Submitted on Monday 31st March 2008
Our Budget Round Up
The latest budget is a bit gloomy and comes against a backdrop of increased government and consumer debt and the potential for recession and housing market slowdown. Concensus seems to be that the chancellor and his boss had little room for manoeuvre.
Residential Finance
House Prices
The RICS does not believe that the budget statement will have a significant impact on house prices.
First Time Buyers
The chancellor threw a few scraps to first time buyers keen to get on the housing ladder with the removal of stamp duty on shared ownership cases until 80% ownership is achieved. A new keyworker shared equity initiative was also on the cards. The chancellor ignored calls for an increase in the stamp duty threshold.
Long Term Fixed
The treasury seem keen to promote long term fixed rates to give people longer term security in the housing markets. Do they know something about future rates that we do not? This is a difficult ask. people have become accustomed to short term planning and unless long term fixed rates can be accompanied by greater flexibility regarding redemption penalties most people are likely to trade long term security for shorter term flexibility particularly if shorter term money is cheaper.
For a detailed read of the treasury position read this http://www.hm-treasury.gov.uk/media/6/4/bud08_housing_787_.pdf
Gold standard mortgages
There was also talk of risk grading mortgages to help with market liquidity but it is too early to know what is intended and how helpful it will be.
Commercial Finance and business
General
Generally organisations such as the CBI and the Federation of Small Businesses expressed relief that the budget contained no nasty surprises but even so the amount of business related small print will do little to ease the general bureaucratic burden on businesses
Factoring and Invoice discounting
Factoring and invoice discounting firms received a boost from details contained within the government paper Enterprise Unlocking UK talent
http://www.hm-treasury.gov.uk/budget/budget_08/documents/bud_bud08_enterprise.cfm
This announced the ending of a previous restriction involving the assignment of debt on governement contracts. Previously if a business wanted to use an organisation such as a factor or invoice dicounter to help compete for a government contract then they would have to have received permission. This inevitably worked against SMEs who henceforth will be in a stronger position to compete.
Government Funding Initiatives
The SME Small Loan Guarantee sheme has received a boost of £60m funding and has been extended to help ambitious small businesses with growth ambitions
A fund of £125m is to made available to women entreperneurs.
Taxation
New CGT rules apply from April where the charge on disposal will be a flat 18% replacing taper relief except for the concesion to business owners on the first £1m in the event of a sale of their business
It is predicted by the RICS that some buy to let investors who purchased in 199,2000 and 2001 will see this as an opportunity to exit the market ahead of the game. According to the Council of Mortgage Lenders this could be up to 165000 in that period but the RICS does not expect a significant exodus
Buy to let investors in French leasehold arangements face an increase of 8% tax on disposal from April comparesd to the 10% that may have come through taper relief arrangements and could seek to avoid this by going non-resident for five years in order to avoid CGT. They would however still have to consider taxation in France.
