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JUNE BUDGET: £26bn of capital spending cuts to come

The chancellor’s emergency budget has confirmed eye-watering cuts of £26 billion a year to capital expenditure by government departments by 2013/14.

According to the budget report, government capital spending was £69bn in 2009/10 and will fall by £26bn to £43bn in 2013/14.

While the chancellor was at pains to point out that his Budget meant no new capital spending cuts, the predicted spending figures bring the coalition into line with the cuts envisaged by the Labour government.

The documents chart an expected fall in capital spending from 3.6 per cent of GDP in 2009/10 to just 1.25 per cent of GDP in 2013/14, confirming the full extent of cuts to come for the sector.

The CPA’s director of economics Noble Francis said: “With the government representing 40 per cent of the construction sector, cutting their spend by half is a major negative for the sector.”

Despite confirming the extent of the cuts, there was no clarification that existing projects would go ahead in their current form.

A statement in the budget report said: “It [the government] will undertake a fundamental review of all capital spending plans to ensure they are affordable and to identify the areas of spending that will achieve the greatest economic returns.”