There is much to welcome in the chancellor’s second budget, but words now need to be turned into action if the much-promised boost to infrastructure is to be delivered, says Infrastructure Intelligence editor, Andy Walker.
In what was largely a budget to help support businesses and the economy as they emerge from what everyone hopes will be the final stages of the Covid pandemic, chancellor Rishi Sunak made a number of announcements that will be welcomed by the construction and infrastructure sector, though more time will be needed to see if they lead to the promised increase in work and prosperity for the industry.
Further details on the setting up of a new UK infrastructure bank to be based in Leeds, (one of many ‘levelling up nods’ to the north in Sunak’s second budget) with a £12bn initial capitalisation and an expectation that it will help to support £40bn of infrastructure investment, will certainly be welcomed by the industry. In a boost to green infrastructure investment, the chancellor also said that the government is to launch a “world-leading sovereign green bond” and said that he wants to make the City of London a global leader for voluntary high-quality carbon offset markets.
Fleshing out details on the new infrastructure bank is rightly grabbing some headlines, but it is yet uncertain where the government’s centralised approach will leave local government and its own plans for infrastructure investment. True levelling up will mean local people making decisions locally and the government will need to guard against overly focusing on large showcase projects when there is much to be done regionally to build back better and rebalance the economy. It will be a key challenge for the government to keep its new former ‘red wall’ MPs happy on that score.
Those MPs will however be happy about the decision to site a new economic campus for the Treasury in Darlington, County Durham and the announcement of a new £1bn towns fund. They will also be cheering the widely trailed setting up of new freeports, which the government claims will make it easier and cheaper to do business and provide better access to infrastructure funding and private investment. In total, eight locations for free ports were announced by Rish Sunak - East Midlands airport, Liverpool, Felixstowe, Humber, Plymouth, Thames, Teesside, and Solent.
Taken together, the announcements on the infrastructure bank, the levelling up fund and new towns fund, freeports, the Treasury shift to the north and also the National Infrastructure Commission towns and regeneration study, which will consider how to maximise the benefits of infrastructure policy and investment for towns in England, at least on paper show that the government is going beyond words with its levelling up agenda. As ever, however, the devil will be in the detail and it will be interesting to see whether the government will give local leaders the economic and political tools to make the decisions that will make a real difference in encouraging infrastructure projects in their areas.
Looking further ahead, the chancellor is clearly trying to boost investment in jobs and the economy with eye-catching initiatives like doubling the cash support for the taking on of apprenticeships and encouraging businesses to invest their cash reserves with a so-called “super deduction” to reduce their tax bill by 130% of the cost. Sunak even quoted an example from the industry in his budget speech, saying that under existing rules, a construction firm buying ten million pounds of new equipment could reduce their taxable income in the year they invest by £2.6m pounds but with the “super deduction” they could reduce it by £13m.
“We’ve never tried this before in our country,” said Sunak, who quoted the Office for Budget Responsibility as saying the measure would boost investment by 10%, around £20bn higher per year. “It makes our tax regime for business investment truly world-leading, lifting us from 30th in the OECD, to first,” the chancellor said.
As well as the unveiling of the new green bond, the chancellor also announced hydrogen investment in Wales, alongside additional support for floating wind, energy storage and biomass schemes, highlighting the UK’s commitment to net zero ahead of the COP26 summit. The industry will now want to see further action on transport and building decarbonisation to make good on the government’s promise of a truly green recovery.
All in all, there is much for the construction and infrastructure sector to welcome from the chancellor’s speech, but the government’s attention now needs to be focused on delivery if its welcome words are to be turned into even more welcome action.