Osborne fails to launch NPPF or provide practical measures on infrastructure push
Chancellor George Osborne unveiled a Budget designed to “back business” that construction industry leaders said appeared to fail to provide the concrete measures hoped for to back up the government’s rhetoric on infrastructure investment.
Following on the heels of a speech by David Cameron to the Institution of Civil Engineers on Monday, which laid out plans to part privatise the UK’s trunk road network in order to bring in private capital, the Budget statement contained relatively few additional details.
Most significantly it ducked launching controversial changes to the planning system under the National Planning Policy Framework, which had been expected and will now be published next week, when it will also come into effect.
Osborne said a pension fund vehicle set up to invest in infrastructure projects had already raised £2bn, and announced further funding for rail, housing and local authority development schemes. For a full list of measures see box below.
Osborne said the Budget, which contained cuts to personal and business taxation, was unashamedly pro-business, and would provide firms with “modern infrastructure; new growth-friendly planning rules and employment laws.”
Figures showed that the changes in the Budget will actually see expected government investment in capital projects, which include but aren’t limited toconstruction, £1.1bn lower in 2011/12 than indicated in the Autumn Statement.
The 2012/13 figure will also be £1.1bn lower than expected in October, however the figures recover in later years.
Osborne also gave no idea of the government’s plans to replace the Private Finance Initiative mechanism, which is currently under review.
Construction industry figures said they welcomed the continued focus on infrastructure investment outlined by Osborne, but had been hoping for greater detail.
Noble Francis, director of economics at the Construction Products Association, said: “There is little in terms of practical measures - we’re talking about relatively small amounts in relatively few areas. It’s not a game changer, there’s very little that is significant.”
Jonathan Hook, construction partner at consultancy PwC, said the industry was waiting for detail on how the pension fund investment would be brought in, and on the future of PFI: “It’ll be positively received by business as a whole, but there’s little for the construction sector. Remember there are a lot of public sector cuts to come so the question is how the private sector can be brought in.”
Ben de Waal, head of residential at Davis Langdon, an Aecom Company, said it was disappointing not to have got more detail on a £150m pilot for Tax Increment Financing, a way of raising money locally to spend on publicly-backed developments.
“It’s a positive move, but people need the detail to weigh up the costs of putting in bids for these pilots,” he said.
Some developers raised concerns about the increased Stamp Duty rate for properties worth more than £2m, which the Treasury said would raise £1.1bn over the next five years.
John Hitchcox, chairman of property firm Yoo, said: “Hiking stamp duty may seem like a good thing by hammering the rich but it will hinder growth by encouraging people to stay in their homes instead of moving.”
Budget: Key points for construction
- Pension fund vehicle to be set up in 2013 - it has already raised £2bn to invest in infrastructure projects
- A further £150m to be invested in stalled housing schemes
- The go-ahead for a £130m rail building programme in Manchester
- A ‘city deal’ for Greater Manchester that will permit it to claw back up to £30m per year in tax to invest in infrastructure
- Councils will be able to bid for a share of £150m to finance development under the Tax Increment Financing mechanism
- Stamp duty relief on zero carbon homes abolished, as part of a reform which will see a clamp-down on avoidance and a 7% levy on the sale of homes over £2m
- Increase the Growing Places Fund by £270m, including £70m for the Greater London Authority
- Enhanced capital allowances available from 1 April 2012 for a designated site in the London Royal Docks enterprise zone and in enterprise areas in Scotland and Wales
- The main rate of corporation tax reduced by an additional 1%from April 2012, meaning the rate will fall to 24% in April 2012, to 23% in April 2013 and to 22% in April 2014
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