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Government forecasts used to second guess spending review

Capital spending cuts to be outlined in this week’s Comprehensive Spending Review could mean the loss of 20,000 houses, 50 hospitals and 700 schools, according to research by the Construction Products Association.

The CPA used the government’s own forecasts to quantify for the first time the likely impact of the cuts on the industry.

By apportioning the spending cuts outlined by the government in its emergency Budget to individual departments based on previous allocations, the CPA was able to model the potential impact of these on construction.

The Communities and Local Government department’s capital spending budget, including repair and maintenance, is predicted to see cumulative falls of £6 billion over the four years of the spending review.

The CPA’s analysis suggests that such cuts would be equivalent to the cost of building 21,874 new houses over that period.

While overall health spending is protected by the government, capital spending on health infrastructure is likely to fall to make up for inflation in the cost of front line services.

The predicted level of capital spending cuts in health could pay for 52 new hospitals over four years, according to the CPA.

The schools capital task force commissioned by the government will file a draft report before the CSR on its recommendations for a school building programme to replace the axed BSF scheme.

But the CPA forecasts that cuts to the education capital budget will total £2.8bn - equivalent to the cost of 733 new schools.

CPA economics director Noble Francis said: “If the government ensured that net investment did not fall below 2.25 per cent of GDP, it would still be cutting £12bn from its budget in 2013/14 alone but it would provide thousands of homes and hundreds of schools in addition to considerable improvements in road transport.”


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