Budget could have been worse

The emergency Budget unveiled by chancellor George Osborne last week was always going to be about as popular as a vuvuzela on the centre court at Wimbledon and so it proved to be. The largest VAT hike in recent times grabbed the headlines but was it really so bad for us in construction?

The Budget proposes a total fiscal tightening of £113bn over the next five years, or 8.9% of current output, against the £73bn planned by the last government. Hence the Tory-Lib Dem target is ambitious - it wants to clear the structural deficit and even work up a surplus before the next election.

The main sigh of relief will have come with the announcement of the setting up of a regional growth fund to finance capital projects over the next two years

I was fortunate enough to have my own private insight into government thinking earlier this year when I had a quick cappuccino with Mark Prisk, the new construction minister. He now works for business secretary Vince Cable and I get a sense that at last we have two people who have an understanding of the fact that our industry is still vital to the country’s economy and, in spite of the recession, employs a vast number of people who will potentially be paying a huge amount of tax - that’s if they are working.

Prisk is a chartered surveyor by background, has run his own business and comes from the school of non-intervention. He is also minister for small business and one of the first things he is doing is to spend five days with five medium-sized firms to get experience of the workplace. I do hope one of those chosen is either a contractor, an architect or a quantity surveying practice. He may see that, while previously we were grasping at thin air for work, at least it now feels like we are dealing with something more substantial - and reachable.

For those of us in the construction sector the Budget was not good but it could have been a whole lot worse. The measures on corporation tax may tempt more foreign businesses to come here and national insurance breaks for regional businesses may drive some expansion outside of the South-east. But surely the main sigh of relief came with the announcement of the setting up of a regional growth fund to finance capital projects over the next two years. It is unclear though where the funding for this will come from.

Surely we can use some overseas funding for infrastructure to support our own industry while delivering much needed aid to poorer nations

The upgrade of the Tyne and Wear Metro, the extension of Manchester’s Metrolink, the redevelopment of Birmingham New Street station, improvements to the rail lines into Sheffield and the rail link between Liverpool and Leeds are all still apparently happening. The chancellor said, somewhat menacingly, that capital projects would be prioritised if they could be shown to have a “significant economic return to the country”.

That measurement of “significant economic return” may not be decided by the same criteria as they were in the past. For instance, I am not sure that frameworks such as the Office of Government Commerce have a great deal of currency with the new coalition. I hear that they may be tainted by association and regarded as the poodles of the past by many at the heart of the new regime. There is a feeling that they did not squeeze as good a deal as they could have done from our industry on behalf of Mr and Mrs Taxpayer.

It is only natural that a new management may want a new team around them to advise. Hence, once more, it seems our industry will be asked to be flexible and work in new and imaginative ways. It could be argued that to make a profit in this climate you will need the imagination of Steven Spielberg. But at least the coalition government sees those who work in the built environment as allies not adversaries and it seems they are keen to foster this relationship.

I have one idea that may help us all. There is an area of expenditure that has been ringfenced from which both our industry and the government could benefit. Namely the overseas aid budget for sub-Saharan Africa, Asia and Latin America. There is some £7bn of protected funding here. It is controversial and, according to recent surveys, many want it slashed. However, something we could do is follow the example of other nations which spend that aid on providing infrastructure rather than cash. Cash can so easily end up in a private account in Lichtenstein. The Chinese government, to name but one example, has given much of its aid to Africa in the form of roads, schools and hospital buildings. We have some of the most valued construction professionals in the world and an unsurpassed skill at providing infrastructure. Surely we can look at using some of this funding to support our own industry while delivering much needed aid to poorer nations.

We could all use some imagination and creativity to get ourselves through these challenging times.

Richard Steer is senior partner at Gleeds