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What would the Conservatives do in education?

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CONSERVATIVES IN CONSTRUCTION: Over the last five years there has been a sharp increase in investment in education facilities, but this seems likely to end in 2010

Although Conservative policies support continued investment in education to drive up standards, this support does not automatically apply to existing capital programmes such as Building Schools for the Future.

Indeed, the party is proposing a redirection of the £4 billion Academies Programme initially towards 12 new schools in the largest urban areas, with further schools to follow. Accordingly, the flow of new projects is likely to be disrupted post-election as existing programmes are reassessed in light of funding restrictions and the new government’s longer-term ambitions.

The latter includes increasing the number of new school places by over 20,000 and radically reforming the education system. In particular, LEAs would lose their overarching responsibility for the management of schools and new private sector firms and not-for-profit organisations would be allowed to set up new schools.

The Conservatives have earmarked £4.5 billion of funding from the BSF programme to support the establishment of such schools.

Sector conditions

Over the past five years there has been a sharp increase in investment in education facilities. Amid growing concerns over the impact of the credit crunch and a slowing economy, the education sector has remained a bright spot for UK construction.

Education has been a long-standing political priority for the current government. Investment in English school buildings alone has almost doubled to £3.9 billion over the past five years; at the same time, there have also been sharp increases in capital expenditure in other parts of the UK and by universities.

The key objectives of planned investment have changed. While an initial priority, especially for the school estate, was tackling outstanding disrepair, the government’s focus has now shifted to providing a ‘modern learning environment’.

Central to this has been the BSF programme, which aims to rebuild or refurbish every English secondary school over a 10- to 15-year period. After a slow start, the BSF programme has now rapidly gathered momentum. While only 12 schools had been completed by April 2008, a further 42 opened during the last financial year.

The government expects 115 to open during 2009-10, with the programme scheduled to accelerate further to 200 schools a year by 2011-12. Furthermore, the government is now embarking on a similar programme of improvements for England’s primary schools, half of which will be remodelled or refurbished over the next 14 years. There has also been a sharp increase in capital expenditure on the Scottish school estate.

Direct government funding has more than doubled since 2005-06, while PPP schemes have further accelerated the pace of renewal.

In addition, rising student numbers have prompted increased investment in further and higher education facilities. The number of students in higher education has risen by 6 per cent over the past three years and the Government anticipates a further 4 per cent rise over the three years to 2010-11.

Against this policy background, education construction was one of the few sectors to perform strongly last year. The official statistics recorded a 12 per cent rise in construction output during 2008. Output slipped back during the first quarter of 2009 and although it subsequently recovered in the following three months, this left output during the first half of the year unchanged on the first six months of 2008.

Glenigan recorded a 17 per cent rise in the value of education starts during 2008 as a whole, despite a 13 per cent drop in starts during the final quarter of the year. Unfortunately, the weakening in project starts at the end of last year continued during the first quarter of 2009, with the value of schemes starting on site 3 per cent down on a year before.

In contrast, planning approvals have strengthened after a weak performance last year. Approvals during the first nine months of 2009 were 21 per cent up year-on-year. Furthermore, last autumn’s Pre-Budget Report included additional funding for school repairs and improvements to primary schools brought forward from 2010-11 planned expenditure.

This has supported a strong bounce in project starts from the beginning of the current financial year. Unfortunately, the flow of new schemes has subsequently started to once again fall back. The value of project starts during the three months to September was 3 per cent down on a year before and a further dip is now anticipated for the final quarter of 2009. This is expected to leave the value of starts in the sector for the year as a whole 6 per cent up on 2008.

Project starts - First 10 months of 2009 (Projects up to £100m)

Source: Glenigan

Sector prospects

Looking ahead to next year, the prospects for continued sector growth are fading. In the Budget, the Chancellor announced that, following consultation last year on the future delivery of BSF, the government has decided to move away from the ‘wave’-based model used to date.

This was to enable local authorities who are currently discussing new BSF projects with Partnerships for Schools to join the programme on a rolling basis, in line with ‘available resources’ and only if Partnership for Schools assesses that they are ready. In theory, this could enable a steadier flow of new projects over the longer term. In reality, following the decision to bring forward capital funding into the current financial year, the ‘available resources’ are set to decline by 6 per cent in 2010-11.

Against this financial background, project starts are now expected to slip back by 8 per cent next year as proposed education projects come under increased financial scrutiny.

Forecast project starts for Education (projects up to £100m)

Source: Glenigan

Furthermore, the Budget also revealed a sharp contraction in gross government investment from 2011-12 onwards, and it is becoming increasingly evident that a more significant retrenchment of overall government spending than currently planned will be needed over the longer term.

While projects in the development pipeline point to a subsequent lift in project starts during 2011, there is a significant downside risk that the value of new work will fall short as planned projects are shelved.

PART 1: Overview
PART 2: Planning

First published in the Glenigan report Building a Conservative Britain. The report is available now for £795+VAT

AJ subscribers can buy the report at a discount of £100 - simply click Buy Now, then enter the code AJoffer and click on Recalculate

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