Opinion: Budget disguises long haul ahead

Aaron Morby 12 years ago

It may have been the toughest Budget for a century, but the construction industry  breathed a sigh of relief, at least for now.

An austerity Budget of this scale inevitably deals hammer blows to the economy that will negatively impact on our industry.

The increase in VAT is a good case in point because it  puts cowboys builders firmly back in the saddle.

Surely the temptation grows for cash-strapped home owners to make cash-in-hand payments on domestic building works, undercutting law-abiding, tax-paying builders.

What should be applauded is the Chancellor’s acknowledgement that the dire state of the nation’s finances isn’t down to capital spending but the public sector’s cost base being too high.

His decision to turn the knife on the bloated state and spare the country further capital spending cuts is welcome news that augurs well for the tough times ahead.

Contractors are among the hard working people of this country who need to be treated favourably again while the axe comes down on the work-shy who have exploited Labour’s lax benefits system for too long.

The Chancellor deftly said the door remained open to well-judged projects that could deliver far-reaching economic benefits.

This is what civil engineers are best at and is a positive challenge for all those specialising in value engineering.

The flurry of rail projects mentioned in the Budget offers a clear pointer to the way this Government is thinking on infrastructure. Road builders, judging by earlier project cuts, will far less well.

What there is no escaping, even with this smidgen of “less bad” news, is that we are in for very tough times ahead.

Taken at face value the pledge to maintain overall capital spending levels is misleading.

It disguises the swathe of projects that have already been cut. What’s more the coalition Government is in effect following Labour’s headline capital spending plans, which already built in huge cuts over coming years.

It is a brutal fact that over the next five years total capital spending will be down by £100bn against today’s levels. This monumental figure amounts to just less than a year’s UK construction output.

The expectation is that the private sector will rush in to meet the public demand shortfall. This is a big ask when banks still seem reluctant to fund even relatively low risk projects at the moment.

But it is also an opportunity to resurrect some old business models, perhaps the return of the developer/builder.

The public sector austerity programme is likely to change local auhtority attitudes to the private sector and pave the way for new private sector partnerships.

Certainly outsourcing firms like Interserve stand to gain as local authorities focus spending money more efficiently.

But what does the future hold for the thousands of local and regional building companies?

There have already been misleading reports that the Building Schools for the Future programme is safe because there will be no more spending cuts.

This couldn’t be further from the case. The pledge to maintain capital spending is about the headline figure not departmental spending.

Each Government department’s spending plan will now be means tested against the new house rules demanding significant benefits to the economy.

In the main this means favouring job creation projects in areas that are suffering from high unemployment. It also probably favours low carbon and energy projects.

Whether that leaves any head room for our school builders remains to be seen when the Comprehensive Spending Review is announced on 20 October.

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