Emergency budget: the verdict
Merlin Fulcher gets architects’ responses to the coalition government’s emergency budget, and finds out if they believe the measures can really save us from a double-dip recession
There was a brief sigh of relief on Tuesday (22 June) when the government’s emergency budget confirmed no more capital spending projects would face chancellor George Osborne’s axe.
After projects worth £11 billion were scrapped last week (AJ 17.06.10) it was a welcome reprieve. But Osborne confirmed more cuts will be made from building programmes next year.
The chancellor announced expenditure reductions of £30 billion a year until 2014-15, and a rise in the standard rate of VAT to 20 per cent from 4 January 2011.
‘Osborne is risking tipping the building industry, which forms 10 per cent of GDP, into serious and prolonged recession’
Chris Romer-Lee of Studio Octopi said: ‘As an SME [small to medium-sized enterprise], the increase in VAT will hit our private residential work. This and the freezing of the higher-rate tax band will reduce disposable income for home improvements.’
Concerns over the impact of the VAT hike were also voiced. Graham Hickson-Smith of 3DReid said: ‘It could have a potential knock-on effect for the retail sector, which seems to be tentatively emerging from the recession.’ Kate Pugh of the Heritage Alliance described it as ‘colossal and damaging’, adding: ‘It aggravates the difference between looking after our historic environment and the zero rate of VAT on new construction.’
Despite a £13 billion increase to business investment, and a reduction in the tax rate plus exemptions from national insurance payments for small businesses, some architects remained unconvinced the budget could save the economy from a ‘double-dip’ recession.
Jonathan Hines, director of Architype, said: ‘Small cuts in corporation tax, income tax and national insurance won’t come near to making up for huge losses in public investment. Osborne is risking tipping the building industry, which forms 10 per cent of GDP, into serious and prolonged recession.’
But fears that the budget could stretch to scrapping Building Schools for the Future and the ARB were unfounded. Russell Brown of Hawkins\Brown said: ‘We’ve been expecting Armageddon. So to a certain extent we’re grateful it’s not been so bad.’
The British Council for School Environments remained concerned. Chief executive Ty Goddard said: ‘With no mention of the schools investment programme, we’re still in flux in terms of the future of our school buildings.’
As he delivered his speech, Osborne took care to distance himself from the Conservatives’ past legacy on public cuts. He said: ‘I think an error was made in the early 1990s when the then government cut capital spending too much.’ Instead he vowed a moratorium on shelving projects within the course of this year, and an autumn spending review that favours projects offering ‘significant economic return’.
Foreign Office Architects’ Birmingham New Street Station and Austin-Smith:Lord’s Manchester Metrolink extension were both safeguarded, and Osborne also unveiled a new ‘regional growth fund’ to bankroll regional capital projects over the next two years.
However, Karl Sharro, senior associate partner at PLP, said: ‘The government has shown a lack of appetite for major infrastructure projects, and the impact on the construction and design sectors will be severe.’
The chancellor also set a 25 per cent average cut in expenditure for all government departments over the next four years, with exceptions for education and defence. This goes beyond the previous government’s planned reductions and follows the departmental spending cuts already announced after the general election last month.
RIBA president Ruth Reed said: ‘We will have to wait until the comprehensive spending review to find out more details of government department cuts, and whether architects and the construction industry will feel the pain of these decisions.’
Emergency budget: key points
· VAT up from 17.5 to 20 per cent from 4 January 2011
· No more cuts to capital spending ‘in this budget’
· Autumn spending review to favour projects with ‘significant economic return’
· Current expenditure reductions of £30 billion a year until 2014-15
· New regional growth fund to finance capital projects over the next two years
· £13 billion increase to business investment
· All new businesses outside London, the South East and the East exempt from £5,000 of national insurance payments for first 10 workers
· Tax rate for small businesses down to 20p from 25p
· Extension to Enterprise Finance Guarantee Scheme, which supports SME access to lending for at least 2,000 small businesses
· 8.1 per cent unemployment to fall to 6.1 per cent in 2015
· Plans for green investment bank
Emergency budget: projects scrapped and at risk in England
Projects scrapped (total project value)
· Stonehenge Visitor Centre by Denton Corker Marshall (£25m)
· North Tees and Hartlepool Hospital (£450m)
· Birmingham Magistrates Court by Denton Corker Marshall (£94m)
· BFI South Bank Film Centre design contest abandoned (£166m)
· Buckinghamshire County Council park-and-ride by Markland Klaschka (£15m)
· Bedford Station by Bennetts Associates (unknown)
· New Wear Bridge, Sunderland, by Spence Associates (£128m)
Projects under review/funding reduced (total project value)
· Building Schools for the Future, 118 new schools (£2.2bn)
· Kent Thameside Strategic Transport Programme (£23m)
· Holt Park Wellbeing Centre by FaulknerBrowns (£50m)
· Sheffield Retail Quarter by Hawkins\Brown, Foreign Office Architects, Allford Hall Monaghan Morris, BDP, Pick Everard, Stiff + Trevillion and ACME (£600m)
· Mersey Gateway by Knight Architects (£431m)
· Aylesbury Estate regeneration by Levitt Bernstein and Pollard Thomas Edwards (£2.4bn)
Projects to survive (total project value)
· Tate Modern extension by Herzog & de Meuron (£215m)
· BFI National Film Archive by Edward Cullinan Architects (£16m)
· British Museum extension by Rogers Stirk Harbour + Partners (£135m)
· Birmingham New Street Station redevelopment by Foreign Office Architects (£600m)
· Sunderland Station redevelopment by Reid Jubb Brown Architecture (£7m)
· Manchester Metrolink extension by Austin-Smith:Lord (£500m)