Billions for infrastructure and housing, but new chancellor’s announcements were short on detail
Billed as the “levelling up Budget”, the rookie chancellor of the exchequer put a smile on the faces of many with a series of grand announcements from the dispatch box this afternoon.
In an enthusiastic performance – some have already suggested Rishi Sunak was putting his case for becoming prime minister in the not-too-distant future – the chancellor addressed the immediate challenges facing businesses in the UK, including the impact of the coronavirus outbreak.
Sunak delivered what one construction industry veteran described as a long-term budget whose ambitions would be welcomed by the industry while also testing the sector’s capacity to deliver.
On the face of it he announced a lot that will have pleased the sector. Hefty infrastructure spending promises and a significant housing boost ticked the sought-after spending boxes.
But several industry observers questioned the shortage of detail.
“In principle, lots of eye-catching headlines but in practice I say … show me the money,” Richard Steer, global chairman of consultant Gleeds, said afterwards.
Simon Rawlinson, head of strategic research and insight at Arcadis, said there was a lot of “jam tomorrow”.
Announcing billions to be invested in road and rail schemes and billions more to be spent on homes – including £400m to be divvied up between mayoral combined authorities and local areas to establish housing on brownfield land across the country – the chancellor indicated the government’s populist thinking.
Confirming that the government would deliver its delayed National Infrastructure Strategy in the spring, Sunak announced £27bn to be spent on roads across the UK as part of a second Road Investment Strategy, including the controversial revamp of the A303, which runs past the world-famous Stonehenge site.
Other sector bright spots were the allocation of £5.2bn for flood defences between 2021 and 2027, £1.5bn over five years to be used for capital spending to refurbish further education colleges, and £4.2bn for five-year, integrated transport settlements for eight city regions on top of £1bn which has been to “shovel-ready” transport schemes.
And he said the government intended to make “an unprecedented investment in urban transport”, confirming allocation of more than £1bn from the Transforming Cities Fund to deliver a range of local transport schemes including a new Central Park Bridge in Plymouth, an increase in the capacity of the Tyne and Wear Metro and new cycleways in Bournemouth, Christchurch and Poole.
The much-leaked suggestion that Sunak would develop the affordable housing programme was confirmed with the announcement of a £12.2bn investment, while the chancellor also allocated more than £1bn from the Housing Infrastructure Fund for nine areas including Manchester, south Sunderland and south Lancaster.
The much-vexed issue of planning reform is to be spelled out in a white paper due to be published in the spring, with the government’s proposals being spelled out tomorrow (Thursday).
Spurred on by the Grenfell Tower fire disaster, the chancellor announced a £1bn fund to pay for the removal of unsafe cladding on the country’s tower blocks. This will cover work to remove not just aluminium cladding material but what Sunak described as “all unsafe cladding”, although he gave no details as to what this would entail.
The chancellor also repeated the government’s promise to build 40 new hospitals at a cost of £100m, accompanied by an increase in the health department’s capital budget of £683m in the 2020-21 financial year to protect the level of NHS operational capital investment.
This will allow trusts to continue to invest in important capital projects such as estate refurbishments and building maintenance
Pressing the government’s green credentials and environmental ambitions Sunak outlined a carbon capture and storage fund and to establish CCS units in at least two UK sites, one by the mid-2020s, a second by 2030.
Using consumer subsidies, the government will also support the construction of the UK’s first CCS power plant, the chancellor added, while the tax relief on red diesel, used to power construction equipment, would be removed. Firm would be given a two-year grace period to manage the changeover to greener fuels.
Reacting to Sunak’s speech, Arcadis’ Rawlinson said that while there was a lot of “jam tomorrow”, there was also a huge opportunity for the industry that had to be matched with a responsible approach.
“That responsibility will be on us as industry to deliver productivity when schemes come through,” Rawlinson added.
There was also a real sense that the government has made full use of its borrowing powers by addressing the government’s net-zero ambitions, Rawlinson said, However he thought the government had missed a trick by omitting to mention the issue of retrofitting homes with technologies to help achieve them reduce carbon emissions.
Across the board the stakes for the chancellor are certainly high. In the short term, the biggest question is how the spread of the coronavirus will affect the economy as well the country’s population.
Measures to support both employed and self-employed people, including support for SMEs with fewer than 250 staff to cope with the extra costs of paying Covid-19-related statutory sick pay, were welcomed.
Longer term, spreading economic activity beyond London and the south-east remains a priority for Sunak and Boris Johnson. The divide between the more affluent south-east and pretty much everywhere else in the UK was a factor in the Conservatives’ thumping victory in the general election and the prime minister and his new chancellor knew they had to deliver a budget which addressed the concerns of those for whom the difference remains all too stark.
For his part Sunak emphasised that the government was delivering on its election promises. Wrapping up his speech he told MPs that his Budget would “deliver security today and lays the foundation for prosperity tomorrow”.
There are inevitably going to be caveats. Gleeds’ Steer said the infrastructure spending announcement and increased funding for housing would be a cause for celebration “under normal circumstances”, but announced in the teeth of a global crisis, with limited reliable financial data, there would be questions around how much control any government would have over the economy to find and invest the cash.
“With construction firms collapsing every day, one wonders if there was much to help them in this Budget. It was big on promises but short on detail as to how it will be funded,” he added.
With so much at stake, both now and in the longer term, the construction industry will certainly be mindful of the old saying about the devil being in the detail.