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Budget 2017 | Chancellor looks to infrastructure spend to counter economic slowdown

hammond budget
  • Growth forecast downgraded by 0.5% this year
  • National Productivity Investment Fund extended to £31bn
  • Housing Infrastructure Fund doubled by extra £2.7bn
  • £1bn worth of cheap loans available to councils for local infrastructure
  • Commitment to East West rail and road schemes
  • £30M boost to trans-Pennine digital rail
  • £400M fund for electric vehicle charging infrastructure
  • £300M to bolster links between Northern rail and HS2 (previously announced)
  • £1.7bn Transforming Cities Fund (previously announced)
  • £34M to train construction industry
  • Government to favour offsite construction methods
  • £220M to implement local clean air funds

The gag-filled start to this year’s budget from Chancellor Philip Hammond could not mask a subdued economic outlook in the form of the Office for Budget Responsibility’s (OBR) downgrading of its GDP growth forecast for 2017 from 2% in March to 1.5% – and a further slowdown in the economy to 1.3% in 2019.

Kicking off with the big picture statistics, Hammond said: “Regrettably our productivity performance continues to disappoint.”

The Budget was ahead of the publication on Monday of the government’s Industrial Strategy white paper.

It also comes ahead of the Infrastructure and Projects Authority publishing an update to the National Infrastructure and Construction Pipeline next month, which will set out a 10 year projection of public and private investment in infrastructure of around £600bn.

Hammond went on to spell out the crucial link between infrastructure spending and the economy: “The key to raising the wages of British workers is raising investment – public and private. And Mr Deputy Speaker, we are investing in Britain’s future: Half a trillion pounds since 2010. The biggest rail programme since Victorian times. The largest road building programme since the 70s. The biggest increase in science and innovation funding in four decades. And the two largest infrastructure projects in Europe – Crossrail and HS2. When I took this job I committed to make the battle to raise Britain’s productivity. And thus the nation’s pay. The central mission of the Treasury.”

On Brexit he said he wanted ”free and frictionless trade.”

Most of the big-ticket transport infrastructure funding had previously been announced, including Monday’s announcement of the £1.7bn Transforming Cities Fund which included an extension to the Midland Metro, as well as an announcement last month of £300M so that HS2 infrastructure can accommodate future Northern Powerhouse and Midlands Engine rail improvements. He set out how the Transforming Cities Fund will be distributed, with each of the six regions with metro mayors will divide half of the pot, with the remainder available for other cities to bid on.

Transport secretary Chris Grayling had already told us that the trans-Pennine rail upgrade would get £30M to trial digital signalling.

So, what was new?

Last week the National Infrastructure Commission published its report on the Cambridge-Milton Keynes-Oxford corridor and today Hammond said the government backed its vision and committed to completing the East West Rail and Oxford to Cambridge expressway schemes.

The funding - the exact figure is yet to be announced - to accelerate the delivery of East West Rail will help deliver the connection between Oxford to Bedford, and from Aylesbury to Milton Keynes by 2024. He also announced a newly-formed company of local partners will also explore how to accelerate the delivery of the connection between Bedford and Cambridge, with the aim of opening the link in the mid-2020s, while programmes of work will start on developing plans for new Cambridge South and Cowley train stations.

The National Productivity Investment Fund, originally launched last autumn at £23bn, has been extended to more than £31bn. Last month Grayling announced some of the fund would be used to pay for road schemes in a £345.3M funding package for 76 local road and public transport projects.

Housing has been a key issue and the Housing Infrastructure Fund has been more than doubled by a further £2.7bn.

The chancellor also announced more than £1bn of discounted lending available to local authorities across the country to support high-value infrastructure projects.

In budget documents, the government said it will use its purchasing power to “drive adoption of modern methods of construction, such as offsite manufacturing”.

Procurement for government funded buildings such as schools and hospitals will adopt a “presumption in favour” of offsite construction by 2019 where it offers best value for money.

Hammond gave £400M to pay for digital vehicle charging points. There would also be an increased tax on new diesel cars which don’t meet emissions standards, which would go towards local clean air plans: “This levy will fund a new £220M Clean Air Fund to provide support the implementation of local air quality plans,” said Hammond.

There was little on Crossrail 2, Hammond simply said the government was “continuing to work with TfL on the funding and financing of Crossrail 2.”

Nothing about the Construction Sector Deal was explicitly said in Hammond’s speech, however in supporting documents it said: “The government is working with industry to finalise a Construction Sector Deal that will support innovation and skills in the sector, including £170M of investment through the Industrial Strategy Challenge Fund. Construction skills will also be a focus for the National Retraining Scheme.”

Hammond announced £34M to train the construction sector.

He said the government will also establish a new Geospatial Commission and will work with the Ordnance Survey (OS) and the new Commission to establish how to open up freely the OS MasterMap data to UK-based small businesses, under an Open Government Licence or through an alternative mechanism. The deadline for the initial work is May 2018 and £40M has been allocated to this work for the next two years.

Elevating Infrastructure is a new event from New Civil Engineer that brings together leaders of Britain’s infrastructure firms and the senior representatives from the government’s Infrastructure & Projects Authority to discuss how our industry can respond and rise to government challenges. The event is being held on December 12 in London, find out more here.

 

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