Budget 2006: industry reaction

The Royal Institution of Chartered Surveyors (RICS) was the first industry association to react the Budget.

Its statement read: "The Chancellor is right to raise the Stamp Duty threshold, but the rise is so small (from £120,000 to £125,000) as to be derisory and represents a squandered opportunity. RICS is extremely disappointed that the Chancellor has not gone further and raised the threshold to £150,000 as RICS has consistently argued over recent years.

"Furthermore, the RICS is dismayed that the Chancellor has once again not seen fit to address the fundamental structure of Stamp Duty, which distorts prices in the housing market by creating pinch points below the threshold for each band. The RICS believes that the tax should be marginal like other taxes, such as income tax. This would remove the distortions in the market.

"The Chancellor has announced increased support for first-time buyers via shared equity schemes. However, the support is small and will help less than 1% of all first-time buyers.

"On real estate investment trusts (REITs) the news is better. RICS welcomes the news in today’s budget that REITs will be introduced from January 2007. These investment vehicles should help the government achieve their aim of improving the efficiency of both the commercial and residential property investment markets and open them to individual investors.

"The government has listened to industry concerns regarding restrictions on gearing, effectively doubling the borrowing thresholds. Also, basing the conversion charge at 2% of total gross asset values will mean a lower tax charge than a model based upon capital gains. These welcome amendments should facilitate an easier transition to REIT status for many listed property companies.

"RICS believes that REITs will help facilitate the development of a high quality residential lettings market."

RICS chief economist Milan Khatri said: "Its a mixed budget for property, offering little to first-time buyers and very little on the affordability of homes. This budget misses another opportunity to address the problems of stamp duty and provide a fairer and more appropriate system that would truly assist first-time buyers.

"However, the introduction of REITs does offer the prospect of boosting housebuilding over the medium- and long-term and we are pleased that the government has listened to the industry’s concerns."

Meanwhile, UCATT general secretary Alan Ritchie highlighted the proposals on tax avoidance: "“I welcome the Chancellor’s commitment to tackle disguised employment through managed service company schemes. These schemes have taken root in some parts of the construction industry. The companies are not set up for the benefit of workers, they have come into existence to dodge tax and employment liabilities. We will work positively with the government to end this practice.”

The Federation of Master Builders was disappointed. Director of external affairs Andrew Large said: "Yet again, the Chancellor has ignored the strong case for a reduced rate of VAT for domestic building  work."

Howver, he welcomed the support for home insulation works and the decision to plough more of the benefits of planning gains back into the local economy.

The National Federation of Builders chief executive Julia Evans said: "This is a beige budget from Brown, with little for construction to get excited about. we await further details on PFI, planning gain supplement and skills and training."

The Construction Industry Council said: "This budget has done nothing to encourgae industry that there is any real desire to reform the regulatory burden imposed upon it: the length of the red tape around construction businesses has grown considerably under this government.

"With regards to PFI, the creation of a standard form of PFI cost report would be helpful as would measures to tackle the bidding costs to encourage more SMEs."