The consensus on the Budget appears to be that the Chancellor had very few options. With growth forecasts downgraded yet again, borrowing up and the deficit essentially unchanged, he has little room for manoeuvre.
After an £11bn departmental “underspend” in 2012/13, public sector spending is set to be even more tightly controlled, with £11.5bn worth of savings (or cuts, depending on your politics) to be found in the June spending review.
Measures for growth amounted to a stimulus for the housing market by underwriting some mortgage lending, a cut in corporation tax (but not for two years) and an increase in spending on infrastructure, also from 2015.
“Infrastructure” was the budget buzzword. It appears 57 times in the Treasury’s Budget Report, compared with construction, which is mentioned just three times. Of course infrastructure investment usually involves some construction but the key issue is timing.
Research by The Guardian shows that less than a quarter of the Government’s projects will be completed during this parliament. The regularly updated “pipeline” of more than 500 infrastructure projects lacks start dates for many schemes. As the paper puts it, the national infrastructure plan includes “dozens if not hundreds of schemes that will not start buying equipment and materials or employing labour until long after the next general election.”
The UK certainly needs long-term investment in infrastructure but the economy, and in particular the construction sector, needs a stimulus now.
It’s instructive to read reactions to the budget from some of the organisations involved in the sector.
Here’s the RICS on infrastructure:
“The £3bn a year announced by the Chancellor is welcome but will not come on stream until 2015-16 – far too late for many businesses that are struggling now. Our members have told us repeatedly that the success of infrastructure projects are about delivery on the ground. RICS believe Government should spend more time and resource in supporting business to gain access to these public sector projects.
“The Government has largely failed to realise that infrastructure projects don’t need to be big to be effective in creating growth. In fact small might very well be beautiful. Across the regions and the nations it’s the smaller repair, maintenance and upgrade projects which can be picked up by medium and small construction businesses. Rail maintenance and school refurbishment are just two areas where a small amount of capital investment would quickly deliver great benefits.”
… and the Federation of Master Builders on housing:
“The FMB worries that the measures announced today may not go far enough to allow smaller builders to deliver the energy-efficent new homes Britain needs. Britain’s SME builders are in need of relief after years of shrinking workloads and rising costs. More than three-quarters of our members recently told us that the most important thing the Government could do to revitalise the home repair, maintenance and energy-efficiency markets would be to cut VAT. This would also provide a level playing field when competing with builders who choose to avoid charging VAT.”
In austere times, maintenance and repair always suffer. While new, large-scale projects are being proposed and (eventually) funded, the everyday infrastructure on which we all rely is being neglected – from roads to rail, from houses to hospitals.
Put this together with the need to make buildings of all types more energy efficient and you have a once in a generation opportunity to tackle the maintenance backlog, to upgrade and to improve performance. Surely that’s worth investing in?