Record–breaking levels of road and rail investment as well as funding for housing, broadband and energy infrastructure were among the headline–grabbing leads in Rishi Sunak’s first Budget. In an assured performance he gave no hint of only being weeks into the second biggest job in British government, delivering one of the trickiest budgets in decades.
COVID-19 provides cover for new spending
Sunak has artfully deployed the growing concern over the ability of the UK and global economy to weather the spread of the coronavirus to justify sidestepping the fiscal rules committed to in the December general election. These are no longer ordinary times and deficit funding is now back in fashion after a decade of austerity aimed at addressing past excesses.
This dramatic relaxation in spending controls follows on from the Bank of England’s announcement of the return to the lowest bank base rate since the depth of the financial crisis in 2009, a half point cut in interest rates from 0.75% to 0.25% – a two-thirds reduction in one go.
Infrastructure spend, spend, spend…
£640 billion of gross capital investment will be provided for roads, railways, communications, schools, hospitals and power networks between now and 2025. A further £30 billion has been provided as an immediate fiscal stimulus to help the economy cope with the COVID-19 threat, including tax relief and exceptional grants for small and medium sized enterprises. R&D spending will also be boosted by 15% this year to a record high of £22 billion.
These are gross headline figures, with most of the big-ticket new announcements adding up to only a fraction of that. Closer inspection of the Treasury’s Green Book over the coming days will reveal just how that figure is reached. Nonetheless the figures are astonishingly large.
Roads, roads, roads…
As part of the new capital investment, a record breaking £27 billion will be spent on 4,000 miles of upgraded roads and 100 junction improvements. Major Highways England upgrades will include a two-mile tunnel for the A303 past Stonehenge, dualling the A66 Trans Pennine route, an improvement to the M60 in Manchester, and A46 Newark bypass. £4.2 billion will target the transport networks of eight city regions through a five-year funding package based on plans put forward by the relevant Mayors.
As the Red Book acknowledges, some of these schemes are still at concept stage, so spending all this money within the next five years will prove challenging where the projects are not shovel–ready and have yet to go through the Nationally Significant Infrastructure Planning process.
£500 million a year in local funding will seek to fill 50 million potholes, totalling £2.5 billion over five years.
Rail and telecoms…
Rail spending will fund Northern Powerhouse Rail between Manchester and Leeds, the Midlands rail hub, a new Cambridge South Station and an upgrade at Darlington. Rail, bus and cycle infrastructure spends are all second order level compared to the major commitment to road improvements.
£5 billion will be invested in rural fast broadband and delivering 4G coverage to 95% of the country.
Other infrastructure spending…
– a £10.9 billion increase in affordable housing investment
– a doubling of spending on flood relief infrastructure to £5.2 billion in the coming year
– £1 billion for greener transport, including investment in electric vehicle charging infrastructure to ensure that drivers are never more than 30 miles from a rapid charging station
– £800 million funding for two Carbon Capture & Storage (CCS) clusters
The budget also provides for…
– £1 billion to remove high risk cladding from public and private sector tall buildings
– a 1% cut in the local authority public works borrowing rate
– 22,000 civil servants to be relocated to office space outside London
Expect more important news tomorrow…
Another young rising star of the government, Robert Jenrick, the Secretary of State for Housing, Communities and Local Government, will announce comprehensive reforms to the planning system. BECG will provide a detailed update on this as soon as it is published.