Home » BCIS responds to ‘lacklustre’ Spring Budget

BCIS responds to ‘lacklustre’ Spring Budget

Published: 07/03/2024

The Chancellor of the Exchequer has presented his Spring Budget to Parliament, outlining the government’s upcoming tax and spending plans. The headline measure is a cut to employee National Insurance, effective from next month.

Dr David Crosthwaite, Chief Economist at BCIS, outlines the key announcements relevant to construction and reflects on their potential to provide a much-needed boost to the industry and economy.

  • Decrease in the main rate of employee National Insurance, from 10% to 8%.
  • Decrease in the main rate of self-employed National Insurance, from 8% to 6%.
  • £240m to housing projects in London, unlocking up to 7,200 homes in Barking and a new life sciences hub and up to 750 homes in Canary Wharf.
  • Establishment of the Euston Housing Delivery Group with £4m to support plans to deliver up to 10,000 new homes.
  • £10.2m to support the development of the Cambridge Biomedical Campus, £7.2m of which to unlock improvements to local transport connections for the Cambridge Biomedical Campus and the city.
  • £400m to extend the 10-year Long-Term Plan to 20 more places, including Darlington, Rhyl, Carlton (in Gedling), Peterhead, Coleraine and Eastbourne.
  • Green light for the next section of East West Rail, ‘accelerating works to allow services from Oxford to Bedford to run by the end of the decade’.
  • Great British Nuclear running competitive process for the selection of Small Modular Reactors – six companies invited to submit their initial tender responses by June.
  • Technical consultation on extending full expensing to assets for leasing
  • Capital Gains Tax for property disposals decreasing from 28% to 24%.
  • Launch of round 2 of the Local Nutrient Mitigation Fund, ‘which will support delivery of 30,000 homes by 2030 that would otherwise be stalled due to high levels of nutrient pollution’.
  • £3m to match industry-led funding for a skills and education programme to attract more people to take up roles as local planners in planning authorities.
  • Up to a further £120 million for the Green Industries Growth Accelerator (GIGA), to support expansion of low carbon manufacturing supply chains across the UK.
  • AI pilot to help speed up development of local plans.

Dr Crosthwaite said: ‘The Spring Budget has continued the trend of fiscal events being distinctly lacklustre for the construction industry. There was very little in it that would give confidence to investors or to firms who are operating in still very challenging conditions.’

‘The Chancellor says he has a plan for ‘sustainable, long-term growth’ but we’re simply not seeing evidence of that in the announced policies and investment.

‘Despite construction being a key lever of economic growth via the multiplier effect, there was no real increase in spending announced.

‘The repeated commitments to housebuilding were limited to only certain areas and schemes and there remain many questions over how the government intends to increase efficiencies in the planning process.

‘Likewise, the claim of investing in infrastructure is there, but still not enough detail following the cancellation of HS2 Phase 2 and promised ‘Network North’ plans.

‘Construction needs investment. We need more major projects to stimulate the economy and get Britain growing again.’

As part of the package of Spring Budget publications, the government also responded to a framework that was recently set out by the head of the National Audit Office, which outlined ways to help deliver tens of billions of pounds of government savings.

Among the NAO’s key concerns about getting value for public money were:

  • Parts of our national infrastructure are crumbling. Maintenance backlogs persist in large parts of the public estate, impeding service delivery and costing more to put right in the long run.
  • Higher inflation has increased costs, particularly for large infrastructure projects.

On the issue of maintenance of capital assets, such as schools, hospitals and prisons, NAO head Gareth Davies said: ‘All too often the NAO’s recent work has highlighted the false economy of allowing maintenance backlogs to build up.’

On major project costs, referring to both HS2 and the New Hospitals Programme, he said: ‘decisions to proceed were not accompanied by sufficiently robust and realistic assessments of affordability’.

In the government’s response, outlining what it is doing to address these challenges, The Chief Secretary to the Treasury describes the recently updated National Infrastructure and Construction Pipeline as a ‘critical document and dataset for industry, which provides more certainty and confidence in the future shape and scale of infrastructure work’.

Dr Crosthwaite said: ‘Unfortunately, the pipeline fails to do that in a number of ways, not least in its lack of clarity and less than convincing pledge to tackle skills shortages.

‘The OBR forecasts published alongside the Spring Budget are predicting very low growth, despite being slightly more optimistic than at the time of the Autumn Statement.

‘We need the government to be much bolder and to properly invest in programmes that will support wider economic growth.’

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