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What to expect from the Spending Review

With the outcome of the government’s Spending Review due tomorrow, these past few weeks have been what Sir Alex Ferguson famously referred to as “squeaky bum time” for cabinet ministers across Whitehall.

After months of private haggling – and in some cases public shroud-waving – departments and public bodies have been discovering just how tough the chancellor is going to be.

So what is the likely outlook for infrastructure?

First, the good news.

Having declared “we are the builders” in his Conservative Party Conference speech in October, George Osborne isn’t about to go all demolition man on us by blowing up departmental capital budgets.

“George Osborne isn’t about to go all demolition man on us by blowing up departmental capital budgets”

On the contrary, he has already pledged £100bn to infrastructure over the next five years, committing to press on with existing investment plans in key sectors such as roads and energy.

Power to the industry

HS2 will also continue to power forwards – though transport secretary Patrick McLoughlin will be in need of his hard hat when explaining the revised and updated cost figures for the scheme.

More interesting will be whether government is yet willing to invest in enabling development at the stations as well. 

Housing, too, must surely see new investment, and must be a good candidate for one of the rabbits out of the hat so beloved of chancellors on days like this.

The prospects for day-to-day revenue spending are, however, much more grim.

Sure, public bodies can strive to be more efficient in their operations, and can certainly be more commercial in their use of property and other assets.

But it’s unrealistic to think that cuts of the level being talked about will have no impact on infrastructure planning, operations and delivery.

Local councils in particular face a further squeeze in areas already under pressure – such as roads spending and planning departments.

And the situation is complicated by the fact that some bodies, such as Transport for London, spend money on capital investment, which the Treasury classifies as revenue.

If squeezed too hard then commuters will face fresh delays – of the new trains and signalling upgrades so badly needed to boost capacity.

To be continued

So, as with any announcement from the Treasury, it would be wise to check the small print before popping the champagne corks.

“It would be wise to check the small print before popping the champagne corks”

More than anything though, it’s important to remember that this spending review is just another milestone, and not the end of the road.

The new National Infrastructure Commission has now begun work on its reviews of energy storage, transport in the north and Crossrail 2, so expect symbolic support from the chancellor next week with substance to be decided on at the Budget in March.

Similarly, while we have now seen initial conclusions on Network Rail from Nicola Shaw’s government-commissioned review, final decisions are yet to come.

And while the government has promised to respond on airports by the end of the year, it would be a brave man to bet on any government statement being the last word just yet.

So while we will soon be able to pronounce with certainty on the outcome of the spending review, the bigger judgement as to whether George Osborne will move from infrastructure good to infrastructure great must surely wait for another day.

David Leam is Infrastructure Director at London First.  

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