The chancellor’s budget has received many plaudits for boosting infrastructure but, according to Julian Francis, when you look at the details behind the speech, there is little substance for the sector with many important investment decisions put off until later in the year.
Despite only having been in the job of chancellor for a few weeks, Rishi Sunak gave a strong parliamentary performance that delighted his supporters and silenced his critics, ensuring that he will now be seen a political heavyweight.
Sunak’s skilful performance highlighted his ability, like all great illusionists, to present a vision of reality to his audience that looks solid and real but is in fact based on nothing but our perception. For when we look at the details behind the speech, we find very little substance for our sector with many of the important investment decisions put off until later in the year.
To be fair to the chancellor, a lot of the reason for this is that the UK, Europe and the wider world are facing a significant public health crisis that is placing considerable strain on the nation’s finances. As a result, the centrepiece of the budget today was a £30bn package to boost the economy and get the country through the coronavirus outbreak. Contained within that spending is £12bn specifically targeted at coronavirus measures, including at least £5bn for the NHS and £7bn for business and workers.
Of real interest to consulting engineering companies across the country, however, will be a new “temporary coronavirus business interruption loan scheme” for banks to offer loans of up to £1.2m to support small and medium-sized businesses, a commitment for the government to meet the costs for businesses with fewer than 250 employees of providing statutory sick pay to those off work “due to coronavirus” and a statutory sick pay rebate which will help lessen the costs on businesses.
A very welcome announcement was the huge uplift in the amount the government spends on research and development, including the long argued for agency like ARPA - the US Advanced Research Projects Agency - a project that Downing Street advisor Dominic Cummings is known to favour to the tune of £22bn. The R&D tax credit refund will increase from 12 to 13%, which will be of considerable benefit to engineering consultancies who are at the cutting edge of the technological revolution.
Alongside that I am particularly encouraged by the announcements on five-year funding settlements for city leaders to invest in local transport improvements and by the additional investment in electric vehicle charging points, both of which are in line with the National Infrastructure Assessment.
That said, a lot of the large-scale infrastructure spending that was alluded to in the speech, £600bn over five years, will only become clear once the government has held its Comprehensive Spending Review (CSR) and has announced its National Infrastructure Strategy later in the year. This is particularly the case around the financial commitments to net zero that were not outlined today. If we are to meet these targets, then the government must start putting real investment into the programme.
All this means that crucial investment announcements that will be involved in our rail, road, air and energy networks will now be delivered in November once all of the key reviews are out of the way.
Although this may be upsetting in the short term, we must not blind ourselves to the long-term benefits this may bring to our industry. The chancellor has committed himself to reforming the Green Book which could have significant implications for how projects are approved in the future with less reliance on ROI measures. The CSR, that is due to conclude in July, will also importantly not only set out detailed spending plans for public services and investment for resource budgets for the next three years from 2021-22 to 2023-24, but will also set capital budgets for a longer period up to 2024-25 allowing for greater planning on the government’s part. Both of these could have profound implications for our sector.
All eyes must thus turn to the CSR and the debate of our times - which will be how the government will achieve its commitment to net zero alongside its stated aim of increasing infrastructure investment and levelling up the country. Far from delivering jam today, the chancellor’s speech has instead told us that we will be getting jam tomorrow. Only time will tell if it will be worth the wait.
Julian Francis is director of external affairs at the Association for Consultancy and Engineering.