Much remains unknown about how exactly the new Labour government will respond to the challenges it faces, despite having declared in its general election manifesto what its main targets for improvement, or ‘missions’, are.
Several of these directly involve significant infrastructure investment and others at least imply substantial investment. So it may have unnerved many that the new Chancellor of the Exchequer Rachel Reeves’ first major statement to Parliament involved cuts to infrastructure investment – the Stonehenge tunnel, the A27 Arundel bypass and the Lower Thames Crossing, as well as reconsideration of the hospital building programme.
On the plus side long overdue planning reform is on the cards, which is essential to attract private sector investment, much of which will be supported by seedcorn public sector money. The promise is held out of a new era of public-private collaboration as private finance is encouraged against a background of threadbare public sector infrastructure.
Some uncertainties will be removed in the Chancellor’s first Budget in October. Others will no doubt remain. The construction industry will welcome whatever workload increases come forward, but of probably as much importance to the industry is being able to see ahead what demand will be. Booms seldom end in anything other than tears as optimistic investments made in things like acquiring land, plant, recruitment and training are left as deadweights on balance sheets when the good times are over.
Rather than having to respond too quickly to often politically driven demand, what construction needs is a clear view of what will happen to demand in something like a five year timescale. That would allow proper planning and give confidence to funders and investors.
A multi-year spending review has been promised for next year, which could be for a two or three year timeframe. But is this really a sufficient time horizon to give confidence to construction companies? The Institute for Government (IfG) think tank suggests in a report – How to run the next multi-year spending review – that a five year timescale would be more appropriate.
The chancellor has already confirmed that the timing of spending reviews will be set out in a Charter for Budget Responsibility. The IfG says that will end unnecessary uncertainty for departments and others over when they will be required to input into the process and ultimately have their future budgets confirmed.
A spending review every two years, covering at least three years, means that departments and public bodies will no longer be left with no indication of what their budgets will be beyond March of the following year. Effective planning is not possible under that sort of regime.
The plan to have regular spending reviews is welcomed but the Chancellor should go further, says the IfG, with a more in-depth spending review that sets cross-departmental spending plans for each government ‘mission’, as well as each department.
The Chancellor has outlined plans to establish a regular cycle of three-year spending plans, that are reviewed every two years.This is welcome, says IfG, and will provide much needed certainty to departments. However, five-year spending plans, reviewed every three years, would provide further benefits from longer term certainty while balancing the need for flexibility.
Overall, departments and suppliers would have a new degree of confidence that plans would not be subject to sometimes seemingly random change for short term political expediency.
Nick Barrett
Editor