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Social housing swallows infrastructure spend
Contract Journal; 3 September 2009

As the government prioritises its spending, across the country infrastructure schemes are being put on hold as the dwindling pot is shifted into social housing in market renewal areas. Mark Smulian identifies the schemes at risk and those poised to benefit

It was good news for housebuilders and contractors who work with them, but less good for anyone who hopes to be building infrastructure in a few years' time.

The government's switch of funding this summer out of infrastructure for growth areas and into construction of social housing may be a sign of things to come for the industry as the free-flowing public spending of the past decade seizes up. Anything left over for construction after the government has repaid its eye-watering debts will be the subject of what ministers choose to call "tough choices", in this case between homes today and infrastructure for homes tomorrow.

Essentially, ministers have decided there is little point in earmarking money to provide infrastructure for major new housing developments in the four Growth Areas and 55 Growth Points (see box) if there is no growth happening in the foreseeable future.

Instead it has shifted these funds into social housing, in particular to the housing market renewal areas in the North and Midlands.

It's clearly good that the money will still be spent on construction. But it will store up problems come a recovery because civil engineering contractors will not have built the infrastructure needed to accommodate new homes in areas where the economy is most likely to stage its fastest recovery.

Under the feel-good headline "Healey unveils further boost for housing", the housing minister John Healey allocated money to build 11,200 new homes, which he said would create 20,000 building jobs.

He allocated 1.7bn in housing private finance initiative credits for councils, 300m for 50 large housing associations and 35m for the housing market renewal areas in the Midlands and the North.

Buried in the small print was the origin of this money. "We have had to make some tough decisions across government about where we spend our money," Healey said.

Growth fund

The lion's share came from the Growth Fund - which was to pay for infrastructure in Growth Areas and Growth Points - and from housing renewal work by councils. Each growth fund recipient took a cut of some 40%, which provoked fury from those who had expected to soon be inviting tenders for new roads, bridges, sewerage, energy supplies and the other infrastructure that goes with large developments. Healey made it clear that a promised consultation this autumn would focus on how these cuts would be made, not on whether they should be made.

The Greater Norwich Development Partnership said it would lose 2m from the 5.6m it had been allocated. It said this jeopardised the proposed Rackheath eco-town, the Northern Norwich Distributor Road and the 21m Postwick Hub - a junction improvements and park-and-ride site on the A47.

"We can't keep applying for the same pot of money as it's moved from one scheme to another," a spokesman said. It was a similar story at the Haven Gateway Partnership - which covers the area around Ipswich, Harwich and Colchester and stands to lose 2.65m.

Projects put in question or delayed there included the 1.5m Cuckoo Farm junction on the A12, flood defences for Ipswich worth 2.2m and 1.5m of infrastructure for BT's Innovation Martlesham projects.

"The loss of funding will therefore have a significant impact on the delivery of jobs and homes at the very point the sub-region is possibly starting to emerge from recession and it appears directly contradictory to the government's statement that they wished to support Haven Gateway's priorities and aspirations," the Norwich Development Partnership said.

Cambridgeshire Horizons lost 6m from its 13.7m allocation. Its chair, the former housing minister Sir David Trippier, was "shocked and disgusted" because, he said, the money "has already been earmarked to a range of vital schemes which are due to deliver significant numbers of new homes over the coming years, and we must now go back to the drawing board".

Growth fund

Among projects at potential risk are infrastructure for new homes in market towns such as the Wisbech, Huntingdon and March. Also at risk is infrastructure in the new town of Northstowe, near Cambridge, and various developments of green spaces around developments.

PUSH - the growth partnership for the Portsmouth and Southampton area - lost 4m from a 9,5m allocation and was particularly angered because this money would have been spent on infrastructure for affordable housing projects. Its chair Sean Woodward was "appalled" that money allocated to support affordable homes in his area would be, in effect, handed to market renewal areas hundreds of miles away.

Industry reaction has been mixed. The Civil Engineering Contractors Association's head of industry affairs Alasdair Reisner said: "Since the start of the downturn, CECA has campaigned for the government to take action to support the house building sector.

"The promise of 1.5bn to fund the delivery of 20,000 new affordable homes will offer work for many of the country's small civil engineering contractors, who provide the infrastructure to support these developments.

"However this must be balanced against the importance of sustaining funding to growth areas, particularly where local authorities have already spent money developing plans for infrastructure schemes, anticipating that they would be paid for with receipts from the government's Growth Fund.

"If such schemes are cancelled as a result of the withdrawal of this funding, then the money spent so far will be wasted. Clearly that would be a situation that benefits nobody."

Steve Turner, head of communications for the Home Builders Federation, said: "Housing output has fallen primarily down to the lack of mortgage availability. "With this in mind, it is imperative that steps are taken by government to protect current house building industry capacity, or housing delivery in the both the short and long term will be adversely impacted."

The switch in spending will mean jam today for some contractors and housebuilders. But will there be enough left over for any jam tomorrow?

Growth areas

The growth areas are the Thames Gateway, Ashford, Milton Keynes South Midlands and the M11 corridor between London and Cambridge.

Growth points were designated in 2006, originally mostly in the South. They are intended to take substantial extra number of new homes, but not on the same scale as the growth areas. There are now 55, some covering more than one town.