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Tue October 27 2020

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How construction is affected by the spending review

20 Oct 10 George Osborne has revealed full details of the Treasury's Comprehensive Spending Review, which will means billions of pounds in public sector spending cuts over the next four years.

George Osborne has revealed full details of the Treasury's Comprehensive Spending Review, which will means billions of pounds in public sector spending cuts over the next four years.

“Today is the day Britain steps back from the brink,” said the Chancellor, as he began outlining the review this lunchtime.

At first glance, it does not look as painful for construction as many had feared. Capital spending will actually increase by £2bn to £51bn, compared to the last budget, subsequently dropping to £49bn, £46bn, and £47bn over the remaining years of the parliament.

Contractors who operate in transport and education can feel happy with the outcome, less so those who rely on social housing. The key points of the review are as follows.

Transport

Transport will receive some £30bn of capital spending over the four year CSR period, a real terms drop of 11%.

The Chancellor confirmed many major schemes would go ahead, including Crossrail. Those he listed – which he said was not the final list – were:

  • M62 expansion
  • Rail platform improvements across UK
  • £500m for Tyne & Wear Metro
  • Rail electrification between Liverpool, Manchester, Preston and Blackpool
  • New suspension bridge over the Mersey at Runcorn
  • M1 and A46 to be upgraded in the Midlands
  • Investment in the Midlands Metro
  • M4 and M5 improvements in the South West.
  • A new transport scheme for Weymouth
  • A11 to Norwich to be upgraded
  • M25 will be widened in key areas
  • A3 Hindhead improvements to go ahead
  • “Key” Tube lines to be upgraded
  • Crossrail to go ahead

However, a further eight schemes worth £1.3bn will be axed.

Education

Education's capital budget will fall from £7.6bn in 2011/12 to £3.3bn from 2012/13, rising slightly £3.4bn by 2014/15. This represents a 60% fall in spending over the four-year period.

However, £15.8bn will be spent refurbishing and improving schools over four years, with 600 new schools to be built.

Energy

The Department of Energy and Climate Change will see it's annual budget rise to £2.7bn by 2014/15, a real terms rise of 41%.

The Green Investment Bank will be created, supported by £1bn of funding, and "much more" from the private sector, said Osborne. £200m will be invested in offshore wind.

£1bn will be invested in creating a carbon capture and storage demonstration plant. £860m of funding will be spent on the Renewable Heat Incentive, to be introduced from 2011/12.

Capital spending on nuclear decommissioning will increase over the next four years.

Healthcare

Overall, healthcare spending will rise to £114bn from £104bn within four years, above inflation, with new hospital schemes such as St Helier in Surrey going ahead.

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Scotland and Wales will receive the same proportional increase in health funding as in England.

However, capital spending on healthcare schemes will fall by 17%.

Housing

The Department for Communities and Local Government's capital budget will shrink by almost three quarters, falling from £6.9bn this year to £2bn by 2014/15.

Social housing capital spending will total £4.4bn over the next four years, providing up to 150,000 new affordable homes during that period.

Osborne also promised reform to the planning system which will “reduce the burden on house builders”.

Justice

The Ministry of Justice's budget will be cut by 6% a year, to £7bn by 2014/15, but it's capital spend will be chopped in half, dropping from £600m a year to just £300m by the end of the four-year period.

Plans for a new 1,500-capacity prison will be deferred, and 3,000 fewer prisoners will be locked up.

Defence

Defence capital spending will increase from £8.6bn in the current financial year to £8.9bn in 2011/12, £9.1bn in 2012/13, and £9.2bn in 2013/14, before falling to £8.7bn in 2014/15.

Across the full period, this represents a fall of 8.7% in real terms.

Cuts include a £14bn training academy in south Wales, where a Laing O'Rourke team was preferred bidder.

Other key points

Local government revenue grants will no longer be ringfenced from April next year, but central funding for councils will be cut by 26% over the parliament.

The number of apprentices supported by government will rise to 75,000 a year, a 50% increase.

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