With the sound of warnings from the European Commission ringing in Alistair Darling’s ears that his plans to halve the UK’s £178 billion deficit in four years “lacks ambition”, just what should be announced in Wednesday’s Budget?
What is likely is that it won’t contain as much detail as many, including UK business leaders and the EU, would like. None of the main parties has yet produced a detailed and credible plan for deficit reduction and it’s unlikely that one will appear before the election.
So with it being doubtful that Mr Darling will unveil new ‘efficiencies’ on March 24, he’ll probably confine himself to looking at how the existing planned cuts will be achieved while simultaneously not scaring undecided voters, British industry and public sector employees away from the polling stations.
Here are a few opportunities within our sector…
- Given that he has just realised an £8bn ‘benefit’ from lower employment (this months figures), will this make him think harder about the benefits of sustaining construction activity? Areas to prioritise/protect in the Public Sector are likely to include house building and improving educational facilities together with key infrastructure schemes.
- Thinking further about the economic gains to be made from reducing unemployment, what could the Chancellor do to help local authorities stimulate growth, economic activity and regeneration? Allowing tax increases to be ring fenced and used locally (aka TIF or Accelerated Development Zones) would be welcomed as well as an extension of the Public Land Initiative.
- The stamp duty holiday was very well received, and could potentially be extended – but by how far and at what threshold? Reinstating this for first time buyers and raising the threshold to, say, £250k would be a popular measure, and if it helps to unlock stalled housebuilding schemes it could well be a price worth paying.
- And what about sustainability? What we don’t want is a repeat of the VAT giveaway – a measure that achieved very little in reality. Just think what the £6bn+ could have achieved in terms of ‘pump priming’ R&D in renewables/sustainability in the built environment. As Paul Morrell is saying, this should be a top priority, with particular focus on incentives for the retrofit market.
- One idea could be to reduce VAT to zero on all construction associated with environmental sustainability and affordable warmth measures. Why not go even further and combine it with reducing VAT on improvements to existing properties to help soften the blow of reduced pockets all round? This could have a marked impact on workload for SME’s and local / regional contractors.
One thing is for sure – there is an immediate need to invest in infrastructure. Treasury sources have already indicated that one of the key measures in the Budget – aimed at stimulating economic growth – will be a £2 billion fund to encourage corporate investment in “green” projects, from high speed rail to offshore wind farms.
We will just have to wait and see what Mr Darling has to say on the 24th…
Graham Kean is head of public at consultants EC Harris LLP.