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Osborne takes axe to industry

Chancellor George Osborne cut several swathes out of the construction industry this week as he outlined how the coalition government would achieve an extra £6.25 billion of savings this financial year. Construction News assesses the damage.

Rail

A £50 million project to upgrade 10 stations - including Manchester Victoria and Clapham Junction - will not go ahead after Network Rail agreed with the Department for Transport to reduce its spending by £100m.

A Network Rail spokesman said that details of the other £50m were still being finalised but elements of capital work could be hit.

Roads

Three Highways Agency schemes, deemed as low priority, have been deferred as part of a £54m plan outlined by the DfT and will no longer start on site this year.

The delayed schemes are the early contractor involvement contracts for improvements on the A453 in the East Midlands and the A23 in Sussex - won by Laing O’Rourke and Carillion respectively.

The other scheme - hard shoulder running on the M6 Junctions 5 to 8 - was one of the projects to be let under the £2bn Managed Motorways framework, on which Balfour Beatty, Carillion, Bam Nuttall/Morgan Est and Costain/Serco are all partners.

Council grants

In addition to the above road and rail cuts, the DfT is to make a £309m reduction in its grants to local authorities.

All the department’s grants - which cover projects ranging from funding local bus services to highways maintenance and major projects - will be reviewed by the Department for Communities and Local Government.

Housing

The Treasury has said there will be £150m in savings from the last government’s housing pledges.

It is understood £50m will be cut from the Kickstart programme and that the remaining £100m will come from the affordable housing budget, primarily the low-cost home ownership scheme.

It is thought there may also be a consultation on cutting the housing market renewal budget by up to £50m.

The Government has, however, put aside £170m to invest in 4,000 social housing starts.

Green building

As part of a requirement to save £85m, the Department of Energy and Climate Change is stopping its £34m Low Carbon Building Programme, which provides incentives to encourage the uptake of low-carbon building technology.

The programme has provided 20,000 grants for capital and installation costs of microgeneration equipment, and all existing grants are secured.

But there will be no new incentives provided until the proposed Renewable Heat Incentive is introduced in April next year.

London 2012

The Olympic Delivery Authority has been told it needs to cut its budget by £27m, as part of £88m of savings to be made by the Department for Culture, Media and Sport.

The previous government had said that the £9.325bn budget for the Games would be protected from any cuts.

But ODA chairman John Armitt was confident the savings could be found by “continuing to make efficiencies in the way the project is delivered, as we have done in the past”.

Schools

Building Schools for the Future and its delivery body Partnerships for Schools will not be targeted as part of the Department for Education’s £670 million budget cut.

A spokesman said: “The cuts made today are not reflected in BSF or PfS savings.

“However, they remain part of a wider conversation ministers are having. The savings announced today are just the beginning of the story.”

Colleges

College construction actually received a boost under Mr Osborne’s first spending review.

About £50m was earmarked to fund capital investment in “those colleges most in need”.

“Together with additional private investment this will secure a total fund of £150m to invest in up to 50 individual schemes,” Mr Osborne said.

Recently signed-off schemes

Departments have until the end of this week to report back to the Treasury regarding the hundreds of projects signed off by Labour this year.

These include several schools, hospital and transport projects that are now at risk of cuts.

Chief secretary to the Treasury David Laws said an announcement on the future of the schemes would be made as soon as they had been reviewed to see if they represented “value for money”.

PFI schemes

The Communities and Local Government Department will make savings of £160m by delaying private finance initiative projects.

The projects to be cut are unlikely to have had finance committed as yet, but CLG was unable to say exactly where the axe would fall.

Editor of CN’s sister title Infrastructure Journal Angus Leslie-Melville said: “It will be difficult for the newly elected government to scrap health and education deals, but leisure centres, libraries and blue light projects - police and fire stations - must surely be looking to their laurels,” he said.

Local authorities

The ringfencing of more than £1.7bn of local government grants for 2010/11 will be removed.

Communities and Local Government secretary Eric Pickles said the move was “an opportunity to devolve real power to councils”.

But the department will have to make £780m in savings this year, and local government spending will be slashed by £405m.

Airports

UK airport operator BAA is withdrawing its application to build a second runway at London’s Stansted Airport after the coalition announced its opposition to the scheme.

Stansted managing director David Johnston said this week: “We have reflected carefully on the new government’s clear intention to change airports policy and have moved quickly to withdraw this application.”

It has also withdrawn plans for a third runway and sixth terminal at London’s Heathrow airport.

UKCMRI

The UK Centre for Medical Research and Innovation is the biggest single project to be affected by this year’s cuts, as the Government revealed it would be phasing funding rather than doling out the £250m lump sum pledged by former Prime Minister Gordon Brown.

The project will now receive £17m of funding this year. UKCMRI, which will be based in a purpose-built facility next to St Pancras station in north London, said there would be no effect on the scope of the project.

The procurement of a main contractor for the job is currently in the early stages, with firms including Laing O’Rourke, Bam Construct and Sir Robert McAlpine awaiting invitations to tender.

Chief construction adviser

Sources close to the Government suggested chief construction adviser Paul Morrell’s post was safe despite the swingeing cuts.

New construction minister Mark Prisk showed great support for the role in opposition, last year criticising Labour for their “dither and delay” in appointing an adviser.