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Budget round-up: VAT up but no more capital project cutbacks

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Chancellor George Osborne has raised VAT but has not earmarked any more capital projects for the axe

The government’s emergency budget has increased VAT to 20 per cent and laid down a 25 per cent cut in departmental spending by 2015.

The Chancellor George Osborne announced there will be no more capital projects cut before the next budget but made no mention of whether BSF would in the long-run be spared.

Ruth Reed, RIBA president, was positive about the announcement. She said: ‘[A] commitment to maintain capital spending is very encouraging, and we endorse George Osbourne’s view that this should protect the most productive public sector investment.’

Past RIBA president Owen Luder said: ‘A better budget for architects than I expected. The Good News – No further capital project cuts.’

Keith Clarke, chief executive of Atkins, said: ‘It is clear that the Government recognises capital spending must be preserved, while rebasing the economy and the move to a low economy model cannot be done overnight.’

Chris Johnson, managing principal at Gensler said: We welcome the Government’s reassurance that projects with “a significant economic return to the country” will be prioritised.’

The government however is now planning to make £30 billion worth of public spending savings each year.An autumn spending review will rescue some projects seen to offer ‘significant economic return to the country.’

A regional growth fund will be established to finance capital projects over the next two years and a white paper will be published to flesh out plans to replace regional development agencies with local authority and business-led development groups.

The small companies tax rate was reduced to 20 pence and the Enterprise Finance Guarantee scheme extended, supporting SME access to lending which benefits at least 2,000 small businesses.

Furthermore all new businesses established outside London, South East and the Eastern region will be exempt from £5,000 of NI payments for their first 10 workers.

Craig Casci, director of GRID Architects, said: ‘The small and regional business incentive is long overdue and may act as a stimulus to some smaller practices.’ 

He added however that localism ‘threatens to add another level of complexity to an already groaning legislative and judicial planning framework.’

Unemployment in 2015-16 is predicted to fall to 6.1 per cent, after peaking at 8 per cent this year.

Departmental budgets will face slashes of 25 per cent and wages for public sector workers will be frozen for the next three years.

Ian Salisbury of campaign group Architects Registration UK, said: ‘[There] can be no doubt that the bid spenders such as CLG will be shedding staff and responsibilities.’ He added that this could be the ‘death-knell’ for the Architects Registration Board.

From 4 January the standard rate of VAT will rise to 20 per cent. There was no announcement on proposals to reduce VAT for refurbishment, part of the Liberal Democrats’ election manifesto (AJ 23.04.10).

Nic Allen, chief executive of Devereux Architects, said: ‘In a profession that has already been hit hard by the recession we hope that the Budget and the VAT rise will not have further detrimental effects on the construction industry.’


Key points


  • VAT up from 17.5 to 20 per cent from 4 January
  • No more cuts to capital spending ‘in this budget’
  • Autumn spending review to favour projects with ‘significant economic return to the country’
  • £30 billion a year current expenditure reductions 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, South East and the Eastern region exempt from £5,000 of NI payments for first 10 workers
  • Small companies tax rate down to 20 pence
  • Enterprise Finance Guarantee Scheme extended, which supports SME access to lending, benefit 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
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Readers' comments (1)

  • Still tough times ahead. Ian Salisbury attempt to link the Budget with his campaign to abolish ARB is very tenuous and dangerous. The last thing the profession or the RIBA need at the present time (if ever) is to do anything to risk losing protection of title. It will open up the opportunity for any Tom Dick or Harry to call themselves "architects". Small practices have enough competition from "non" architects without giving them the opportunity to call themselves architects. It would decimate architectural education. Who would study for 5 years if they could do a 2 year crash course to justify them using the title? The RIBA should work closely with ARB and accept it was set up to protect the interests of clients and not the profession.

    Owen Luder PPRIBA

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