Better than expected, but pre-Budget forecast will not spare construction’s pain

Better than expected, but pre-Budget forecast will not spare construction’s pain

There was a widespread view, stoked in part by the new incumbent at No 11 Downing Street, suggesting that the first output from the newly established Office for Budget Responsibility would most likely reveal the public sector debt to be far greater than we had been led to believe.

Understandably this miffed the ex-Chancellor Alistair Darling who quite rightly was irritated at the suggestion he was a smoke and mirrors merchant.

Well, now it would seem that if he had been misinforming us about the size of the impending debt then it was to exaggerate it in the run up to the General Election.

Because we appear, according to Sir Alan Budd and his team at OBR, to be about £20 billion better off than we thought. Not much better in the grand scheme of things, with the overall public sector net debt expected to rise to £1,376 billion by 2014-15, but this is a hell of a lot better than some had feared.

And for those looking for encouraging signs, the OBR estimate of the future tax take is up on the Budget estimate, with overall current receipts in the current year expected to be £6 billion better, having been about £8 billion better last financial year.

On a point of minor detail (if £12 billion can be a minor detail), someone might want to look at the Stamp Duty figures again. I for one would be surprised if they yield as much as is expected.

That aside what did raise more than an eyebrow was looking at the projection for jobs in the economy. The figures suggest that fall in the numbers employed has now bottomed out and will be on the rise from here. For my money that is a brave call.

I am not sure what assumptions are plugged in for the exodus or inflow of migrant labour, but if these figures prove correct the tax take and the burden of unemployment on the state will be pretty favourable. Mind you if they are over optimistic there will be a need for the Treasury to find more money.

On the darker side of the OBR output is the revision down of the growth forecast. This downward revision means that we are expected to be earning less to be able to pay off the (slightly lower) debt than was previously estimated. But in fairness there were plenty of lifted eyebrows over Darling’s projections for growth, so this is no surprise.

Overall, however, there is nothing in the report to suggest that the plight of the construction industry would be altered that much.

The Chancellor is eager to savage the public debt quickly and along with that he will be spilling plenty of blood within the construction sector as public capital spending is axed severely.

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