iven so much of our short to medium term economic outlook is riding on our negotiations with the EU this was, as expected, a budget short on new measures and announcements. However, on a positive note the overarching themes did recognise the importance of infrastructure investment to building the economy that the UK needs if it is to meet public expectations around housing, jobs and wages, with the Chancellor stating his aim to "break the productivity challenge by investing in infrastructure and science".
The headline growth forecasts from the OBR were positive and steady which gave some room for plans to increase public spending, translating into a five year path to RDEL 1.2% growth, as opposed to the previous eight years of falling investment. It makes the Spending Review next year increasingly important with further funding potentially available. However, this is a headline pledge and unlikely to be equally reflected across all Departments – indeed it might well be much less than this for key housing and infrastructure departments, once the 'protected' areas such as the Departments of Health, International Development and the Ministry of Defence are taken into account
In the run up to the budget, I called on the Chancellor to set out how the Government would respond to the National Infrastructure Assessment as outlined by the National Infrastructure Commission. There was some clarity on this with a commitment from the Government to respond next year with a National Infrastructure Strategy – I suspect as part of the Spending Review – along with an interim update on what they have done so far.
The headline infrastructure spending announcement was the confirmation that Vehicle Excise Duty (VED) will be ring-fenced to provide £28.8 billion to the National Roads Fund including £25.3 billion for the Strategic Roads Network. A sensible choice to bring increased transparency and align road funding to a ‘user pays’ model, although VED in its current form is forecast to be declining revenue stream, so hopefully this will be a first step towards more substantial roads funding reform. There were a swathe of smaller announcements around infrastructure, including some £570m for local authorities to fix potholes and improve local traffic hotspots, along with commitments to development funding for East-West Rail on the Oxford Cambridge Milton Keynes Corridor and for Northern Power House Rail. It sets these projects up well for a full commitment next year in the Spending Review.
Despite increasing the headline pledge around the Industrial Strategy Funding by £1.6 billion, there were still no further details on how the balance of the previously announced Construction Sector Deal funding will be used nor what is expected of industry in this regard. Finally, when it comes to infrastructure financing the main news was the death of PFI and PF2, perhaps not too much of a surprise given the ominously absent PF2 pipeline which has been a moot point with previous budgets. The Chancellor’s wording here was very careful in terms of not ruling out some form of public-private partnership model in the future and given the likely budgetary constraints against the NIC’s National Infrastructure Assessment demands, it could be a more effective model for all parties involved and will have a place in the infrastructure pipeline going forward.
What was interesting on this front was the rise in influence of the British Business Bank which appeared a number of times in the statement. I wonder whether it will have a prominent future role in shaping any such model, along with picking up a Government backed investment fund for infrastructure to replace the European Investment Bank (EIB) post-Brexit and the government’s commitment to finance SME house builders. It certainly appears as if it’s becoming the Government’s trusted adviser of choice on a number of construction and infrastructure finance matters. However, realists will point out that the £200m announced for the BBB is a far-cry from the £2. 1 billion the EIB invested in the UK in 2017
When it came to placemaking, the political will and recognition of a holistic approach was there, even if it was slightly constrained by a lack of substantial funds at this point. Alongside some short-term boosts to the high street, such as the small shops rates relief and the future high streets fund there were hints of more substantial CPO reform and future city deals to be announced. It’s clear the Government is recognising the need for integrated local planning and it certainty stands ACE’s APPG on Building Communities in good stead to be influencing the agenda over the next year.
Finally, for smaller businesses the biggest headline was that SMEs will now be charged 5% instead of 10% when taking on apprentices. This means greater opportunity for smaller companies to hire them and more potential for the work of the ACE supported Technical Apprenticeship Consortium (TAC) to continue to provide a mechanism for consultancy firms to develop and deliver high-quality apprenticeships in our sector.
To summarise, it’s clear we have some work to do ahead of the Spending Review next year, but making the most of the Government’s wish to call the end to the era of austerity, we will need to make the case for infrastructure and housing investment to build a truly secure and prosperous economic future for the UK.. This budget is a step in the right direction, but more needs to be done to turn aspiration into delivery. ACE and its members stand ready to do their part to make this happen.
Hannah Vickers is Chief Executive at the Association for Consultancy and Engineering (ACE). This blog post originally appeared on LinkedIn.