Budget "could fail industry"

The construction industry this week delivered its Budget submission to Chancellor Kenneth Clarke. But it is pessimistic about gaining concessions from the Government in the run up to the General Election.

The industry fears that November's budget will be a pre-election sop to voters with short-term enticements such as tax cuts whose knock-on effects of less capital investment and increased job insecurity will bode ill for the construction sector.

The submission, from the Construction Industry Council, the Alliance of Construction Product Suppliers, Constructors Liasion Group and the Construction Industry Employers Council, makes several demands including:

n Urgent action to improve the beleaguered Private Finance Initiative;

n An abstention from polices that would harm the housing market's fragile recovery;

n Reduction of VAT on housing renovation and alteration works

n Tackling the œ3.2 billion repair backlog on school buildings;

n Raising total investment in transport infrastructure to the level recommended by the Confederation of British Industry.

The submission warns that unless these measures are met, the UK's future economic competitiveness will be jeopardised. It says that between 1980 and 1993 UK gross fixed capital formation accounted for only 17 per cent of GDP, far less than that invested by other countries. In 1995, investment slipped further to below 15 per cent of GDP. The industry wants the Chancellor to standardise PFI contract terms, allow schemes under œ10 million to undergo a fast track assessment by-passing the PFI scheme and to clarify the return expected on schemes such as hospitals, prisons and schools which have an uncertain risk factor attached to them.

The submission also asks that the Government avoid taking measures that will harm the incipient recovery in house sales.

Graham Watts, chief executive of CIC, said: "We don't want any more initiatives like the insurance premium on mortgages or higher interest rates or personal tax cuts in the budget which will mean further cuts in capital investment to pay for them which will have a knock-on effect of making people more insecure about their jobs."

But Watts said the industry remains realistic about its chances of influencing the Chancellor: "We're not confident at all. On the day we met construction minister Robert Jones to discuss our budget proposals, William Waldegrave told individual Government departments not to bother him with requests for Budget concessions.

"There will not be much help for the construction industry in this Budget because it will be a pre-election one but we will keep on trying."

A spokesman for the Treasury refused to comment.