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Transport a 'bright spot' in spending review

Transport was highlighted as a ‘bright spot’ in George Osborne’s spending review by industry commentators, who stressed the need for the detail promised tomorrow.

Responding to today’s announcement, Glenigan economics director Allan Wilen said: “The government will need to look to the private sector to deliver much of this investment.

“Although some key departmental capital budgets are being increased in 2015/16, overall departmental capital expenditure will total £48.3bn, a mere 1.3 per cent rise in real terms.”

Simon Rawlinson, head of strategic research at EC Harris, said that while there should be some detail on a number of large-scale projects announced tomorrow, the detail around the project itself is not the only important factor.

“There is moderate expectation around the level of detail, some projects we will know about but others might be interesting. It’s not juts the detail of the project, but more the detail on how they will get through the gateways they need to,” he said.

The 5.5 per cent rise in transport capital spend is against current expenditure in the department falling by 9.3 per cent, said to affect repairs and maintenance on roads.

Department capital budget for selected government departments

 2014-15 (£bn)2015-16 (£bn)Year on year growth in real terms (%)
Education4.64.6-1.7
Health4.64.70.1
Transport8.99.55.5
DCLG4.83.1-35.6
BIS2.12.515.3
Total 46.948.31.3

Source: Glenigan

Mr Wilen said the rise in capital was a “bright spot” with investment intended for new road and rail projects, while Mr Rawlison noted that “transport has been quite a beneficiary, but there is a slight concern around the extent to which spending on roads has been cut already and whether they can bring it back under slimmed down operations.”

Meanwhile the announcement around 180 free schools, 20 new studio schools and 20 university technical colleges drew more uncertainty. Mr Wilen noted that the projects will be funded from “capital budget that is shrinking by almost 2 per cent in real terms”.

“The sharpest cut is to the Department for Communities and Local Government capital budget which is to fall by 36 per cent to £3.1 billion, with the Government looking to private sector funding and higher rents to sustain investment in social housing provision,” he added.

Research from Glenigan published this week identified a £114bn pipeline of potential construction projects under central government. Mr Wilen said: “Whilst most capital budgets have avoided the sharp cuts seen to departments’ general expenditure, it will be essential that the promised funding is effectively deployed to ensure that as many of these projects move forward as planned.

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