Emergency Budget Must Look Beyond Short-Term Fixes

The Construction Products Association has written to the Chancellor ahead of his Emergency Budget statement, urging him to focus future public spending where it will deliver the most cost effective solutions and support sustained economic growth in the longer-term. Although the wider UK economy recently returned to growth, the construction and product manufacturing industries have continued to experience very difficult conditions and output is expected to fall further in 2010 following last year’s largest fall in output since 1974. Given that construction and product manufacturing are worth £110 billion each year and account for 9% to GDP, these sectors will have an important part in ensuring long-term economic recovery in the UK.  The Construction Products Association has therefore highlighted key priorities for the Budget, which will be essential in helping a faster and stronger recovery. The Construction Products Association proposes that the Budget should: – Prioritise public investment in areas that provide benefits to the whole economy
– Ensure the UK is a competitive place to carry out a diverse range of businesses
– Accelerate progress towards making the UK a low-carbon economy Michael Ankers, Chief Executive of the Construction Products Association said; ‘We recognise the need to reduce public borrowing and welcome the urgency with which the government intends to do this. However, the government must ensure that future public spending is focused on delivering economic growth through the provision of essential energy and transport infrastructure, education facilities and housing.  Where money is spent it needs to deliver the most cost effective solutions, as appropriate capital investment not only stimulates economic recovery in the short-term, but provides a beneficial legacy in the longer-term, by increasing productivity. ‘As a result, the government should ensure that net public sector investment does not fall below 2.25% of GDP, as if it does the asset base of this country will begin to deteriorate and we will be simply storing up problems for the future. This investment in itself will also generate significant short term benefits. A recent report by the independent economic consultants, LEK Consulting, highlighted that for every £1 spent on construction output, £2.84 is generated for the economy and a further £0.50 is generated for the Treasury. ‘It is also essential that business competitiveness is not harmed.  With decisions on investment made at a global level, it is critical that the UK is seen as a competitive place to conduct business, to ensure economic recovery is not delayed and to make long-term growth certain.  The UK currently has the 20th highest rate corporation tax in the EU and although we welcomed the recent announcement that within five years the UK will have the most competitive corporate tax regime in the G20 and we look forward to further details about this in the Budget.  Similarly the planning process, which currently undermines investment and competitiveness, must also be improved; there is a long term secure supply of energy and that increasing environmental requirements to help the UK move towards a more sustainable economy do not place UK business at a disadvantage compared to its main EU competitors. ‘Finally the government must provide incentives to help the creation of a low carbon economy, especially with regard to the energy efficiency of the existing housing stock.  We welcome the ‘Green Deal’ and the proposed early legislation to implement this. However, this alone will not be enough. Government currently allows a lower rate of VAT on the professional installation of certain energy-saving products, but this list must be updated to take account of new products and solutions such as energy efficient boilers, glazing systems, water/liquid source heat pumps, solar shading, window films (internal and external photovoltaics, green roofs, and rainwater harvesting.
‘This is clearly a critical time for the UK economy and the government is faced with very difficult decisions as to how it can sustain the economic recovery in the short term, whilst demonstrating it is intent on redressing the public sector deficit as quickly as possible. The construction industry has an important role to play in this. In the short- term we can help speed up the economic recovery whilst at the same time playing an important role in providing the basis for long-term economic prosperity and helping to ensure that government targets are met.’