This week’s budget from Rishi Sunak, the newly appointed chancellor of the exchequer, has had a mixed response from the co-op movement, with good news for the housing sector but disappointment for community energy.
In the wake of December’s landslide election, which saw the Tories eat into traditional Labour constituencies, and with the challenges of Brexit and coronavirus to be met, the Johnson government has promised increased spending.
When Mr Sunak’s budget was announced on 11 March, specific measures included a welcome change for private rental housing co-ops. They will no longer have to pay punitive taxes introduced to tackle property enveloping – a practice which places the ownership of expensive residential property in a corporate entity, as a means of hiding asset ownership and avoiding taxes.
Because housing co-ops also own property via a corporate entity, they were caught up along with the oligarchs who have been abusing the housing system, said James Wright, policy offer at sector body Co-operatives UK. “Government made sure this didn’t happen to social landlords and legitimate property-related businesses but, as is so often the case, co-ops were not properly considered,” he added in a blog for Co-operatives UK.
Co-operatives UK, Friendly Housing Action, Radical Routes and the Confederation of Co-operative Housing worked together to lobby for a co-op exemption, gathering evidence and compiling detailed submissions.
Mr Wright said: “The government has come now through for housing co-ops. With this tax change, shared housing co-ops can really be that affordable and empowering alternative to renting from a landlord, even in places where the cost of housing is sky high.”
Looking at the problems the tax has caused for the sector, he said: “At the moment housing co-ops that are not social landlords have to pay an additional tax of at least £3,500 a year on properties with a value over £500,000. Some co-ops have faced putting up rents by 39% to cover this.
“Furthermore, any newly forming housing co-op looking to buy a property valued over £500,000 is hit with an additional 15% on Stamp Duty, which can only be covered through charging much higher rents.
“This has started to make living in a larger shared housing co-op much less affordable, especially in parts of the UK where housing costs are already high, at a time when the mix of affordability, control and community could be so beneficial.”
Mr Wright said the co-op organisations had started lobbying efforts for a 100% relief on the punitive taxed in early 2018. “A combination of great collaboration, evidence, careful lobbying and quality submissions has paid off,” he added.
Radical Routes says the change means that its housing co-op model “may become a viable option to provide self-managed housing for low income residents in high cost areas like Oxford, Bristol & Brighton”.
But Community Energy England, which lobbies for community-owned renewable energy projects, said the budget continued the poor treatment of the sector by the government.
Policy and advocacy manager Duncan Law said: “A budget intended to ‘unleash the energy, inventiveness and creativity of all the British people’ does nothing for community energy.”
He added: “This budget could have been far more ambitious in its scope to create a better, cleaner and more equitable energy system creating more resilience in the UK energy network. Instead we see a stubborn commitment to old centralised solutions. We call on government to look again at alternative opportunities and consider the benefits more support for renewable, locally generated energy can bring to the country.”
He said Mr Sunak had offered “giveaways and the occasional claw-back, for instance of Entrepreneurs Relief”, but warned “there was very little for the enterprising and dedicated people who have been pioneering the future of energy in their local communities”.
He added: “The Committee on Climate Change says that the transition to net zero will be impossible without the consent and participation of people and communities. Community energy is key to this engagement.
“Since the removal of virtually all government support – the Feed-in and Export Tariffs, tax reliefs, increased business rates, hiked VAT – community energy has struggled to make a business case to stay active.
“We had hoped for the reinstatement of Social Investment Tax Relief (SITR) for community energy, business rate concessions in recognition of the important social benefits, a pledge to reverse the hike in VAT from 5% to 20% for energy saving measures, with an ambition to reduce it to zero and announcements of the details of funding for energy efficiency upgrades to housing.”
Mr Law poured cold water on the notion of the budget being green, and criticised its “vast new funding for roads dwarfing spending on green transport, road fuel levy frozen and nothing on energy efficiency in buildings”.
He said the main clean energy investment in Mr Sunak’s budget is an £800m fund for carbon capture and storage to enable the continued use of fossil fuels. Another £900m investment is split between R&D on nuclear fusion, space and electric vehicles. “By contrast the government has only extended the Renewable Heat Incentive (RHI) by one year,” he added.
But Mr Law welcomed some positive commitments: £270m pledged to a new Green Heat Network Fund to run between 2022 and 2025, which takes total government support for heat networks to over £500bn, an ambitious action plan on tree planting and the development of ultra-low emission vehicles and infrastructure to support electric vehicles.
“It’s worth noting that there is currently no government strategy to engage the public in the transition to a low-carbon economy,” he warned. “This will need to change. People should understand why and what changes are needed, see a benefit from making low-carbon choices and have access to the information and resources required to make the change happen.
“Ministers, networks, regulators all agree that ‘The future of energy is local’. As a trusted, knowledgeable and highly motivated local intermediary, community energy is uniquely well placed to advocate for and deliver the necessary engagement and changes at a local level while delivering high return on investment and legion community benefits.
“Community energy is an essential powerhouse for transformation but only if it receives some support to act.”
Mr Law said Community Energy England will continue to lobby for SITR to be made available for community energy schemes and will call for the government’s imminent Energy White Paper (and the Net Zero Plan) to put people at the centre of energy policy – “as consumers, but also as participants, innovators and leaders in the increasingly local, low carbon energy system. Community energy is the key to this engagement”.