Pre-budget: £3bn of infrastructure and social housing spending fast-tracked

The government is to bring forward £3bn worth of infrastructure and housing projects in a bid to kickstart the economy, it was announced today.

Chancellor Alistair Darling made the announcement as he set out his Pre-Budget Report in Parliament this afternoon (Monday).

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The package unveiled by the Chancellor includes:

• £700m to advance the Department for Transport's existing plans to increase capacity on the motorways and other highways;
• £775m to be brought forward for housing and regeneration investment, including £200m investment on Decent Homes. £150m will be invested on social rented housing in a bid to deliver 2,000 more social rented homes. There will also be £175m for major repairs to council housing stock and £100m for regeneration and housing infrastructure projects;
• Regional Development Agencies (RDAs) will also consider how they can bring forward £100m nationally on regeneration projects;
• £800m will be brought forward on the priority schools capital programmes, which in particular will mean additional capital spending in 2009-10 to fund the acceleration of improvements to the primary school estate;
• £442m to accelerate support for 25 capital projects to improve further education infrastructure, and 50 projects to improve facilities at higher education institutions;
• The Warm Front energy efficiency programme will see £50m brought forward and £100m extra invested to provide insulation for 60,000 homes;
• £20m will be brought foward on spending on flood defences.

Darling also announced a number of measures designed to help small businesses, which he described as "the engine of our economy".

Among the measures in the report that look set to affect construction firms are:

• A temporary £1bn Small Business Finance Scheme, which is aimed at improving SMEs' cash flows by lending between £1,000 to £1m to small firms on flexible terms.
• An extension of the empty commerial property relief to big firms.
• A planned 1p rise in small business corporation tax is to be delayed.
• Fuel duty will be raised to compensate for a cut in VAT from 17.5% to 15%.

Commenting on the news, Dr Noble Francis, economics director Construction Products Association, said:

“Generally we are glad to see the government is going to be bringing forward £3bn in funding from 2011 to the next couple of years for motorways, schools and insulating homes.

“But it is not enough to prevent a fall in construction output next year.

“We are expecting, looking to 2009, there is going to be a 5% fall in construction output.

“Obviously we will be looking into the details (of the pre-budget report). And there are small areas that could be of great help to manufacturers and contractors. But on the borrowing side there are some concerns.”

The measures came as Darling revealed that the economy was expected to shrink by between 0.75% and 1.25% next year.