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The real picture of stimulus ‘spending’

Analysis of the Government’s £26 billion construction stimulus measures in the past year has revealed that only £1bn of new money was offered.

Figures compiled by the Construction Products Association show the Government has announced a total of £26bn of stimulus packages since September 2008.

But scrutiny reveals the extent to which the packages have been re-announcements of existing budgets from the Comprehensive Spending Review for 2008 to 2010.

Only £1bn of new money has been created for the industry, with a further £3bn brought forward from 2010/11 to 2008 to 2010.

Two of the three genuine ‘new money’ announcements concerned housing boosts in October 2008 and the April 2009 Budget. The other was the £300 million created to rescue a limited number of stalled college projects. Elsewhere, billions of pounds of transport, education and housing spending were announced from existing budgets.

Industry leaders told Construction News that while any spending should be welcomed, they were disappointed to see how much was merely rehashed. CPA external affairs manager Sarah McMonagle said: “The fiscal stimulus or construction over the past year has been welcomed, especially for housing. Yet there has been a flow of announcements and reannouncements that essentially cover the same finance.”

Civil Engineering Contractors Association head of industry affairs Alasdair Reisner added: “The stimulus spending was a combination of restated existing Government plans, amounts already allocated for the future that were brought forward and a relatively small proportion of new money.”

Mr Reisner said that the reduction in future budgets caused by bringing money forward was a concern.

Federation of Master Builders director of external affairs Brian Berry said: “The figures are very interesting but sadly not surprising. We’ve been expecting this gloomy scenario. The Government’s financial black hole will make 2010 a worse year than 2009 for the construction sector.”

Concerns were raised by a number of industry parties as to how gaps created by the £3bn of money brought forward from the 2010/2011 budget would be plugged. National Specialist Contractors Council chief executive Suzannah Nichol said: “It is obviously very helpful to stimulate the economy at this moment in time. However, taking so much money from future spending budgets will leave problems for us to encounter in the future.”

CECA said much rested on how quickly the private sector could grow to make up for the reduced public sector spending.

Mr Reisner said: “The question of the success of the Government’s strategy to deal with the recession rests not only on whether the construction industry is weathering the storm today, it also depends on what will happen tomorrow.

“We can see from the Government’s output figures for the industry that there has been an uplift in work in the transport sector, particularly in roads, but we also fear that this spending will fall away dramatically in the next few years as we face a sharp drop in the profile of public investment.”

A spokesman for HM Treasury said it had always made clear that the money it was spending had been originally planned for future years, rather than being additional capital spending.

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