George's announcements welcome but drop in spending remains

The chancellor can by no means be accused of underestimating the important role investment in the built environment can play during difficult economic times today, by supporting a sector of the economy contributing nearly 10% to GDP and creating jobs for people who desperately need them, while simultaneously providing the country with the infrastructure it needs to prosper tomorrow. Investment in the built environment took centre stage during today’s announcement. Surprises were few and far between, a series of pre-announcements and leaks put pay to that, and as expected plans to invest in housing, the schools estate and the roads and rail network stole the limelight.

Sadly behind the rhetoric the substance was much thinner and big questions about how significant hurdles to institutional investment will be cleared and where money for schemes such as Get Britain Building would be sourced from were left unanswered. Furthermore, just 16% of the £4.7bn of truly new publicly financed infrastructure investment announced today will be spent before March 2013, suggesting that help will not be received sooner rather than later as is required.

An additional £1.2bn for projects in the education sector was probably the biggest surprise. £600m will be used to create 40,000 new school places in areas with the greatest demographic pressures, with the remainder allocated to the delivery of 100 new free schools. Funding to provide additional school places will be available from 2012/13, with money to build new free schools kicking in from 2013/14.

Today’s announcements have to be welcomed but in reality do little to reverse the sharp fall in government capital spending - from £62bn in 2010/11 to £45bn in 2013/14. A giveaway it certainly wasn’t but that was probably to be expected given the strong, and strengthening, headwinds the UK economy is facing.