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News Release from: EC Harris | Subject: PBR and CSR delivers more of the same
Edited by the Buildingtalk Editorial
Team on 15 October 2007
PBR and CSR delivers more of the same
EC Harris have questioned whether the chancellor's announcement of increases in education and local government are enough to meet the government's agreed targets in these areas.
In Alistair Darling's first Comprehensive Spending Review (CSR) and Pre-Budget Report (PBR) since being promoted to chancellor on June 28 he increased the education and skills budget to GBP7.4bn by 2010 He also announced that investment on science and technology will rise to GBP6bn by 2010
This article was originally published on Buildingtalk on 21 Jan 2005 at 8.00am (UK)
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This followed the Prime Minister's early promise that education spending in the UK will raise from GBP77.4bn in 2007/08 to GBP90bn by 2010/11.
Paul Foster, Head of Local Government and Education for EC Harris, welcomed the increase in education funding although he questioned whether the increases for capital spending might well be taken up by inflation "The funding model for the secondary sector is potentially flawed as it is not taking into account the high level of inflation in the construction industry.
It is also worth mentioning that with BSF being behind programme, this is compounding the impact of inflation.
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"The GBP200m which has been made available to accelerate the primary capital programme is good news although deriving value from this investment will be contingent upon the Department for Children, Schools and Families having a coherent strategy in place to deliver the programme.
In addition, this does not appear to be new money as it seems it is being paid for by the slow progress of the BSF programme".
Foster also welcomed the increased funding for universities and skills to meet the requirements of the Sainsbury Review and Leitch Report.
"This extra money is essential to meet the targets of Sainsbury and Leitch and, of course, the development of skills for the UK workforce is a major issue, and one that affects the construction industry in particular".
Graham Kean, Head of Public Sector for EC Harris, said: "Although an increase in funding for the education sector is to be welcomed.
CSR poses more of a challenge for local government authorities who we expect to be subject to increased efficiency targets.
"The chancellor has provided local government with what can best described as a bare minimum.
This will create increased pressure for them to address their cost base in a radically different way - and with property being the second biggest cost after staff we would expect progressive council leaders to be taking a much keener interest in property to utilise it more efficiently to unlock value within their property portfolio.
"Local government will also need to address how it engages with citizens, and as such, I expect the sector will start to move more rapidly towards transformational workplace change.
In the long-term I would expect local government to be looking at strategies that will deliver both capital receipts and revenue savings, alongside improvements in efficiency and service quality".
Kean added that; "It will also come as no surprise that similar pressure will be exerted on central government departments and agencies as resources are channelled into the popular areas of education and health.
"The Lyons Review has led to relocation of a significant number of posts out of the capital.
The question now is how much more could be achieved by fully embracing the potential of new wages of working and a more progressive approach to property strategy".
Health .
In health Mr Darling told the House of Commons that he will increase funding to the NHS by an average of 4% above the rate of inflation.
Overall health investment in England will rise from GBP90bn in 2007 to GBP110bn by 2010.
Conor Ellis, Head of Health at EC Harris, said: "There is no doubt that the 4.4% headline figure, regardless of the issues of inherent capital spends, is still a reasonable basis for the NHS moving forward.
This will fund new primary care services, more responsive walk in centres and several new hospital developments and improvements in a wealth of patient care experiences.
"However in the past few years the growth in productivity has lagged massively behind the growth in funding.
Yet we have gone from funding of GBP53 billion in 1997 to more than GBP110 billion by 2008.
This coupled with high profile performance issues such as consumer needs and rate of hospital infection rates has given rise to a view that the reform programme has delivered too slowly and that the next 3 years will be more challenging".
For Ellis the NHS must now measure itself against international benchmarks.
"Given funding is now reaching EU averages what must be accepted is that the UK cannot rely on benchmarking the performance outcomes of the best of the NHS, but has to meet the standards of the best performing countries worldwide.
"This means every investment case for new premises and new technology must not only be targeted at client need but improving measurable outcomes.
The changes need to remove outdated practices and processes that will enable a service improvement from within the available finance".
Housing .
There were no surprises in the chancellor's speech on housing.
The increased house building targets had already been highlighted.
The big change here is the shift in approach to Planning Gain Supplement - a move that will be welcomed by many in the industry, but it does create another period of uncertainty while alternative approaches are assessed.
This will most likely lead to local authorities relying on S106 agreements as a route to planning gain.
At the same time the chancellor was speaking, Yvette Cooper was speaking at the HMI Conference in London.
She spoke of the drive to free up land supply to enable housing targets to be met.
Increasingly we expect this land to come from public sector organisations, perhaps through asset strategy reviews identifying surplus assets that can be brought forward for development.
An integrated drive for more progressive public/private partnerships and a simpler planning regime are all steps in the right direction.
Richard Jones, Head of Residential and Regeneration for EC Harris, said: "Yvette and her team are quietly getting on with delivering against very ambitious targets both in the private and public sectors.
What we are finding is that increasing pressure on the margins of traditional house builders, more innovative ownership and management models are emerging, linked to public sector land supply and broader regeneration objectives.
"The role of affordable housing providers and RSLs is becoming ever more interesting with some becoming larger developers in their own right".
Overview of the Pre-Budget Report and Comprehensive Spending Review .
Economy.
In keeping with his predecessor's and now boss' "golden rule"; a pledge to only borrow to invest, not to fund current spending, Mr Darling said the government will keep net debt at a sustainable level during the next economic cycle.
The chancellor said that net borrowing was expected to fall from GBP38bn in 2007 to GBP23bn in 2012.
Government departments will look to save a further GBP30bn by 2010, and this is on top of the GBP20bn already achieved.
Amongst the other proposals outlined by Mr Darling were help for lenders to provide more fixed-rate mortgages for 10 years or longer.
Tax .
As widely forecast the chancellor raised the inheritance tax threshold for married couples to GBP600,000 and promised it will rise further to GBP700,000 from 2010.
He also pledged early legislation on non-domiciled tax payers as a first step to charging after seven years, then a higher rate after 10 years.
The chancellor stated that these proposed measures would raise an average of GBP650m for the Treasury's coffers.
In setting out his first CSR Mr Darling said that the review "will be tighter for many departments".
Slower expected economic growth will mean reduced tax revenues for the government, and the spending targets set by Mr Brown when he was still chancellor will be hard to meet.
Even without a November election, Mr Darling has inevitably had to tread very carefully when preparing the PBR and CSR for this year.
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