The real big freeze

The Conservatives have made sorting out our dire public finances their biggest priority. If elected, it means they can legitimately claim to have won a clear mandate for slashing public spending on an unprecedented scale.

Already policy statements have identified quangos like the Homes and Communities Agency, regional development agencies and the Infrastructure Planning Commission as ripe for winding up. Whatever savings are achieved by running the rule over such bodies, the brutal fact remains that the brunt of any cuts will likely fall on big capital spending programmes, many of which are offering the construction industry life support. Few details will emerge this side of an election, but intense pressure to find savings puts education, roads and housing in the firing line.

Noble Francis, chief economist at the Construction Products Association, believes the £55bn Building Schools for the Future programme will falter, with only projects now under contract surviving a review. In effect, the programme to rebuild or refurbish 3,500 schools will be stopped in its tracks pending a new Tory education policy.

Elsewhere, the £3bn motorways programme, due to get under way in 2010, looks vulnerable to delay, dealing a body blow to the faltering civil engineering industry. Smaller firms relying on local government spending will also feel the freeze as building maintenance and highways work is put on hold.

Even the historically low levels of spending on public housing are expected to fall by the wayside, triggering a second big wave of company failures and job losses beyond the tens of thousands already shed. This is of obvious national concern as construction accounts for about 9% of national GDP.

There is a risk that if we accept, no matter how grudgingly, that cuts are inevitable, then the battle for a considered, long-term view is already lost. Talk of spending cuts has dominated the political landscape and overshadowed an equally important debate about where we need to protect investment that propagates economic growth.

Consecutive governments fail to realise the potential the construction industry brings to invigorate the economy by delivering real bang for buck. The UK Contractors Group has commissioned a report, Construction in the UK Economy: the Benefits of Investment, due to be published at the end of January, which delivers a compelling economic case in pounds and pence.

Talk of spending cuts has dominated the political landscape and overshadowed debate about where we need to protect investment that propagates growth

For every pound spent on construction, the nation derives a wider economic benefit of £2.85. In an area like roads spending, this multiplier soars – offering a return of £4.83. This is a simple but powerful argument that must be promoted at every opportunity. In its support, the CBI, while calling for government borrowing to be redressed urgently, has set out an alternative plan for huge efficiencies without scything down capital spending.

The myopic focus on slashing individual departmental spending underestimates the damaging knock-on effect on an industry like construction, which straddles health, education, transport and local government sectors. Strong ministerial support is needed to win the investment argument with the next chancellor. Over the first six months of the new government, ministers will need to argue forcefully through a round of spending reviews. But how many will carry the clout or be sufficiently well-briefed to fight their corners?

Among the main spending departments, shadow housing minister Grant Shapps commands the most impressive credentials. But his housing pledges to date have failed to inspire confidence. Plans to return planning powers to local communities in the name of local democracy are lambasted by housing experts as a new Nimby charter.

Still worse, plans to wind up the recently formed Infrastructure Planning Commission threaten a return to drawn-out planning squabbles over projects of national economic importance. This will impede the speed at which the nuclear power station building programme is advanced and the future expansion of Heathrow.

The impact of the recession has also put back Tory plans to set out details of regeneration projects such as the Thames Gateway. Shadow regeneration minister Stewart Jackson admitted the party’s commitment to publish a green paper in January or February will now have to be delayed until after the general election.This means a long wait before the Tory position on the future of economic development funding is known.

While we can all agree on the need for cuts to sort out the public finances, we must make sure they are the right kind. Cuts must be targeted at the battalions of civil servants running bloated public services, not the millions of people working to improve the UK built environment. There is still a huge backlog of work that needs to be done that will help lift the economy and protect the health of an industry that will be called on to meet the challenge of delivering a zero-carbon economy in the years ahead.