigabit-capable broadband; and

announces that the Shared Rural Network agreement has been finalised between the government and industry, with the Government committing up to £510m of funding.

AR welcomes this proposal.

Planning (1.145)

The Secretary of State for Housing, Communities and Local Government will shortly set out comprehensive reforms to bring the planning system into

the 21st century, followed by a Planning White Paper in the spring. These reforms will aim to create a simpler planning system and improve the capacity, capability and performance of Local Planning Authorities (LPAs) to accelerate the development process. The Government will also explore long-term reforms to the planning system, rethinking planning from first principles, to ensure the system is providing more certainty to the public, LPAs and developers.

The planning system, both in terms of its operation and policy as regards retailing, has long been a concern to AR and we will be participating fully in the consultation processes.