Budget opportunity to stimulate growth

Construction Products Association calls on Chancellor to introduce policies to help speed recovery

THE Construction Products Association has written to the Chancellor in advance of his Budget statement next month, calling on him to introduce a range of practical policies that, while helping drive growth, will not endanger the Government’s desire to achieve its medium-term deficit target, but will speed the country’s economic recovery.

Speaking about the Association’s proposals, Michael Ankers, chief executive of the Construction Products Association, said: ‘Public sector capital investment will still fall 26% between 2010/11 and 2013/14, despite the announcement made last year for additional capital spending in housing, education and infrastructure. To ensure the UK economy is given the best possible chance for recovery, it is essential that government focuses on sustainable investment for growth.

‘The 2012 Budget provides the Chancellor with the opportunity to introduce a package of measures to stimulate the economy and deliver growth. This should include a further rebalancing of public spending away from current expenditure and into capital investment, as this will not only generate economic activity and employment, but will increase long-term productivity as a result of improving the infrastructure of this country.

‘However, key to delivering the infrastructure that the country needs is the attraction of additional private finance to compensate for the shortfall in public capital investment and the use of additional quantitative easing to raise levels of housing supply.’

The Association suggests that by purchasing bonds through its asset purchase scheme in a company that provides homes, government could increase housing provision so that the gap between housing supply and housing need does not increase further. This would also ensure that the quantitative easing is used in a manner that fully benefits the UK economy and that the Bank of England has another method for withdrawing the finance associated with quantitative easing in a swift manner without distorting one particular market.

Other key proposals for the Budget include:

• Doing more to ensure the Green Deal succeeds. The Association has long held the view that a reduction in VAT to 5% for Green Deal work (and also equivalent energy-efficiency work done outside the Green Deal) is necessary to incentivize consumers to take out these measures and to make the Golden Rule more achievable. As it currently stands energy usage is charged at 5% VAT whilst the products and solutions that will help reduce energy usage are charged at 20% VAT.
• Delivering the support package for energy-intensive industries announced in the Autumn Statement and providing support for capital investment to help industry offset rising energy costs and retain international competitiveness through utilizing an enhanced capital allowance. The capital allowance would be at no cost to government in the long run and be essential for those firms that will not benefit from the previously announced support package.
• Removing the Carbon Reduction Commitment from manufacturing sectors for which it was not primarily intended, as this has become a bureaucratic nightmare which creates anomalies that affect the competitiveness between companies within the same sector.