Osborne said it was time to be ‘bold’ on infrastructure but the most significant news was in other areas
In the opening minutes of his Budget speech on Wednesday, chancellor George Osborne promised to be “bold in delivering infrastructure”, and “bold in building the northern powerhouse”. In actuality, however, by far the most ambitious – and unexpected – announcement was not in either of these areas, but on the introduction of a national compulsory living wage.
The living wage - of £9 an hour by 2020 - is a major step forward in tackling the gulf between income and living costs among those in low paid jobs. Of course for businesses, including those in construction, there will inevitably be some work needed on how to meet this raised pay level. This is particularly the case for large firms, including some labour-only subcontractors, which may find that Osborne’s suggestion that cuts to corporation tax will offset the raised salary costs fails to balance out quite so neatly.
But even when it came to measures that will most directly impact on the built environment, the Budget’s take on infrastructure investment was overshadowed by the implications of policies in two other areas.
The first, and most worrying, is the imposition of an annual 1% reduction in rents paid by social housing tenants in England, which will take place for four years from 2016.
There was precious little detail behind the government’s repeated rhetoric pledging infrastructure upgrades
The announcement is likely to undermine the ability of housing associations to invest in the development of more affordable housing, with the cut to associations’ income potentially sabotaging their ability to secure loans for development. With the affordable housing sector already struggling to come anywhere close to meeting demand thanks to cuts to capital funding, the latest overhaul looks set to create even more problems.
The second announcement with large potential significance for construction is the government’s pledge to drive creation of a further 3 million apprenticeships with a levy on large employers. The further boost to apprenticeships, and the issue’s continued presence at the heart of the government’s policy agenda, will be welcomed by the industry. However, as Building went to press it was unclear whether this levy would apply on top of the levy construction companies already pay to the CITB - raising questions about how the commitment will be met in practice and the cost to employers of doing so.
So what of infrastructure? The biggest single headline on the subject from Osborne’s speech was the launch of a national fund for England’s strategic roads, paid for out of vehicle excise duties. This move, which, unusually for the government, ties the taxes raised from users directly to the investment in their services, will be greatly welcomed by both those businesses which are heavy road users and the civils companies involved in road construction.
But aside from that, there was precious little detail behind the government’s repeated rhetoric pledging infrastructure upgrades. This is particularly disappointing given recent large-scale setbacks for the sector in the form of delays to Network Rail’s investment programme, and confirmation that there will be an ominously lengthy wait before the government responds to the Airports Commission’s backing of a third runway for Heathrow.
Most specifically, the fact that the repeated desire to create a northern powerhouse has - on the evidence of this week’s Budget at least – failed to be underpinned by thought-out projects or even a clear understanding of what constitutes the “North”, raises concerns over a potential loss of momentum around the idea, whatever the number of references made to it in speeches.
It is to be hoped that the Autumn Statement, which will lay out the government’s spending plans in detail, will allay these concerns. But for now, the wait must continue.
Sarah Richardson, editor