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The Chancellor of the Exchequer gave infrastructure investment a high billing when he delivered spending plans for the coming four years. George Osborne signaled the importance of infrastructure to economic growth, while indicating that total capital investment is likely to be higher than proposed in the June Budget.
Headline figures
Total departmental capital budgets will be £51.6 billion in 2010-11, £43.4 billion in 2011-12, £41.8 billion in 2012-13, £39.2 billion in 2013-14, and £40.2 billion in 2014-15.
£9.3 billion would be spent as planned on the delivery of the Olympic Games, while £30 billion will be allocated to transport projects over the next four years. This includes £14 billion for railways. It also includes £10 billion for maintenance and investment in new high value road, regional and local transport schemes.
Funding of £15.8 billion was also included for the maintenance and rebuilding of schools.
Two new funds may be used to spur additional development. The proposed Regional Growth Fund will now run for three years, with its budget rising from £1 billion to £1.4 billion.
At the same time the Green Investment Bank will benefit from an initial £1 billion. This figure may rise later as funds are directed from the sale of public assets. However, it will not begin operation until 2013/14.
Further environmental investment includes a £1 billion fund to support an industrial scale demonstration project for carbon capture and storage technology. There will also be £200 million available for to support offshore wind technology and manufacturing at ports.
While some of these announcements are positive, the impact of deficit reduction plans cannot be overlooked.
Departmental capital budgets are set to fall by 29% over the course of this Parliament. On average, total departmental budgets will decrease by 19%.
Road programmes have been particularly affected. More than £2 billion of road projects have been delayed or postponed as a result of the spending review.
Wales, Scotland and Northern Ireland are also set to see their budgets fall in real terms, and this will impact on funds available for projects that consultants deliver.
However, the government is keen to look at private funding options for investment, and measures like Tax Increment Funding by local councils may raise funding for key local projects.
The increased emphasis on infrastructure is likely to be welcomed by industry, particularly given its potential to help build private sector growth. What is important, therefore, is that good intentions spur delivery, particularly outside of south eastern England.
Programmes confirmed to go ahead
- Funding to enable Crossrail to go ahead;
- Upgrades and capital maintenance on key parts of the London Underground at a cost of £6 billion;
- Upgrades to the Tyne and Wear Metro;
- Electrification between Liverpool, Manchester, Preston and Blackpool;
- Journey time reliability improvements on the Great Western line to Cardiff, though this does not specify the electrification project that was previously announced;
- Redevelopment of Birmingham New Street station;
- Extending the route of, and increasing capacity on, the Midland Metro;
- Widening the remaining section of the A11 to provide a continuous dual carriageway link between Norwich and the M11;
- Improving the junction between the M4 and M5;
- Easing congestion on the M1 between junctions 28 and 31;
- Widening of the M25 between ten different junctions;
- The Mersey Gateway Bridge; and
- Extensions for the Tate Gallery and British Museum in London.
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