OUR MESSAGE TO THE NEW GOVERNMENT
We will soon know the result of what seems to have been an interminable election campaign. Unfortunately, its importance, at a time when this country is still in one of its worst-ever financial crises, seems often to have been lost in inter-party wrangling over relatively minor details of policy. Most commentators agree that none of the main parties have seriously confronted the problem of the deficit. Is this because they fear to tell the electorate the unpalatable truth about the cuts that are to come, or is it because they are themselves unsure of the solutions to this crisis? Almost certainly it is a mixture of the two.
The immediate aftermath of the General Election will be a critical time for us all. It is then when we shall see the stuff that the new government is made of. Will it start axing expenditure from day one in order to create a good headline and make both the electorate and international markets see ‘they mean business’? Or will they take a more studied and reasoned approach, beginning rather more modestly and consulting widely about cuts with both the experts and those who will have to implement reduced budgets?
In this issue, commencing on page 12, we have sought the views of prominent members of our industry - hirers, suppliers and trade associations - to ascertain what they think the next government - irrespective of which party/parties form it - should do to assist hire, together with its suppliers and customers.
BLOATED PUBLIC SECTOR
We have found much consensus with some clear views about the way public expenditure should be tackled. Many felt that the private sector had borne the brunt of the pain of the recession with, of course, hire and the wider construction industry being one of the worst hit markets. Major companies have had to swiftly adjust to revenues plunging by 25-50% and they have brought workforce, depots and equipment numbers into line with this. Meanwhile they have seen Government bureaucracy continue to grow.
As a result, many of our respondents were keen to draw the essential distinction between the Government’s capital expenditure
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programme and current expenditure on bureaucracy. Because of the construction-related activity of much of our industry, critics might dismiss this as special pleading, but it is far more than that. There is little doubt the public sector has become bloated. It is not just the numbers that are employed, it is also their conditions of employment and, in particular, their pension funds. The whole machinery of government needs reform. We need to address the question of whether government should be involved in so many aspects of its citizens’ lives but, at the same time, safeguards must be kept in place to protect the vulnerable members of society. It will be a difficult balancing act and one which calls for a studied approach, rather than a ‘slash and burn’ one.
From our corporate point of view, however, the most important issue will be what the next Government does about capital expenditure. Over the decades, the classic reaction of Governments to budget deficits has been to slash capital expenditure. Why? Because it is the easiest thing to do. People don’t miss what they haven’t got (although they might feel betrayed if they don’t get the new hospital or school they were promised during an election campaign). This attitude towards investment in public infrastructure has been sheer short termism. It has done enormous damage to our construction industry (although despite it all our builders and civil engineers are still world class). It has, however, meant that, increasingly, construction products and raw materials are sourced overseas and that construction companies have not invested as much as they should for the long term in areas like training.
Construction remains a key factor in the economic recovery. If growth is to be sustained we need the infrastructure to support it. The next Government has to balance the requirement to cut the deficit with promoting economic expansion (which itself will help to reduce the deficit). They must not take the easy route of slashing capital expenditure again. Last December’s Forum drew attention to research highlighting the multiplier effect of construction, with every £1 invested in the industry yielding a further £1.84 for the economy. This is a very powerful argument for sustaining capital expenditure; let us hope the new Government heeds it.
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