Question: How does the UK investment in the built environment compare with investment in other EU countries?

Michael Ankers: We are bottom of the league. Across Europe about 12 per cent of GDP is invested in the built environment, i.e. schools, hospitals, roads-the infrastructure. There is great variation between the European countries but however you measure it, whether it is investment per head or percentage of GDP, UK with just 8 per cent of GDP, is bottom, and has been for quite a while.

Question: So why has it been given such a low priority?

Michael Ankers: Over the last 20 years or so, there has been a great desire to cut taxes and we've not seen investment through capital expenditure as a priority. There has been a determination of governments of both the main political persuasions to try to reduce taxes, and long term investment has taken second place.

Question: Isn't this because Government have difficult decisions to make over scarce resources and when it comes down to paying teachers, doctors, nurses this can be at the expense of capital projects?

Michael Ankers: Government is about making decisions, there is no question about that, but one of the encouraging things that the Labour government did when it was elected in 1997, was to distinguish in its first Comprehensive Spending Review between capital expenditure and current expenditure. Capital being investment in new schools, new roads and other investment projects which have a long term pay back, and current expenditure which includes salaries, social benefits and so on. The objective was to ensure that even when we had to reduce expenditure, capital investment was not necessarily cut back.

Question: The recent Comprehensive Spending Review included a substantial increase of £19 billion for the built environment - good news?

Michael Ankers: Yes, very encouraging news. For the previous decade the construction industry had been growing at a slower rate than GDP, in other words, the figure I quoted earlier on was getting smaller and smaller, because growth was lower than the growth of GDP. This was the first time in a generation that there had been a substantial shift to capital projects funded by government. As a result we will be providing business with better infrastructure, better roads, better transport systems, which all help to make business more competitive, and raises the quality of life for people in this country through better schools, hospitals, and housing, It's not just about improving the prospects for the construction industry.

Question: What does the government hope to achieve with this increased investment? Michael Ankers: I think one of the encouraging things last year, was that we had some clear output targets as to what government intended to achieve, in terms of projects on the ground not just money spent. Treasury is very good at confusing us as to which money has been spent and where. This Comprehensive Spending Review included targets in terms of the number of houses that were going to be improved, the number of schools that were going to be built, the number of hospitals that were going to be improved and built. We were encouraged by that. What we have found in the study we have just completed, however, is that in a number of cases the measures by which we can monitor progress to meeting those output targets are not actually in place.

Question: How does the government monitor these targets?

Michael Ankers: I think the government is trying to develop the measures to monitor these targets. Some of them are easier than others. For example, we can monitor the extent to which we build 100 new hospitals within a certain time frame. As for some of the other important measures, such as improving the quality of the social housing stock so that it all is of a decent standard, we are not currently collecting information in a timely way about the condition of the current stock against that standard and so we can't monitor progress towards eliminating that backlog, one of the government's most important targets. What we have done in this study is to identify where the gaps are and to help government to understand what information it needs to bring forward so that we can all work together to achieve this.

Question: So how many gaps have you found?

Michael Ankers: I can't give you a specific number, but there are certain areas where information is not going to be available for a couple of years. For example, it will be 2003 before we know the amount of social housing that was not up to a decent standard in 2001 - the base line year for the government's targets. It will be some time, therefore, before we can monitor whether we are making progress towards eliminating that backlog.

Question: Will the government's investment meet the need for new social housing?

Michael Ankers: No. Even Mrs Thatcher - the great enthusiast for the right to buy - accepted there was a proportion of people for a whole variety of legitimate reasons who didn't want to own their own house; they couldn't afford it, they didn't want the responsibility and some of those on low incomes need help with their housing costs. Now governments have reduced substantially over recent years the amount of social housing that's been built and last year we built only some 20,000 new social houses. And the total amount of housing built last year was at its lowest since the 1920s, apart from wartime. We are losing about 47,000 social houses a year through measures such as right to buy, but creating fewer than 40,000 in new social housing through new build, converting, etc. You don't have to be a genius to see that we are losing social housing stock every year. This can't go on forever.

Question: So what's at stake if this trend downwards continues?

Michael Ankers: Clearly there are people who are in need of social housing who are not going to be able to find acceptable accommodation; they are going to have to share with other people, perhaps young families won't be able to find their own accommodation. There are no government estimates, but the former Chief Government Housing Advisor wrote a report earlier this year and on the basis of his figures we would estimate that there is a shortfall of new social housing every year of about 30,000 houses.

Question: What about London and the South East. Is it reaching crisis point?

Michael Ankers: Its difficult to say whether it is reaching crisis point, but you will notice that government has adopted other measures to help key workers, such as teachers and nurses to find accommodation in an area where its extremely expensive. It's hard to say it's at crisis point, but it certainly is a serious problem. One of the difficulties we face is that although government in its Comprehensive Spending Review has allocated more resources to social housing, we don't anticipate it creating extra dwellings on top of what's currently being provided, because the money is being more focussed on London and the South East where the cost of land and building is more expensive. There may be more money, but it isn't going any further.

Question: There is talk of an economic downturn ahead - what will be the impact on the construction industry?

Michael Ankers: Until the events of the last two or three weeks, the scenario as we saw it was that the private sector construction activity (commercial and industrial development) was going to slow down over the next 2 or 3 years. We didn't anticipate a recession, but it was generally levelling off and we saw the capital investment proposed by the government as coming forward and replacing that and therefore maintaining modest levels of growth within the construction industry. Clearly, it's very difficult in the light of what's happened over the last two weeks and what may happen over the weeks and months ahead, to look forward with any confidence. I would suggest there are two scenarios. One where there is a recession and as a result of that some of the commitments the government has made it will not be able to be honour simply because the resources available are less than they anticipated (lower income from taxes) and unemployment is higher (more benefit payments). The other scenario is that if there is a recession as a result of political uncertainty and the downturn in America, the government may say that it needs to borrow the money in order to try to maintain growth in the economy, and its expenditure plans for schools, hospitals, roads and houses is a way that it might try and keep the economy going. And with inflation and interest rates relatively low, interest rates very low, there is a situation where they could argue that they could borrow that money without doing long term damage to the economy even if interest rates were to go up a little bit. It's not the way Gordon Brown has operated over the last 4 years, but he may decide the time has come to be a bit more flexible.

Question: Which scenario do you think and which do you hope?

Michael Ankers: In all honesty I would hope for neither scenario, and I would hope that we could return to where we were three or four weeks ago fairly quickly. I really can't see the way things are going at the moment any more than anyone else. We are still too close to a situation that none of us can fully understand the implications of. It is still too early for the government to make that judgement.

What does disappoint me, however, is that in the current situation, the Chancellor has done 'nothing' to help retain confidence in the economy, He has been anonymous over the last few weeks at a time when he should have a much higher profile in bolstering economic confidence.

Question: Nervous time for the construction industry?

Michael Ankers: I think a nervous time for everybody! You've seen the effects on the stock market, and all sorts of people feeling a little less secure in their jobs. Consumer expenditure which has been very buoyant even though there have been signs of a downturn, will be critical, but it is too early to say what is happening there. Is this something that's just going to be three or four weeks and then we return to where we were before, or is this a new trend and we are going to have to work from a lower baseline? I honestly don't know, and I don't believe the Bank of England or anyone else could say with any confidence at this stage. We are in very uncertain times, as you say.

Question: How would you like to work with the government in the future?

Michael Ankers: The government is clearly committed to improving the quality of the public services. That is what the government has set its stall out to achieve and it will want to go to the electorate in four or five years time demonstrating that it has improved the quality of public services in the built environment. That was a major manifesto pledge, and they would find it very embarrassing not to be able to show they have delivered at least a substantial part of that programme.

We are a key vehicle for delivering that pledge. To help in this we need to work much more closely with government departments. Let's get the information I was talking about earlier; let's work with the government to see what the scale of the problem is in some of these areas. If, for example, we need to do a lot to improve conditions of the roofs of school buildings, let's look at ways of delivering this cost effectively. And if they get good value construction, they are likely to invest more in the future.

Question: Is the Whitehall structure easy to work around?

Michael Ankers: You can carve up government and Whitehall in as many different ways as you want and you are bound to create some anomalies. We were keen to be part of the DTI when we saw that the Labour Government was going to make changes in Whitehall. We felt our industry belonged better with Department of Trade and Industry. Clearly we have close relationships with Housing at the Department of Transport, Local Government, and the Regions where there are planning issues which are of major concern to us. As is evident from our study, we need to develop close links with the Departments responsible for Education and Health because of how we can help deliver their capital development programmes. We also have close links with DEFRA because of the close relationship our activities have with the environment. So long as DTI acts as an effective sponsor for the industry across Whitehall, I am happy to deal with individual departments on issues that relate directly to their interests.

Question: So you wouldn't want a minister for the built environment who works across the departments?

Michael Ankers: The danger with this is that it adds another tier of responsibility. They would be dealing with housing, transport, schools, hospitals, etc, and there could be confusion with the more specific responsibility in the individual departments dealing with these issues. Lord Macdonald has been given a role in the Cabinet Office to ensure Election commitments are driven through. We will have to see how he responds to the study we have published.