Spending Review Outlines Infrastructure Investment

DELIVERING the Spending Review, Rishi Sunak said his immediate priority was to battle the effects of the coronavirus outbreak – allocating £55 billion for next year.

The Chancellor also announced the next stages of its investment plans in infrastructure with £100 billion of capital spending next year and a £4 billion Levelling Up Fund.

Setting out the budgets for government departments and devolved administrations’ block grants for 2021/21, the Chancellor of the Exchequer Rishi Sunak said: “Today’s Spending Review delivers stronger public services – paying for new hospitals, better schools and safer streets. And it delivers a once-in-a-generation investment in infrastructure.”

The Office for Budget Responsibility (OBR) forecasts the economy will contract this year by 11.3%, the largest fall in output for more than 300 years.

As the restrictions are eased, the OBR expects the economy to start recovering growing by 5.5% next year, 6.6% in 2022, then 2.3%, 1.7% and 1.8% in the following years.

Multi-year project investment

The government says it plans £100 billion of capital expenditure next year giving “multi-year funding certainty” for select projects, such as school and hospital rebuilding, housing and transport schemes.

For housing, nearly £20 billion of investment underpins the Government’s long-term strategy, including £7.1 billion for a National Home Building Fund and a confirmed £12 billion for the Affordable Homes Programme.

There will be almost £19 billion of transport investment next year, including £1.7 billion for local roads maintenance and upgrades.

An allocated £4.2 billion is for NHS refurbishment and maintenance of infrastructure.

The Government’s commitments on building 40 hospitals by 2030, rebuilding 500 schools over the next decade, and delivering 18,000 modern prison places across England and Wales by the mid-2020s was reiterated.

Flood and coastal defence investment in England is £5.2 billion over six years.

There’s also over £22 billion of funding for High Speed 2.

A new National Infrastructure Strategy outlining the government’s long-term vision for infrastructure investment, and a UK infrastructure bank to finance major new investment projects across the UK, were announced.

Levelling Up

A new £4 billion Levelling Up Fund will invest in local infrastructure while a refreshed Green Book (that assesses cost/benefits on projects) will link projects and programmes to Government objectives, including on Net Zero.

£600 million will be available next year to local authorities to bid on projects up to a value of £20 million.

The Treasury is to set up its Northern headquarters next year with thousands of civil servants moving to the regions.

The Chancellor also announced an increase in the National Living Wage, by 2.2% to £8.91 an hour from April 2021, likely benefiting around two million of the lowest paid.

For businesses, the business rates multiplier will be frozen in 2021-22, saving businesses in England £575 million over the next five years.

The Spending Review repeated plans for investments in research and clean energy sources, part of the Prime Minister’s ten point plan.

Apprenticeships

As part of its levelling up agenda plans the government plans, from August 2021, for employers who pay the Apprenticeship Levy to transfer unspent levy funds in bulk to small and medium-sized enterprises (SMEs) with a new pledge function. Unspent levy funds will still expire after 24 months. A new online service will start in August 2021 to match levy payers with SMEs that share their business priorities.

From April 2021 employers in construction will be able to front-load training for certain apprenticeship standards. Durinf 2021-2022, the government says it will be testing approaches to supporting apprenticeships in industries with more flexible working patterns, including consideration of how best to support apprenticeship training agencies.

Incentive payments for hiring a new apprentice introduced in the Plan for Jobs will be extended to 31 March 2021.

Industry Comments

Missed a trick

James Talman CEO NFRC

NFRC’s Chief Executive, James Talman, commented saying: “It is very welcome that a further £320 million of funding has been committed to the Green Homes Grant for the next year, but the government has missed a trick by not extending this to have a broader scope. We do not see why the Scheme could not be extended to include solar PV, for example, which could play a big contribution in helping the UK reach its net-zero target.

“We were also pleased to see the National Infrastructure Strategy announced, committing to £27 billion more capital spending over the next year, alongside a new National Infrastructure Bank. The government should follow this strategy up as soon as possible with a detailed pipeline of work, and engage with the supply chain in good time.

“The Treasury is giving with one hand to the industry and taking with the other—by going ahead with Reverse Charge VAT next March. We have members who will lose hundreds of thousands of pounds in cash flow when this policy is introduced, and this will have a detrimental impact on the very companies the government expect to deliver on their infrastructure investments. The Chancellor should urgently rethink this policy.”

No detail

Brian Berry, Chief Executive of the Federation of Master Builders (FMB)

Brian Berry, Chief Executive of the FMB, said: “Local builders stand ready to support a strong and green economic recovery, but the statement from the Chancellor today fell far short. We look to the National Infrastructure Strategy for more detail, but no mention in the Chancellor’s speech of low carbon homes or green jobs is unacceptable given the challenges we face. Confirmation of investment in further education and skills is welcome, as is the announcement of the National Infrastructure Bank. It’s important that local builders have access to both, if they are to provide the jobs, homes and growth the country needs coming out of the pandemic.”

Welcome spending on apprenticeships

Ann Watson Enginuity CEO

Ann Watson, CEO of Enginuity representing UK engineering and manufacturing said: “The loss of many thousands of apprentices due to redundancy and lack of sector capacity since March has been nothing short of catastrophic, so we welcome the £2.5 billion in additional spending on Apprenticeships – and the changes to the Apprenticeship Levy allowing transferal of funds to SMEs.”

Speed is of the essence

John Rossiter, indirect tax director at MHA MacIntyre Hudson, said, “The Spending Review struck a good balance between large long-term infrastructure projects and funding for smaller regional ‘shovel-ready’ projects.  Combined with the commitments made to upskill workers and create jobs, this should provide the foundations to help support the medium-term recovery from the Covid-19 crisis and longer-term ambitions.

John Rossiter Indirect Tax Director MHA McIntyre Hudson

“However, it’s vital that funding is made available quickly and efficiently, and that projects needing funding are identified and agreed in a timely fashion. Speed is of the essence if jobs in the construction sector are to be protected in the short term and increased in the longer term to meet infrastructure demand.

“The establishment of a National Infrastructure Bank allowing private investment is a very positive development announcement, and will help funding get to where it needs to be deployed. However, there absolutely needs to be regional capability to deliver projects. Not just local authorities or private business, but other stakeholders such as the local community, campaigners and advisers have got to be engaged. This model has been proven to work – and work effectively.”

National Skills Fund

Steve Radley, CITB Policy Director

Steve Radley, CITB Policy Director, said: “ It is now critical that the right skills and training interventions are put in place to help people benefit as a result of this investment and give the industry the skills it needs.

“A new route from FE into industry, through the expanded construction Traineeship, reform of the Apprenticeship Levy and the prioritisation of construction skills in the Government’s National Skills Fund and new Levelling Up Fund will be essential in doing this.”

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