The Budget – Two Cheers, Just...

Simon Raine
George Osborne’s 2012 budget focussed more on taxation than specific measures to strengthen and grow the economy. This has led many commentators to consider that more can be read into what was not said, rather than identifying the proposals which might assist our struggling construction industry.

The chancellor is putting his faith in a number of general measures that he hopes will provide the private sector with the confidence to fill the gap left by a reduction of £1.1bn in expenditure on capital projects in 2012/13 compared with the previous year. These include:

  • An additional 1% reduction in the rate of corporation tax to 24% in 2012/13 with further 1% annual reductions for the subsequent two years
  • Enhanced capital allowances for areas in London, Scotland and Wales
  • The introduction of a package of oil and gas measures to secure billions of pounds of additional investment in the UK continental shelf
  • An increase of £150m in the Get Britain Building fund designed to deliver over 12,000 new homes by supporting construction firms needing development finance
  • Consideration of the potential role a social housing REIT could play to support investment in the social housing sector

The budget also included a number of measures designed to accelerate investment in infrastructure in the public realm, although many consider that there is currently insufficient detail in the measures to understand how they will be financed. Nevertheless, proposals announced include: 

  • Supporting the establishment of a new Pension Infrastructure Platform owned and run by the UK pension funds as a means to finance the government’s previously heralded investment in major infrastructure projects
  • Agreeing to a proposal from Manchester to pilot a new Earn Back model that will allow the local authority to retain up to £30m per annum in tax revenues to invest in infrastructure projects
  • Allocating a further £150m to larger scale projects in core cities to be financed through Tax Increment Funding which allows local authorities to borrow against future growth in business rates
  • Increasing the Growing Places fund by £270m to empower local communities and businesses to lead development in their own areas. However, this will be funded from within existing departmental budgets which inevitably will result in cuts elsewhere
  • Recognition of the need to confront the lack of airport capacity in South East England 

 

  • £130m for the Northern Hub rail scheme to improve links between a number of northern regional towns and cities
  • £60m to establish a UK centre for aerodynamics
  • £100m fund to support investment in major new university research facilities

    The environmental lobby appeared to be mildly disappointed but not surprised by the budget, noting that the chancellor remarked that “environmentally sustainable must always be fiscally sustainable.”

    Overall the industry probably gave the chancellor two cheers for his budget.

    Overall the industry probably gave the chancellor two cheers for his budget. Whilst his proposals gave some hope for future improvement, most were building on previous commitments without containing sufficient detail to give the industry the confidence that real change will happen in the near future. In particular, it did not launch the changes to the planning system under the National Planning Policy Framework which the government believes will accelerate progress of sustainable development across the country. Those changes have now been published and come into effect today, March 27, 2012.

    Specific infrastructure and building projects under active consideration include: