RICS director of external affairs comments on the controversial government announcement
The property and construction sector will certainly feel its share of the general pain, and when this sector hurts, the whole economy hurts more.
The government is gambling with the economy by reducing communities and local government capital spending by 74% over the next four years. This will have a significant effect on housing supply, especially social housing, which is already at historically low levels.
As well as reducing the number of affordable homes this could have a wider impact on the housing market where continued low supply will create affordability issues, particularly for first time buyers.
This comes on top of a 60% reduction in spending on the construction and refurbishment of schools. Cuts like this risk endangering the hugely important construction sector – every £1 spent by the government on building projects generates around £3 for the wider economy.
Cutting construction spending will have serious negative impacts including long term unemployment, loss of skills and outdated infrastructure preventing economic growth.
The government is gambling with the economy by reducing communities and local government capital spending by 74% over the next four years
While welcoming both the new Green Deal scheme and the commitment to increased funding for renewable energy infrastructure, RICS believes plans for a Green Infrastructure Bank will need much more than the £1bn allocated in the CSR to be successful in leveraging the necessary private sector investment in the low carbon economy.
The plans to tackle inefficiency in public sector asset management by creating two new vehicles for the estate in London and Bristol led by the Government Property Unit are welcome. But the really big savings are to be made in the bulk of the estate in the regions. Publication of asset registers should help get this moving.
Everyone realises that big cuts are needed to reduce the deficit. The axe has been wielded, but next year’s budget provides an opportunity to support innovation and growth by making fiscal adjustments that will have a big payback, such as cutting VAT on repair and refurbishment of buildings, supporting investment in carbon reduction measures, reinstating empty commercial property rate relief and changes to the tax system to support greater investment in residential property.
Read the full Spending Review .
Mark Goodwin is RICS director of external affairs