The Chancellor’s Budget on March 3, 2021 contained few surprises. In it he set out the huge amount of money borrowed by the country during the pandemic and, with the furlough scheme and other support mechanisms set to continue until well into this year, the total amount of borrowing this year is expected to be more than £350bn, the highest ever in peacetime. The Chancellor has acknowledged that it will take many decades to pay this back. It is fortunate that interest rates are at a record low. The economy is expected to bounce back to pre-Covid levels by 2022 but income tax thresholds will remain frozen until 2026 and corporation tax will rise to 25% in 2023.
From an infrastructure perspective, given the plethora of policy announcements in late 2020, there is relatively little to report. Amongst the main announcements relevant to the South West:
· Eight new freeports were announced but only one of these is in the South West – Plymouth. The Port of Bristol applied for freeport status but was not successful.
· There is to be a review of Research & Development tax reliefs to make sure the UK remains a competitive location for cutting-edge research.
· £20 million to fund a UK-wide competition to develop floating offshore wind demonstrators and help support the government’s aim to generate enough electricity from offshore wind to power every home by 2030.
· £68 million to fund a UK-wide competition to deliver first-of-a-kind long-duration energy storage prototypes that will reduce the cost of net zero by storing excess low carbon energy over longer periods.
· £4 million for a biomass feedstocks programme in the UK to identify ways to increase the production of green energy crops and forest products that can be used for energy.
The Government has also announced the publication of its growth plan: ‘Build Back Better: our plan for growth’. This includes:
· £1 billion funding for a further 45 towns in England through the Towns Fund. The only towns in the South West that qualify for this are Swindon and Bournemouth which will receive £10m in total.
· Plans or at least £15 billion of green gilt issuance in the coming financial year, to help finance critical projects to tackle climate change and other environmental challenges.
The Government is also publishing the prospectus for the £4.8 billion UK-wide Levelling Up Fund, providing guidance for local areas on how to submit bids for the first round of funding starting in 21-22.
Housebuilding has been incentivised with a new mortgage guarantee scheme being made available for buyers with 5% deposits.
It was also announced that the new UK Infrastructure Bank is to be set up in Leeds with an initial capitalisation of £12bn.
Peter Kydd, SWIP Chair, said:
“A number of the announcements made today provided further detail on previous announcements. It is noticeable that there is a significant focus on new investment in the North of England in this Budget.
As an example, with over £40m already invested in Wave Hub by previous governments, it could have been a quick win for the Government to focus its £20m floating offshore wind demonstrator programme on the Wave Hub facility in North Cornwall. Wave Hub is fully licensed as a floating wind demonstration platform and is grid connected. Instead, its future is unsecure with Cornwall Council putting it up for sale, and if it can’t be sold, it will be decommissioned.
Let us hope that the Wave Hub facility can emerge as a winner through this programme.
The levelling up agenda makes it all the more important that those in leadership positions in the South West work together to secure the region’s fair share from the new Levelling Up Fund and the other initiatives announced in the Budget.
But we have some challenges. The documents published alongside the Levelling Up Fund prospectus show that the South West has only five areas in the 124 highest priority areas (Mendip, Isles of Scilly, Sedgemoor, Torbay, and Torridge). Cornwall, widely recognised as one of the areas requiring most economic support in the UK, is ranked alongside Bath and Bristol in the second priority areas.
As we learn more about the investment programmes announced today, we will provide further briefings but the key message from today is that the South West needs to make its case for future infrastructure investment as strongly and effectively as it can.”