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Budget 2010

The 2010 Budget took place on 24 March.  The chancellor's statement, full Budget report and accompanying documents are all available on the Treasury website. 

The key points of interest are highlighted below in order which they appear in the Budget report. We issued a response to the Budget statement, and our policy circular gives more information for members and associates.

Chapter 3 - Reforming financial services

  • The government reaffirmed its commitment to help develop robust securitisation and covered bond markets at both domestic and international levels. This is being carried forward as part of a wider programme of work reporting to the Council for Financial Stability. No further detail was given on how this is being taken forward. 
  • Lloyds Banking Group (LBG) and Royal Bank of Scotland (RBS) exceeded their mortgage lending commitments. During the 12 months to February 2010, LBG exceeded their commitment of £3 billion by £1.4 billion. RBS exceeded their commitment of £9 billion by £2.7 billion. Going forward the government confirmed that LBG has agreed to £3 billion and RBS £8 billion in additional mortgage lending for the 12 months from March 2010.
  • The government intends to integrate Northern Rock Asset Management and Bradford & Bingley under a single holding company. Both firms will remain seperate legal entities.
  • The government remains committed to encouraging competition between existing banks and building societies, and between incumbants and new banking entrants or other challenges. The report specifically welcomed the OFT's short review of barriers to entry in retail banking and the FSA's intention to deliver further improvements to the bank licensing process.
  • Following setting up an expert group in 2009 to look at strategic issues affecting the building society sector, the government intends to publish a discussion paper on building society capital shortly.
  • The government wants to ensure every adult in the UK can access practical, impartial information and advice about money. To this end, on 11 March 2010 the government announced that it and the FSA had committed £20 million in 2010-11 to fund the rollout of the Money Guidance service. The FSA will establish a new independent consumer financial education body to lead the national implementation of the service.
  • The government intends to transfer the regulation of second charge mortgage lending to the FSA, including the regulation of existing second charge loans. The government is also continuing to explore how best to protect consumers in the buy-to-let market and those whose mortgages are sold on to unregulated firms.
  • The government highlighted the role of the Home Finance Forum in encouraging high standards of industry best practice. And noted it has helped, in conjunction with the CML, to develop a new approach to monitor voluntary repossessions, and changes to the Civil Procedures Rules (to be implemented from April 2010) to help address concerns over interactions between first and second charge lenders. 
  • HMRC will open discussions with mortgage lenders on the formal introduction of an income verification service for mortgage lenders to provide them with greater certainty about those to whom they lend.

Chapter 4 - Supporting business and growth

  • In order to provide greater flexibility the UK real estate investment trusts (REITS) the government intends to legislate as soon as possible in the next parliament an amendment to allow UK REITS to issue optional stock dividends as an alternative to cash as part of their property income distribution requirement.

Chapter 5 - Achieving fairness and providing opportunity

  • The government is considering responses to their housing benefit consultation and emerging findings from research on low-income working households before setting out reforms. However, from October 2011 the highest rents across the country, including the most expensive 8% of properties in London, will be excluded from the calculation of the local housing allowance in each area.
  • The standard interest rate at which support for mortgage interest is paid will be maintained at 6.08% for a further six months until December 2010, and targeted help via the mortgage rescue and homeowner support schemes will continue into 2011.
  • From 25 March 2010 there will be a two-year stamp duty relief for first-time buyers on property purchases up to £250,000, and an additional 5% rate will be introduced on property over £1 million from 2011-12.
  • Through a recent consultation, the government has invited industry to work with them to conisider the contribution the private rented sector could make to addressing demand, housing supply and any barriers to investment. The government is also taking forward a package of reforms to drive up quality and professionalism in the sector.
  • As the economy recovers, the government will take action to promote a strong long term recovery in the house building industry and help to maintain affordability by addressing the long term housing supply challenge. The government will work jointly with industry through a ministerially sponsored action group to address the challenges and develop proposals for action. 
  • The government will consult on detailed plans to replace the council housing finance system with a self-financing system.

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