Delivering the Spending Review, Chancellor of the Exchequer, Rishi Sunak, said his immediate priority was to protect people’s lives and livelihoods as the country continues to battle the coronavirus outbreak – allocating £55 billion to tackle the virus next year.
He also set out how the government would deliver stronger public services – honouring the promises it made to the British people with core day-to-day departmental spending growing by £14.8 billion in cash terms next year compared to 2020/21. From 2019/20 levels, that is an average growth of 3.8% a year, the fastest rate in 15 years.
The Chancellor also announced how the government would deliver the next stages of its investment plans 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 said: “Today’s [25 November] Spending Review delivers on the priorities of the British people. Our health emergency is not yet over, and the economic emergency has only just begun; so, our immediate priority is to protect people’s lives and livelihoods.
“But today’s Spending Review also delivers stronger public services – paying for new hospitals, better schools and safer streets. And it delivers a once-in-a-generation investment in infrastructure. Creating jobs, growing the economy, and increasing pride in the places people call home.”
Building back better
The government has announced the next phase of its infrastructure revolution with £100 billion of capital expenditure being made available next year, to kickstart growth and support hundreds of thousands of jobs.
This will give multi-year funding certainty for select projects, such as school and hospital rebuilding, and housing and transport schemes – backing new investments in cutting-edge research and clean energy sources, and investing in a greener future by delivering against the Prime Minister’s 10-point plan for climate change.
The Chancellor also set out plans to further the levelling up agenda by launching a new £4 billion Levelling Up Fund that will invest in local infrastructure, while a refreshed Green Book will link projects and programmes to government objectives, including on Net Zero.
This is supported by the new National Infrastructure Strategy, outlining the government’s long-term vision for infrastructure investment, and a new UK infrastructure bank – headquartered in the north of England – to work with the private sector to finance major new investment projects across the UK.
And to ensure that government policies that have the most impact on levelling-up are created by those living in communities outside of London and the south east, the Treasury will 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.
Industry reaction to Spending Review
The Chancellor has ‘missed a trick’ by not broadening the scope of the Green Homes Grant, says the NFRC.
James Talman, chief executive officer of the NFRC, said: “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.
James concluded: “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.”
With the economic emergency only just beginning and a challenging year ahead, John Newcomb, chief executive officer of the BMF acknowledged that there was some welcome news within the Chancellor’s announcement.
He said: “In particular, we welcome the £20 billion committed to underpin the government’s long term housing strategy, confirmation of capital investment to deliver the government’s commitments on building 40 hospitals and rebuilding 500 schools over the next decade, and the multi-year funding required to deliver the Prime Minister’s 10-Point Plan for a Green Industrial Revolution. The latter includes a welcome 12-month extension for the Green Homes Grant, which was announced last week.
“However, we would have liked to hear the Chancellor go further and announce funding for a National Retrofit Strategy to turbo-charge the levelling-up of housing conditions throughout the country. Pump-priming this work would undoubtedly improve lives, create jobs, boost the economy, as well as making greater inroads towards the government’s target of net zero emissions by 2050.”
The response from the government must be bolder if we are to “build, build, build” our way to recovery, argues 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 [25 November] 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.”
Regarding the push for Net Zero, Brian said: “We cannot meet our Net Zero carbon targets without improving the energy efficiency of our homes and moving to low carbon heat sources. Failure in this Spending Review to commit to a long-term retrofit strategy, or to bring forward the £9.2 billon promised in the Conservative manifesto will set the country back. Acknowledgement of the need to retrofit is one thing; but a plan must follow.”
With regards to apprenticeships and training, Brian added: “SMEs train 71% of apprentices in construction and are ready to help support new jobs in the sector. While the confirmation of funding for further education, £375 million through the life time skills guarantee, and a particular reference to apprenticeship changes to help SMEs are all steps in the right direction, colleges will need more support if we are to cover the existing gaps in traditional construction skills like bricklaying, let alone train people in much needed green construction techniques.”
On newbuild housing, Brian said: “This year more than ever we have all appreciated how important it is to have a decent place to live. SME house builders stand ready to deliver more sustainable and beautiful homes, in each community and on small brownfield sites. I welcome the extra support from the Chancellor with the announcement of the National Home Building Fund and confirmation of Help to Build. Extra funding is welcome, but without urgent investment in our local authority planning departments to speed up decisions, projects are struggling to get off the ground.”
Similarly, Steve Radley, policy director at CITB pointed to the need for the right measures to be put in place to “give the industry the skills it needs” to meet demand. He said: “The Chancellor’s commitment to a large increase in infrastructure spending next year and publication of the National Infrastructure Strategy gives the construction industry greater confidence about the future work pipeline.
“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 further education 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.”
