No one really expected the chancellor to suddenly abandon austerity but many hoped he would
Even before the Evening Standard leaked the Budget’s main details, and the House of Commons deteriorated into what the deputy speaker politely termed a “circus”, it was clear that the chancellor’s announcement this week was going to be controversial.
The longer the downturn has dragged on, the more criticism has been levelled at George Osborne’s steadfast refusal to divert more cash to capital spending in order to stimulate the economy, or to introduce clearer measures to generate private sector investment.
This has come not least from a construction sector that experienced a 6% fall in output between December and January alone. Wednesday’s adjustment of the 2013 UK economic growth forecast to just 0.6% only underlines the case for investment.
The construction industry knew better than to expect a dramatic change of attitude, but there was some hope that the ever closer prospect of an election would spur the government to act more decisively to relieve the industry’s pain in order to lift the economy. In the event, there was only one part of the construction sector to really see any such relief - and it was arguably the one that needed it the least.
Osborne’s package of measures on housing - including the expansion of the mortgage indemnity initiative and raising of the build-to-rent fund from £200m to £1bn - are, of course, a welcome boost for housebuilders. In particular, the dramatic extension of the First Buy scheme to provide £3.5bn of equity for those who want to own a new-build home could ramp up activity in the sector. However, the sales increases and profit rises recently reported by private housebuilders indicate that this market has already turned for the better. And the planning reforms introduced a year ago under the National Planning Policy Framework are also really starting to help the sector.
Of course, it’s good news that the government is building on this progress - but, given that Osborne appears alive to the political advantage to be gained from boosting sectors where economic activity can be generated quickly, it is hugely disappointing that he has not chosen to introduce similar measures to stimulate recovery elsewhere in construction.
Again, the government has missed an opportunity to give a shot in the arm to the sector, and the economy
The £3bn capital spending increase announced for 2015-16 is all well and good, but that’s still two years away and there is, as yet, no detail about what it will be spent on. And the limited progress on the UK Guarantees Scheme, much hyped by the government as a means to kick-start large scale infrastructure projects, effectively ends any hope of that initiative having a significant impact in the foreseeable future.
Building has repeatedly pointed out - including in our own Budget submission to the Chancellor, published in the magazine last week - the great potential that green construction has to stimulate growth. There was some progress here, which we welcome: one of our five Green for Growth campaign aims - a move forward on zero-carbon housing - was acted on by the chancellor (see this news story). But again, the government has missed an opportunity to give a shot in the arm to the sector, and the economy, by stimulating immediate spending on green measures.
Osborne said in his speech that although the process was taking longer than expected, the government was “slowly, but surely, fixing our country’s economic problems.” But the point he still seems unable to grasp is that, as far as construction is concerned at least, the very slowness of his approach is only making the economic trench that the UK is in deeper and deeper.
Sarah Richardson, editor