Live blog: Spending Review 2010

2pm Our debate on the Spending Review has now started live text debate Put your questions to the experts.

12:04pm Hope you enjoyed the Great Green Refurb Question Time. Apologoies for Chris Huhne’s non-attendance. But good that the government put up another big hitter in Greg Barker, minister of state for climate change. The webinar will available to view in a couple of days.

We have another live debate at 2pm involving two of our economists who have probably be working late into the night trying figuring out what crumbs the spending review has left for construction.

8:56am Today we’re taking stock of the government’s announcements on spending and giving you the opportunity to put questions to experts on what it means for construction. At 11am we have our webinar on refurbishment. It’s the Refurb Question Time and we’ve got a panel that wouldn’t look out of place on David Dimbleby’s BBC version.

Chris Huhne, recent Twitter convert Kevin McCloud and Paul King will be dicussing the government’s green deal, and will be giving practical detail on how best to green the existing housing stock. The webinar is Free and you can put your questions live to the panellists. Sign up here.

At 2pm we’re having a live text debate on the aftermath of the spending review. Economists Graham Kean and Noble Francis will be telling you what it all means for construction workloads, and will be Simon Tolson will be looking at any legal implications.

Thursday 21 October

4:44pm Don’t forget we are having a live text debate tomorrow at 2pm. Details here

4:40pm Apologies, Cabe have just issued a press release: It says it is: “now taking stock of the decision and looking at options to create new ways to support and champion good design.”

We are bitterly disappointed by the decision. CABE has worked hard with Government in recent months to create low-cost ways to ensure that people can still get the practical advice and support they need to create a good quality built environment. The quality of housing, schools, streets and parks has a major impact on everyone’s life, every day. Indeed, the quality of your local neighbourhood matters even more in tough economic times. So we are surprised to see that no resources at all can be found from the Culture programme to deliver the Government’s commitment to this area of public life.

4:38pm Sad day for Cabe staff. Speculation on Twitter that the staff have gone to the pub asthey’re no longer answering their phones.

3:15pm Brief overview of the capital spending cuts in our story here.

2:16pm: “Funding will be made available to enable Crossrail to go ahead” but, says Building’s David Matthews, CSR fails to give certainty that construction on Crossrail will be complete by 2017, or finally confirm that no stations or spurs will be cut.

2:00pm £4.4bn is divided between HCA programmes. This funding must now be used in a more flexible and creative way to maximise its impact.  The creation of an investment fund that could be used across a number of potential housing and regeneration sites, with the potential to create self financing business plans, is a compelling possibility for new build.
Graham Kean

It’s official - Education is back as a priority!   Graham Kean’s hunch, voiced in last week’s economist’s podcast, proves correct.

1:55pm No mention by George Osborne in his list of key transport projects of Skanska and Costain’s £1.1bn A14 upgrade put on hold in the summer, says Joey Gardiner. Does this mean it has now been dropped?

1:50pm The massacre of the Communities and Local Government department is becoming apparent. 74% off capital and 51% off current spending. To fall from £6.9bn this year to £2bn in 2014/5.

Osborne deserves 9/10 for rhetoric of his CSR announcement - Shadow Chancellor reduced to a stand-up debating routine, devoid of content
Graham Watts on Twitter.

We are now working on the implications of Osborne’s spending decisions. Send us your thoughts to newsdesk@building.co.uk.

We have attached the Treasury’s Spending Review document to this story. See file on the right.

1:30pm £15.8bn availble to refurbish and improve the schools estate over four years - 600 new schools will be built (from the BSF and Acadenies programme). Over four years annual capital expenditure will decrease by 60%, says Sarah Richardson. From 2010/11 capital expenditure will be £7.6bn, £3.3bn from 2012/13 and creeping up again to £3.4bn by 2014/15.

1:25pm £30bn on transport over four years. This includes £14bn investment on railways. Here’s a brief overview of the capital transport projects that are getting the go-ahead.

• M62 expanded
• Rail platforms improved across country
• Birmingham New Street station will be upgraded.
• £500m on Tyneside Metro and bus network
• Rail Electrification from Manchester to leeds to Blackpool.
• New supsension birdge over the Mersey at Runcorn
• M1 and A46 upgrades in the Midlands
• Investment in the Midlands Metro
• M4 and M5 improvements in the South West.
• A transport scheme for Weymouth
• A11 to Norwich will be upgarded (to cheers in the House)
• M25 will be widened in strategic places.
• Road improvements will be made on A3 at Hindhead
• Crossrail to go ahead and key Tube lines to be upgraded.

Osborne says there will be more details next week on transport and the National Infrastructure plan will be unveiled.

The expected confirmation to pass legislation to use growth in future business rates to create upfront investment funds through the implementation of a Tax Increment Financing scheme is welcomed. This will undoubtedly complement the localism agenda and create one of the key funding mechanisms available to the newly formed Local Enterprise Partnerships
Graham Kean

1:16pm Prioritising public spending on those most likely to support growth. There will be the largest ever investment in adult apprenticeships. 75,000 apprentices a year will be supported by the government - 50% higher spend than Labour.

Science budget of £4.6bn a year will be protected. £324m savings identified every year. £220m will be invested in bio-medical bulidings including St Pancras and Cambridge.

£200m will be invested in windshore technology. Green investment bank is confirmed. £1bn of funding for htat bank. Hopefuly much more from private sector and future sales of government assets.

Warm front to be phased out - this is the energy and insulation improvement fund for people on benefits - it will save £280m in savings). Renewable heating incentive will be introduced.

Major investments in flood and coastal protection.

Tate and British Museum plans will be supported by the government. (And free entry to museums to continue).

1:12pm Healthcare spending rising to £114bn from £104bn within four years - that’s a rate above inflation. “Will we fund new hospital schemes”, says Osborne, including St Helier.

It will be interesting to see what constitutes the mix of “affordable” housing in the future. Will low cost home ownership grow substantially as a proportion of the mix of affordable new homes? Probably.
Brian Green, economics commentator

1.06pm New work programme will provide intensive support for those seeking work. Increasing use of digital services to help cut bills. Welfare measures to save £7bn.

No family will receive more benefits than the average family which is working.

A very quick comment in the budget trades operational reform with budget protection for Fire and Rescue services.   I wonder if this is an indicator of a theme we will see emerge over the coming weeks and months? It seems as though organisations that accept the need to change will be supported in their transition towards more efficient operating models. This is a shrewd investment by the Chancellor.
Graham Kean, EC Harris

1pm £900m to be spent on targeting tax evasion - expects to collect £7bn more in taxes. State pension age will reach 66 by 2020 for men and women - four years earlier than planned. This means women’s age on retirement to raise more quickly.

David Eastgate, chief executive of the Hyde Group, says: “The priority now for providers to be innovative in financing the building of new homes and providing support services that help people adversely affected by spending cuts.

12:54pm: Plans for new 1500-people prison will be deferred. Ministry of Justice budget to be cut by 6% a year, reduced to £7bn by 2014/15.

Compared to previous budgets, the detail provided and the pace at which it is delivered is bewildering!  Just listening to the Chancellor speaking now reveals the complexity and interdependancy  between tax receipts, benefit payments, capital investment, incentives and penalties. I wonder when we will get to the 2p rise on Beer?
Graham Kean

12:49pm Funding for social housing is to undergo more than 50% cuts and the biggest shake-up in decades under Osborne’s plans. Social housing funding of £8.4bn between 2008/11 has been cut to just £4.4bn. Housing associations will be able to charge 80% of market rent to new tenants to enable the funding of 150,000 new social homes, similar to the level being built now. In addition new tenants for social housing will not get secure lifetime tenancies.

The plan to cut the back office costs of government will require many more projects similar to DfE and BIS where these departments have embraced new ways of working and consolidated their property portfolios.
Graham Kean, EC Harris

12:44pm The Treasury budget will be cut by a third. We will move cabinet office to save on teh enormous cost of the Treasury’s PFI building. Queen is getting income frozen for a year, and then down for the years after. Total royal household to be 14% lower by 2014. Diamond jubilee will get £1bn special funding.

12:40pm We need to invest in transport, the green energy infrastructure and sciences, says Osborne. Public service reform large part of today’s announcement. We have squeezed every last penny out of waste and admin costs. Assets will be sold. Whitehall admin costs of every department will be cut by a third leaving to £6bn in Whitehall savings, not £3bn as previously thought. Around 490,000 public sector jobs are expected to go in four years.

12:39pm Capital spending will be at £51bn, £49bn £46 £47bn over coming years. This is £2bn higner than set out in budget. Total spending will be £702bn £713bn £724bn £740bn over next four years.

12;37pm Current spending totals haven’t changed since the plans announced in the last budget. Spending is rising not falling over the years because of debt interest payments increasing. “It takes time to turn around the debt supertanker.”

12:35pm The OBR have audited all the spending plans.

Within 3 minutes of starting his speech, Education has re-emerged as a priority, along with a renewed commitment to Infrastructure. All this under a banner ’investing for the future’.Graham Kean, EC Harris

12:31pm “We have chosen to spend on health, education and infrastrucure. We have chosen to cut waste and reform the welfare system.”

12:30pm: “Todays the day Britain steps back from the brink,” Osborne’s first words.

12:25pm Nick Raynsford attacks Cameron on social housing tenure. Cameron says coalition is about to unveil bold new housing plan designed to get more social homes being built.

12:23pm Cameron says he’s protecting capital expenditure in answer to quesion on job opportunities in the North East.

12:21pm: Cameron: “We’re doing this because we have to, not because we want to.”

12:16pm: Osborne fiddles with his pen and flicks through his notes, while Cameron takes questions at PMQs

11:07am: Read Brian Green’s Brickonomics blog on public finances. It’s going to get tougher whatever the outcome of today’s spending review.

10.50am: Sky’s Mark Kleinman has this on the Green Investment Bank. He says it will be get £2bn of funding from the sale of state-owned assets. What he fails to opint out is that this is exactly the plan that the previous government had. However, it is interesting because the whole thing has been under review, that despite this they may have come back to exactly where it has started. Infrastructure people had been hoping for a huge expansion of its role and will be disappointed. In particular this means it’ll be unlikely it will be able to get involved in the Green Deal programme to refurbish existing homes.

9.14am: The Guardian’s front page predicts “multi-billion pound” cuts to the prison programme, as part of a round-up of what it expects to see, but does not give any further details. Given justice secretary Ken Clarke’s previous comments about prison building, a cut in prison building would not be at all unexpected. The Telegraph is predicting road-widening schemes and other transport projects will be abandoned, despite rail users seeing rises of up to 8%

9.12am: Most papers have today followed up the BBC’s story on social housing yesterday, but seem not to have taken it on much further. As Joey revealed yesterday, the plan is to pay for the cuts in social housing by allowing rents to rise. However, there is still disagreement on the scale of the cuts - with most putting the figure at over 50%, but some still discussing 80%. Joey says the clever money is on 50% - it feels like cuts of 80% were contemplated but the government has rowed back at the last minute.

9.10am: Lots in the papers today on the Spending Review as you’d imagine, but little new in our areas. Most papers focusing on the inadvertant revealtion by treasury chief secretary danny Alexander that 490,000 public sector jobs will be lost as a result of the cuts programme, an estimate by the Office of Budget Responsibility.

Tuesday 20.10.10

5:30pm: The Spending Review will start at 12:30pm tomorrow.

4:57pm: Joey says he’s been told there’ll be nothing tomorrow on the review of civils engineering costs launched in the spring. Just in case you were holding out for it. Former Arup chair Terry Hill, who was appointed to head the investigation in June, told Building then his work would feed in to the CSR, but it looks like there’ll be no specific announcement.

3:38pm: David Cameron has confirmed that the defence budget will shrink by 8%.

3:02pm: Check out a blog by Joey, just posted, on the latest on housing spend - follows up comments at 12:33pm that we could see cuts of 80%, and he’s got much more detail.

1:55pm: A few words from Richard Threlfall, the head of public sector infrastructure at KPMG. “Difficult decisions on transport, housing and regeneration schemes are likely to fall to local authorities and perhaps to Local Enterprise Partnerships when they are established. Some Government Departments may even run post-CSR competitions to decide which schemes will survive so the waiting game may not be over for a while yet.

”[…]The Government is understood to be unenthusiastic about the use of PFI to “buy now, pay later”, and some schemes that would have been revenue funded may proceed if they can be switched to capital. Schemes which can be demonstrated to drive economic growth, and schemes which can draw on third party funding, are likely to be the survivors.”

More crystal-ball gazing from Richard will be available on the KPMG website later today, I’m told.

1:35pm: Check out the Guardian’s interactive “you make the cuts” visualisation. Joey has cut by £100bn more than necessary. For the sake of the public sector let’s hope he doesn’t move into politics.

1:30pm: MoD have confirmed that it is to cancel the £14bn - yes £14bn - St Atham training facility in South Wales, supposed to be being built by a consortium called Metrix which included Laing O’Rourke and QS Currie and Brown. The statement over what’s called the Defence Training Rationalisation project (DTR) does not link the move to today’s announcement of the wider strategic defence review, due to be made by prime ministere David Cameron in the House of Commons. In a statement defence secretary Liam Fox said: “It is now clear that Metrix cannot deliver an affordable, commercially-robust proposal within the prescribed period and it has therefore been necessary to terminate the DTR procurement and Metrix’s appointment as preferred bidder.” More soon…

12.33pm: Joey says insiders are suggesting that social housing cuts could actually be even worse than reported today - more like 80% than 50%.But the target of building 150,000 affordable homes nevertheless is being taken seriously - to be funded by allowing extra local authority borrowing and increasing rents on new homes and re-lets. Every £1 extra on rents per week generates £234m for the sector, and allows it to borrow another £4bn, so there are clearly realistic options here, if the Coalition is happy to increase rents while at the same time capping housing benefit.

11:13pm: Some reaction to the slashing of the housing budget by half. Mike Leonard of the Modern Masonry Alliance said it was “devastating news” for manufacturers, merchants, builders and those on council waiting lists.

“This will result in a major loss of jobs in building materials manufacture and construction sectors and further misery for those waiting for a home to live in.”

11:06am: Implications of Alan Johnson’s speech has been verified by Joey. Under the coalition plans public sector net investment would fall to £20bn annually by 2014/5, whereas under Johnson’s plans the figure would still fall, but to £29.5bn. So Labour would be spending £9.5bn more than the coalition.

9:17am The Labour press office has finally got back to Joey regarding Johnson’s speech… Answers to Joey’s questions from 14:43pm yesterday to follow.

Tuesday 9:07am: Morning. 24 hours to go, and the BBC have given a lot of space on its website to the 50% budget cut in social housing, a story we covered yesterday. What is ’new’ news according to Joey Gardiner is the target of building 150,000 affordable homes.

16:46pm: KPMG’s head of public sector Alan Downey has written a blog on the CSR.

“The Spending Review may well mark a shift within capital investment, away from social infrastructure in favour of economic infrastructure, such as transport projects, high tech industries and R&D.”

14:43pm Joey Gardiner says Johnson’s speech seems to imply Labour rowing back on its own proposed cuts to capital spending. The previous situation is that Labour had proposed halving capital expenditure by 2014, and the Coalition’s emergency budget said it would stick to that.

However Johnson is suggesting that a Labour government would now cut capital spending by only half as much as currently proposed - effectively ditching its previous position - using a £7.5bn bankers tax to pay for it.

The key section of Johnson’s speech is here (Joey admits the figures seem to clash with what was previously known):

We will ask the Government to think again, and come forward with proposals for the banks to make a greater contribution. We are open minded about the mechanism by which this is done. In terms of scale the £3.5bn bill from Alistair Darling’s bonus tax was absorbed with ease last year. In a time of rising profits they should be asked to maintain that scale of contribution alongside the existing levy proposal. The combination of these existing tax plans, and the call for banks to pay their fair share, could contribute £7.5bn by the end of the Parliament.

That is the balanced, fair, and most importantly pro-growth choice the Government should make.

These further tax revenues should be used as an additional fund within the capital budget - a fund to prioritise growth.

The Government’s plans imply a 33% real cut in capital spending. If they adopted the approach I am outlining today the cut would be almost half that figure.

The additional cash means that vital infrastructure projects could go ahead - keeping people in work now, and creating the environment for growth in the years to come.

It means that the building of affordable housing can be targeted - recognising the irreplaceable role for the state in construction when private demand dries up.

And we call again on the government to change their perverse decision on Sheffield Forgemasters which prevented an £80m loan from providing an important breakthrough - helping a British company compete in the manufacturing supply chain for civil nuclear energy.

Joey’s on the case with the Labour press office….

14:13pm Alan Johnson’s speech has been summarised by Andrew Sparrow’s Politics Live blog at the The Guardian. He wants banks to contribute £3.5bn to the infrastructure fund. Full speech here.

13:51pm Thanks for QS blogger Derek Mynott @GFPartnership for pointing out that the hashtag should read #spendingreview, not #spreadingreview

12:55pm: This is also worth looking at - Joey’s also done a story based on the National Housing Federation’s view of what the CSR will hold for housing here. And it’s not pretty.

12:48pm: Here’s Joey Gardiner’s story on Huhne’s statement.

11:41am: A crack team of construction economists came into Building’s offices last week to give their predictions for the CSR. I’ll blog the best of the debate shortly, but in the meantime there’s a podcast of the debate below. Their written predications also appeared as part of Osborne Watch in last week’s news feature in Building.

11:24am: Not surprisingly Alan Johnson is poised to attacked the coalition’s plan for spending cuts in his first speech as shadow chancellor. According to Sky News In a speech to the City he will also call for baks to contribute to a £7bn fund for infrastructure investment

11:00am: Chris Huhne confirmed this morning that the Severn barrage won’t go ahead. The news was in a written ministerial statement on energy policy. Huhne said a study into the project showed that there was “no strategic case at this time for public funding of a scheme to generate energy in the Severn estuary. Other low carbon options represent a better deal for taxpayers and consumers.”

Huhne also confirmed eight potential sites for new nuclear power stations: Bradwell, Essex; Hartlepool; Heysham, Lancashire; Hinkley Point, Somerset; Oldbury, South Gloustershire.; Sellafield, ; Sizewell, Suffolk and Wylfa on the Isle of Anglesey.

On Andrew Marr’s Sunday morning programme George Osborne said the priority was healthcare, education and big infrastructure developments. More here from Stephen Kennett on likely projects that will go-ahead including Crossrail and the Thames Gateway bridge.

10:48am: Good morning, Alex Smith here. Welcome to Building’s coverage of the Comprehensive Spending Review. We’ll thought we’d start early as there’s so been so much coverage already on what can be expected in Osborne’s review.

Those Tweeting should use #spreadingreview as the hashtag. A bit long, you think, but that’s what @hmtreasury said they were going to use. There’s a rival #csr10 which is gaining fast according to the number of stories Tweeted in the last 30 minutes using this hashtag.