The Scottish Building Federation (SBF) has reacted angrily to the Pre-Budget Report, presented this afternoon to the House of Commons by the Chancellor of the Exchequer Alistair Darling.

SBF Chief Executive Michael Levack expressed bitter disappointment that the Chancellor confirmed that the standard rate of VAT will return to 17.5% from the 1st January, ignoring continuing pleas from the construction sector to slash VAT on building works for home improvement and repairs to 5% as a means of boosting the industry.

He was also dismayed that the announcement included no commitments to help fill the major gap in funding for capital investment in next year’s Scottish budget, as a result of the £300 million of funding accelerated into this year’s budget.

He suggested that the announcement meant that the Scottish Futures Trust could waste no more time and must act immediately to mobilise additional private capital to make up the funding shortfall.


Without concerted action, and with private housebuilding and commercial property still in the doldrums, Mr. Levack warned that the Chancellor’s announcement could send many Scottish building firms back into the red, prompting a second recession within the sector.

Mr. Levack said: "The pre budget announcement offers Scottish construction firms not a single drop of Christmas cheer as they ponder what 2010 may have in store for them.

"We have consistently campaigned for VAT on home building repairs and improvements to be cut to 5% but once again this call has gone unheeded. Ironically, given the pressure the public finances are currently under, all independent evidence suggests that cutting VAT in this area would have significantly increased consumer spending and boosted the overall tax take for the Treasury.

"While I welcome the new boiler scrappage scheme the Chancellor announced today, it will have a far more modest impact on cutting carbon emissions than would have been achieved by a substantial cut in VAT on home building repairs and improvements."

On the issue of capital spending, Mr. Levack added: "With no additional money committed from the UK Treasury, a gaping black hole in capital investment in next year’s draft Scottish budget remains.

"This can come as no surprise to the Scottish government, given the currently parlous state of the public finances. But it does mean that the Scottish Futures Trust must act urgently to source significant quantities of private capital to make up the shortfall. If that means resurrecting PPP then so be it."

Michael Levack concluded that, by failing to act today, the Chancellor may have condemned the Scottish construction industry to a "double dip recession".

(GK/KMcA)