The new chancellor said he wanted to deliver announcements in a more low-key style than his predecessor.
Even so, this Autumn Statement was preceded by more teasers and hints than in previous years. Some of these even included talk of infrastructure investment.
So have the actual commitments announced today met expectations? As always there is a mixture of positives and negatives.
The positive news is that some investments are geared towards addressing the serious productivity gap the chancellor mentioned in his speech. The negatives are that the levels of funding still are very low and show a depressing lack of fresh thinking on how to invest.
Devil in the detail
New transport funding has been announced: £1.1bn in English local transport networks and £220m on the (Highways England) strategic road network. The devil will be in determining how much of this is genuinely new money and how it will be delivered.
If, as would appear to be the case, this means an infusion of money to local authority roads (traditionally the bridesmaid to Highways England’s network of trunk roads and motorways), then that is undoubtedly a good thing.
Additionally there is to be £450m for new digital railway signalling. Again, if this is additional funding to go to Network Rail to deliver some of the digital railway’s objectives, then again this is a positive announcement to increase capacity on the network.
The chancellor also endorsed the report published last week by the National Infrastructure Commission on enhancing transport communications between Oxford and Cambridge.
Localism still remains paramount, even if it not described in those terms. The chancellor has continued the trend towards decentralising expenditure with additional seed corn money announced for the Midlands Transport Hub to go ahead, and the promise of other announcements for funds to devolved spending bodies such as LEPs and City Deals, including a £1.8bn Local Growth Fund for infrastructure.
Local spending decisions can deliver disproportionate benefits to communities, but may not help affect the bigger picture. Seed corn funding is welcome, but again there is a world of difference to providing additional running costs for Transport for the North and dedicated budget commitments.
The problem with all of these announcements is one of scale and timing. The UK still has a huge hill to climb in terms of the quality of its infrastructure.
”There are also questions as to the timing for delivery of projects – even those that are ‘shovel-ready’ or in procurement are still a long way from delivering benefits”
Perhaps understandably, the chancellor did not mention the most recent OECD report which places UK as 33 out of 35 of its members (above Greece and Portugal) in respect of infrastructure in general and 34 out of 35 in respect of transport infrastructure.
The sums announced are going to go some way to address this, but may not go very far. There are some 245,000 miles of roads in the UK, much of which is of a very poor quality – particularly on local road networks. In relation to rail, there is a continuing struggle to ensure capital expenditure delivers value for money – but again, query how much the additional sums are going to be able to deliver in terms of actual network enhancement.
There are also questions as to the timing for delivery of projects – even those that are ‘shovel-ready’ or in procurement are still a long way from delivering benefits – and there appear to be no references to addressing the skills gap, apprenticeships and the post-Brexit outflow of skilled labour.
Lastly: where is the fresh thinking? There was a lack of any suggestion in the chancellor’s speech as to how to create better opportunity for private investment in infrastructure, especially from those insurance and pension funds looking for assets to finance but which are currently either overheating the domestic secondary market or investing overseas.
”The sums announced today should not be sniffed at, but we shouldn’t be fooling ourselves that this is anywhere near enough”
There had been previous mention that the cobwebs would be blown off the UK Guarantees scheme, but there were no specific announcements on how this might be used in future – possibly a reflection of the paucity of projects there to be guaranteed.
The Treasury has said there will be further announcements around a “pipeline” of projects for PF2; it remains to be seen what these may be and what if any steps have been taken to address some of the criticisms levelled at the model – not the least being the time taken to get to market.
The UK once led the world at looking at innovative approaches to funding infrastructure investments. The UK institutional funds have indicated a willingness to invest – it has to be hoped that there may be the first glimmerings of an appetite to try to reconsider this. If not now, then when?
Small can be beautiful. Local is good. Maybe given the post-Brexit fiscal pressures on government funding and the warnings of difficult times ahead, at present this is all that can be hoped for. The sums announced today should not be sniffed at, but we shouldn’t be fooling ourselves that this is anywhere near enough.
Jon Hart is a partner – PFI and infrastructure – at Pinsent Masons