Opinion: Economist’s view on where cuts will fall

Grant Prior 13 years ago

Allen Wilen, economics director at construction industry contract monitoring service Glenigan,tells the Enquirer what sectors are under threat from the new public spending regime:

“The full implications for the construction industry, along with the rest of the country, will take time to emerge with the planned emergency Budget and the subsequent Comprehensive Spending Review.

“However key messages are already clear, with tackling the Budget deficit the most pressing priority.

“The new Government is committed to implementing the £6 billion of additional cuts this year promised in the Conservatives manifesto.

“Whilst this may in part be delivered by the axing of cherished Labour programmes such as ID cards, public sector capital expenditure programmes are likely to be regarded as a relatively easy target.

“Construction related areas, from the schools building programme to Crossrail, will be vulnerable to both explicit spending cuts and to cuts by stealth as protracted ‘policy reviews’ push back planned spending into future years

“Longer term the squeeze on the public sector investment is likely to be less severe than would have been the case under a simple Conservative majority government.

“Nevertheless given the pressure on Government finances, the new Government is likely to be keen to develop private sector funding models to secure deliver planned projects.

“In addition, changes in Government policy are set to block specific areas of private sector investment.

“Given both Conservative and Liberal Democrat opposition, BAA’s plans for a third runway at Heathrow and the expansion of airport capacity in south east England appear especially doubtful.

“In other areas, such as the need for new nuclear generation capacity, the Liberal Democrats are at odds with the Conservatives and progress is likely to be slow at best.

“The Conservative party has argued for effective action to cut public spending and tackle the budget deficit in order to reassure financial markets and nurture a private sector lead recovery.

“The new Government will have to demonstrate to financial markets that it will have the strength and longevity to deliver the promised overall reduction in the budget deficit.

“Furthermore there is a risk that continued political uncertainty could undermine consumer and business confidence and hamper the pace of economic recovery.

“There have already been tentative signs that the upturn in the housing market faltered ahead of the general election, with the number of mortgage approvals for house purchase sluggish during first four months of 2010.

“Any apparent political indecision could be replicated in the housing market, dampening the anticipated recovery in new housing activity over next twelve months.”

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