CSR Part 1: where the axe fell
Capital budgets across governmental departments were left in ruins following Wednesday’s Comprehensive Spending Review. Projects and programmes were scrapped, re-scoped or re-phased and funding models were rethought as the reality of the biggest reduction in government spending since the 1976 emerged in chancellor George Osborne’s speech.
Contractors working in education, social housing, the health sector and defence-related projects were particularly badly hit. However, transport and infrastructure projects escaped relatively unchanged.
- Housebuilders and contractors face a radical policy shift on the funding of social housing, Building reports. Direct government funding for housing and regeneration is set to be cut 75% by the financial year 2014/2015, falling from £8.4bn to £2bn. The government hope to replace direct grant via the HCA with increased borrowing from local authorities and housing associations, which will now be able to set higher rents on new lettings. This funding stream is due to contribute to the government’s target of building 150 000 new homes over the next four years.
- The capital budget of the Department for Education will fall from £7.6bn in 2010/2011 to £3.4bn in 2014/2015, a drop of 60% in real terms. Building reports that the government is seeking cost reductions of 40% for the 600 schools currently under construction through the BSF and academies programmes. The remaining funds are likely to pay for around 600 BSF schools and academies already confirmed as going ahead, while an additional £9-10bn over the next four years will fund the yet-to-be-announced post-BSF schools building programme.
- The Ministry of Defence will have its capital spend cut by 7.5%. The £14bn St Athan training academy in south Wales, built by a consortium including contractor Laing O’Rourke and architect Scott Brownrigg, has been scrapped.
- The capital budget of the Ministry of Justice has been halved. It has abandoned plans for a new 1,500-place prison and will reduce its London estate from 18 to four buildings.
- The Department for Energy and Climate change will see its budget fall from £1.7bn in 2010/2011 to £1.1bn in the next financial year. It will then rise to £2.7bn in 2014/2015, a 41% rise in real terms.
- Transport funding has been cut by a relatively slim 11% in real terms over the four year period of the CSR. But as a result, Transport for London’s budget has been slashed by 28%.