Michael Levack: Reform is welcome, but a VAT cut would be quicker

A REFRESHED Scottish infrastructure investment plan comes as welcome news, as the construction industry continues to struggle out of the toughest and most prolonged slump in its recent history.

Since 2007, we have witnessed more than 50,000 jobs dependent on construction disappear from the Scottish economy. We have seen billions wiped off the value of industry output and hundreds of firms forced into insolvency. That’s a huge impact for any industry to absorb. But it also illustrates the scale of the sector and how important it is to the health of the economy as a whole.

Building firms rely on a clear pipeline of new work to be able to plan future capacity and to have the confidence to invest in skills and apprenticeships. So I am glad to see the Scottish Government putting further flesh on the bones of the plan it published just over a year ago.

But the investment plan is only part of the picture. What has frustrated the industry most in recent years is not a lack of political commitment to invest in major capital projects. It is the Byzantine practices that strangle the public procurement process, coupled with a planning system that still takes far too long to decide major applications.

The Scottish Government recognises the challenge and its commitment to undertake a root-and-branch reform of construction procurement practices is welcome. There is a lot to be done.

Ministers must introduce the standardised pre-qualification questionnaire we have been promised for years, so firms are no longer obliged to reinvent the wheel every time they bid for a public contract. Procurement rules should be redesigned to actively encourage quick and efficient public tenders. If every unsuccessful contractor on a tender shortlist were entitled to be reimbursed part or all of the cost of participating, it could help put an end to genuine horror stories of upwards of 20 firms being shortlisted to compete for a single contract.

Despite Scottish Government efforts to prioritise capital spending, there’s no escaping the fact that public funding for construction projects is being cut back, so any short-term growth will have to come from the private sector.

What is more, private consumers provide the bulk of bread-and-butter business for smaller building firms. Reputable businesses are suffering on two fronts, as property owners either choose not to spend or opt to employ rogue traders willing to “lose the VAT” but equally likely to do shoddy or dangerous work.

Cutting VAT on building repairs, maintenance and improvements to 5 per cent would save consumers £15 in every £100 they spend. Whereas awarding new public contracts takes time, cutting VAT could boost the industry overnight. It is the other vital brick in the foundation of a sustainable recovery for construction. When he presents his 2013 Budget in March, we will look to the Chancellor to deliver.

• Michael Levack is executive director of the Scottish Building Federation.