1. Back on track
The government outlined plans to support £30bn of investment in the railways in 2014 to 2020, including committing £16bn of funding for High Speed 2 up to 2020.
But the budget for HS2 ballooned from from £33bn to £43bn, transport secretary Patrick McLoughlin has revealed. The first phase is now budgeted at £21.4bn and the second at £21.2bn, including a £14.4bn contingency fund in total. But McLoughlin added that he expected the final cost to be less than this, pointing out the Olympics also came in under budget.
Katja Hall, CBI chief policy director, said: “We cannot sit on our hands when the West Coast Main Line is set to reach full capacity by the 2020s – squeezing out passengers and freight. We back sustained, additional capital investment in the existing rail network to meet soaring demand. The HS2 project is important but it needs to wash its face. Industry, investors and taxpayers need confidence that the business case and programme management is watertight. Given wider public spending constraints, ministers need to keep very firm control of costs.”
2. Roads to recovery
Plans were announced for a £28bn programme of enhancements and maintenance of national and local roads from 2015 to 2020. But much of this is back-loaded with Highways Agency spending rising from £1.5bn in 2015 to £3.8bn in 2020/21.
Institution of Civil Engineers director general, Nick Baveystock, said: “Government’s commitment to provide our strategic roads network with the long-term funding certainty it needs is excellent news and should signal the end of the ‘stop and start’ funding which has hindered effective maintenance and management of this vital asset for too long.
“The £10bn investment for road repairs, with £6bn allocated for local roads, is also a positive step and will go some way to clearing the £10.5bn local roads backlog. These funds, however, must be complemented by a focused, joint central and local government programmed for the work. Given the significant pressure on local authority budgets, this will ensure the funds are protected, spent in a cost efficient way and do ultimately result in improved road conditions for the UK.”
3. Education emphasised
Chief secretary to the Treasury Danny Alexander announced a commitment to invest more than £21bn in schools over the course of the next parliament. This includes accelerating the rebuild of 261 schools as part of the Priority School Building Programme by 2017, two years earlier than planned.
The move comes a month after the Department for Education announced a £1bn funding shortfall in the PSBP after it cut the value of the private finance element of the programme, Building magazine explained. This left around 150 of the 261 schools without funding, with the DfE stating at the time that funding for these schools would be dependent on the spending review.
The commitment is predicted to including enough funding to build over 275,000 new primary places and 245,000 new secondary places by 2020, as well as up to 180 free schools, 20 studio schools and 20 university technical colleges in 2014/15.
4. Affordable housing boosted
The review contained plans to invest £3.3bn to deliver 165,000 new affordable homes by 2017/18. This will involve extending the Affordable Homes Programme with £957m funding each year from 2015/16 to 2017/18, and a £400m Affordable Rent to Buy scheme.
PwC’s engineering and construction partner, Chris Temple, said: “The £3bn to kick-start the 165,000 new affordable homes is an ambitious commitment and will be a welcome change from the current low levels of funding into the sector. We will also need to see a commitment towards better connectivity between financiers, suppliers, contractors and buyers to enable this ambition to be realised.”
CBI’s Katja Hall said: “The government has listened to the CBI’s calls to invest in the Affordable Housing Programme beyond the current 2015 cut-off. This is a further step towards addressing the massive shortfall in new homes.”
David Orr, chief executive of the National Housing Federation, said: “The £3bn over three years announced today is in reality a further disappointing cut in subsidy and won’t deliver the ambitious house building programme we need. The lack of investment in housing is now acting as a brake to growth in other parts of the economy.”
5. Infrastructure loan guarantees
The government announced plans to extend the UK Guarantee Scheme for two more years to December 2016, including a guarantee of up to £500m to support the Mersey Gateway Bridge and a guarantee for the new nuclear power station at Hinkley Point.
Institution of Civil Engineers diirector general Nick Baveystock said: “Extension of the government’s guarantee scheme and the inclusion of a guarantee advancing Hinkley Point C is a welcome and sensible step, demonstrating government’s commitment to the role of nuclear as part of a wider energy mix that can achieve a secure and decarbonised energy supply and meet the challenges of security and affordability.”
Katja Hall, CBI chief policy director, said: “Extending the UK Guarantees Scheme is a no-brainer. Potential investors have been put off by the impending cliff-edge next year. The new guarantees for the Mersey Gateway and Hinkley Point will reassure business that ministers are backing up their promises with real action.
Steve Nicholson, Mersey Gateway project director, said: “We’re very pleased with today’s news as it shows that government continues to recognise the benefits that Mersey Gateway can bring to the north west. The UK Guarantee Scheme helps to build capacity in the project finance market, which will support the robustness of funding proposals for Mersey Gateway as we move to deliver financial close. For final tender purposes we gave all three shortlisted bidders access to the UK Guarantee Scheme for up to 50% of the senior debt required to fund the project.”
6. Commercial experts in the driving seat
The chief secretary to the Treasury announced that Lord Deighton’s call for delivery of major national projects to be put into the hands of commercial experts will be accepted, helping to push forward stalled and future projects to delivery.
Dr Nelson Ogunshakin OBE, chief executive of the Association for Consulting and Engineering, said: “Industry has supported government’s renewed focus on infrastructure, but so far this good intention has been undermined by the ability to deliver projects. We await further detail, but allowing the expertise of the private sector to drive delivery forward can make the difference in getting projects from plans to being built. Industry is keen to engage with Lord Deighton and wider government on these plans to get projects delivered efficiently and effectively, now and in the future.”
Katja Hall, CBI chief policy director, said: “It’s clear that too often Whitehall simply doesn’t have the commercial nous or managerial expertise to get major projects through. We welcome Lord Deighton’s work to inject a more hard-nosed approach into getting a better deal for the taxpayer and speeding up progress.”
7. Funding cycles extended
Public bodies dealing with significant infrastructure works will now benefit from longer funding cycles than the traditional three- year cycle. This will see, for example, Transport for London secure its capital finance for six years.
Dr Nelson Ogunshakin OBE of ACE said: “This gives certainty to industry and investors, over the long term, better fitting the cycle of infrastructure financing, planning and delivery. Moving funding beyond a parliamentary term does mean, however, securing cross party support to these plans. We therefore call on the Labour Party to endorse these longer funding plans to maintain this certainty and confidence.”
8. English Heritage to be broken up
The government announced an £80m fund to facilitate the division of English Heritage into two bodies: a charity to care for its historic properties and a separate organisation, provisionally named the National Heritage Protection Service, responsible for planning and heritage protection. The move will take effect from March 2015. The charity will be able to generate greater commercial and philanthropic income than is currently allowed.
Kate Pugh, chief executive of the Heritage Alliance, told Building Design that she cautiously welcomed the move. “I can see why it makes sense in the current climate, but where that leaves the rest of English Heritage, I’m not sure. We welcome the consultation.”
9. LEPs to share new single fund
The Spending Review established a Single Local Growth Fund to distribute funding to Local Enterprise Partnerships, worth £2bn a year for the rest of the decade.
Forum of Private Business media officer Rob Downes said: “The allocation of £2bn to the single local growth fund is no doubt the biggest disappointment of the day. It doesn’t give the long-term commitment businesses were looking for and needed to hear to really get behind the local growth agenda. Given the disappointingly small amount going into the fund, the onus now is on the 39 LEPs to submit clear and convincing growth strategies focused on a small number of key local policies if they are going to make real change.”
10. Flood defences
Danny Alexander said that £370m would be spent on flood defences in 2015. That would increase in real terms every year to 2020, meaning that around 400,000 homes would be protected this decade. However, commentators have said that is only a marginal reinstatement of funds that were cut in 2010.
