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CPA calls for no cuts to public sector spend

The Construction Products Association (CPA) has written to the Chancellor ahead of his Budget statement, urging him to maintain public sector net investment at or above 2.25% of GDP, if the public sector built environment is not to start deteriorating.

While a fragile recovery has been reported in the wider economy, the construction and product manufacturing industries are expected to fall further in 2010, following the largest fall in output on record last year.

The CPA says Construction and product manufacturing are worth around £110bn each year and contribute 9% to GDP, and they suggest the Chancellor Alistair Darling should:

  • Prioritise capital investment and show a clear commitment that public sector net investment does not fall below 2.25% of GDP
  • Ensure the UK is a competitive place to conduct business - do not levy any additional tax or regulatory burdens placed on business that harm competitiveness
  • Make quicker progress towards making the UK a low-carbon economy. Government should undertakes a review of energy-saving and water-saving products and solutions that are eligible for a lower rate of VAT
  • Extend the Boiler Scrappage Scheme. In the two months since it was set up, the scheme has already committed all 125,000 vouchers initially allocated for the full two year life of the scheme.

CPA chief executive Michael Ankers said: “We recognise the urgent need to reduce public borrowing, which is expected to have reached £178bn in 2009/10.

“However, the government needs to ensure that spending occurs where it is of most benefit; ensuring that recovery is not harmed and long-term growth encouraged. Capital spending on essential housing, schools, energy and transport infrastructure stimulates economic recovery in the short-term, with crucial benefits for employment, and leaves a beneficial legacy from the investment by increasing productivity in the longer-term.

“It is also essential that business competitiveness is not harmed.  Investment decisions are often taken at a global level, so it is critical that the UK is seen as a competitive place to conduct business and the economic recovery is not delayed any longer than is necessary. 

“This means making sure the tax burden upon UK business is minimised; the planning process, which currently undermines investment and competitiveness, is improved; 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.

“Thirdly 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. Government currently allows a lower rate of VAT on the professional installation of certain energy-saving products. However, 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.

“Finally, the government should allocate an additional £50 million to the Boiler Scrappage Scheme.  The scheme which was launched in January this year, has already exceeded everyone’s expectations in the first two months. It is estimated that on completion of the scheme 945,000 tonnes of carbon will have been saved at a cost of just £53/tonne – a much better return on public investment than many of the alternative schemes to promote renewables.

“The UK economy faces many challenges as we try to recover from the worst recession since the 1930s. Addressing the significant budget deficit has to be a key priority, but in developing the programme for this, the construction industry must be seen as a vehicle for delivering the recovery and helping to rebalance the economy,” he said.

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