Michelle Essen and Lisa Dromgoole: A Scottish view - construction issues in the election manifestos

Womble Bond Dickinson (WBD) lawyers Michelle Essen and Lisa Dromgoole outline what the election manifestos have in store for the VAT Reverse Charge, the Apprenticeship Levy and Skills Shortage, and Modern Methods of Construction

Michelle Essen and Lisa Dromgoole: A Scottish view - construction issues in the election manifestos

Michelle Essen

The political parties have published their manifestos for the December 2019 General Election, setting out their stalls on a wide range of issues.

Very often the focus is on what the Conservative, Labour and Liberal Democrat manifestos say.

However, in this article we particularly want to focus what the SNP manifesto says (if anything) about three areas of interest for construction, those being:

  • the VAT Reverse Charge
  • the Apprenticeship Levy and Skills Shortage, and
  • Modern Methods of Construction.

The VAT Reverse Charge

The VAT Reverse Charge is national legislation, affecting the supply chain north and south of the border, and one of the main drivers for this legislation, from the government’s point of view, is to reduce tax avoidance in the construction industry. It was due to come into force on 1 October 2019, but was then postponed to 1 October 2020.

The Conservative, Labour and Liberal Democrat manifestos did not expressly mention the VAT Reverse Charge, but did all state an intention to tackle tax evasion.

The SNP manifesto also does not expressly mention the VAT Reverse Charge, but it does say that “SNP MPs will back improvements to tax collection and tougher action on tax avoidance, including….multilateral efforts to address tax challenges from the digitalisation of the economy, further action by the UK government to tackle international tax avoidance… [and] a comprehensive inquiry into the digitisation of tax, to uncover the reasons for HMRC and UK Government delays that mean we still do not have the 21st century tax payments system that could help tackle avoidance and evasion”.

In light of this and the focus in the other parties’ manifestos on cracking down on tax avoidance, it seems unlikely that the VAT Reverse Charge legislation will be postponed again, and so the construction industry should continue to prepare for this legislation to come into force in October 2020.

The Apprenticeship Levy and Skills Shortage

There has been a long recognised skills shortage in the construction industry and it has been reported that the construction skills shortage affects Scotland also - with a BBC article in May 2019 “Scotland-wide construction worker shortage warn experts” saying “More construction workers are needed to address Scotland’s housing shortage, industry experts have said. An independent group commissioned by the Scottish government has made 40 recommendations to boost the sector and close the skills gap.”

The government had sought to tackle this UK construction skills shortage through apprenticeships and through the introduction of the Apprenticeship Levy in 2017.

The Apprenticeship Levy does apply to Scotland. However, its application in Scotland differs from its application in England. The UK Government website page “Apprenticeship funding: how it works” directs Scotland related queries a separate website called Apprenticeships.Scot. This explains here that:

All UK employers with annual salary bills of more than £3 million now pay an apprenticeship levy. If you’re an employer in Scotland who already has apprenticeship programmes in your organisation, apprenticeship funding will continue to be administered by Skills Development Scotland through contracted learning providers and direct employer contracts.”

Michelle Essen and Lisa Dromgoole: A Scottish view - construction issues in the election manifestos

Lisa Dromgoole

In their manifestos, the Conservatives say they want to “look at how we can improve the working of the Apprenticeship Levy”, Labour says it will “make it easier for employers to spend the levy”, and the Liberal Democrats say they will expand the Apprenticeship Levy into a wider “Skills and Training Levy”.

The SNP manifesto does not expressly mention the Apprenticeship Levy, nor the Skills Development Fund.

But the SNP manifesto is clear that the SNP opposes the Immigration Skills Charge and seeks devolution of migration issues with specific reference to potential staffing shortages in key sectors including construction. The SNP manifesto also raises potential devolution of employment law generally with specific proposals in connection with the statutory living wage, agency workers in the gig economy and age discrimination which would undoubtedly impact those operating in the construction industry.

With each of the Conservative, Labour and Liberal Democrat manifestos all containing statements about a review of or changes to Apprenticeship Levy (which would impact on Scotland), in light of the 40 recommendations received by the Scottish Government referred to above, and taking into account of other employment policies referred to in the SNP manifesto, these in turn may help to continue to address the skills shortage in the construction industry in Scotland. We will just have to wait and see.

Modern Methods of Construction

Modern methods of construction, often shortened to “MMC”, encompass a wide range of new ways of designing and building construction projects more quickly, more efficiently and with reduced waste. The most common uses of MMC relate to offsite construction.

The UK Government has openly supported MMC, referring in its Autumn Budget 2017 to a “presumption in favour of offsite construction by 2019 across suitable capital programmes, where it represents best value for money”.

Of the Conservative, Labour and Liberal Democrat manifestos, only the Conservatives expressly mentioned MMC, briefly saying they will “support modern methods of construction” (when talking about homebuilding).

The SNP manifesto does not mention MMC expressly either. What it does say though is the SNP will “bring to market a £3 billion portfolio of projects, including renewables, waste and construction, ready for green finance investment”.

With that investment and in light of the “presumption in favour of offsite construction” referred to above, the gathering momentum behind MMC is likely to continue enabling the construction industry to continue to innovate, develop software, invest in smart technology and itself become smarter.

Final thoughts:

Lisa Dromgoole, managing associate in the construction and engineering team, in WBD’s Edinburgh office, said: “An analysis of the competing manifestos of the main political parties in advance of the general election demonstrates that each of them has something to say on the topics that matter within the construction industry today. North of the border the analysis could not be complete without considering the SNP.

“Although much of the policy is in connection with apprenticeships, MMC and tax are national or reserved issues, the Scottish Government does have devolved powers on education and training, housing, land use planning and some forms of taxation. The manifesto pledges to press for additional devolution – watch this space.”

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