Spending Review: Housing budget cut

Published:  22 October, 2010

LONDON: There was little good news for construction sector in the Chancellor's autumn spending review.

George Osborne unveiled the biggest UK spending cuts in decades, telling MPs "today is the day that Britain steps back from the brink".

The Government plans to slice 60% off the affordable housebuilding budget. Wednesday's spending review saw the housing budget cut from £8.4bn over the previous three-year period to £4.4bn over the next four years. The loss would be covered by new social housing tenants who face charges of up to 80% of market rates.

Ministers believe that 150 000 new affordable homes could still be built in England between 2011 and 2015 by dramatically increasing rents to fund new housing schemes.

Capital budgets across government departments have been fallen by up to 74%.

The Comprehensive Spending Review has slashed capital expenditure by up to 74% across government departments.

The Chancellor also announced that capital spending on the school estate would be £15.8bn. But, over the four-year period this represents a 60% fall in real growth, with the budget falling from £7.6bn in 2010-11 to £3.4bn in 2014-15.

At the Communities and Local Government the capital budget has been cut by 74% from £6.8bn to £2bn. Spending on affordable housing, which has been cut by 60%, comes out of this budget.

Other departmental capital budgets include:

• Transport, down 11% from £7.7bn to £7.5bn.

• Ministry of Justice, down 50% from £0.6bn to £0.3bn.

• Energy and Climate Change, up 41% from £1.7bn to £2.7bn.

• Health, down 17% from £5.1bn to £4.6bn.

Construction will also be hit in Scotland, Wales and Northern Ireland where capital budgets have been cut by 38%, 41% and 37%, respectively.

There was some relief for the construction industry given the Chancellor's decision to maintain transport investment over the next four years.

There was some relief for large infrastructure projects. Public sector capital spending which had been expected to fall by 35% over the period of the Comprehensive Spending Review will now fall by just over 30%. As a result the cuts to public sector construction spend are expected to be £3.5bn less than was announced at the time of the Emergency Budget.

Michael Ankers, chief executive of the Construction Products Association said: "public sector investment in construction over the next four years will be more than £20bn less than in the last four years and that will have significant consequences for the construction industry".

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