By Mark Hall-Digweed, Partner, Carter Jonas (Infrastructure)

Introduction

Yesterday’s Budget was billed as a defining moment for economic growth. On first impressions, it appears to have been a constructive day for infrastructure. There were ample mentions of infrastructure in the Budget Report – no fewer than 76 uses of the word ‘infrastructure’ in fact. Much of it was retrospective but there were several positives too.

Heathrow runway
Tuesday’s pre-Budget support for the extended Heathrow runway was perhaps the most significant announcement from my point of view. But while aviation capacity matters, so too do the fundamentals that affect every household, along with the need for every household to be serviced by transport and utilities. Electricity networks in many areas are already at their limits, and developers are struggling to secure timely connections for new communities. Sewerage systems are under strain too, and strategic water infrastructure has not kept pace with population growth.

The same applies to the national energy system. Significant upgrades are needed to the transfer of power across the country. While the Great Grid upgrade starts to address the challenge of moving wind generated power from offshore, and moving coastal nuclear power inland, local distribution will require concurrent activity by DNOs.  Many renewable energy systems suit localised consumption, but storage technology is the conundrum that the government has the key to unlock.  Yesterday’s R&D budget could play an important role in driving innovation in this area.

Setting out support for Heathrow ahead of addressing these essentials feels like an unusual sequencing choice.

Small Modular Reactors (SMRs)
The government has published an updated Green Financing Framework, adding nuclear energy to the list of eligible expenditures for green financing (with some exclusions). This goes some way to support the role of nuclear energy as a green energy superpower and is welcome, as is the decision to place the next generation of nuclear technology at Rolls-Royce in Derby.

Continued funding for SMR development is welcome. Nuclear is central to a resilient energy mix. But until there is a commitment to the strategic grid upgrades required to move power from a likely SMR site on the coast to homes and businesses across the country, the impact will remain limited.

New towns

We had hoped for more commitment to the funding of new towns in this Budget. New towns need a commitment to infrastructure from day one, and this appeared to be an omission. Overall, the New Towns Taskforce estimates that its recommended locations could contribute at least 300,000 new homes in the coming years, but they will not be delivered successfully without the utilities, transport links or energy capacity needed to support them.

Landfill Tax

The Budget states that the government will not converge the two rates of Landfill Tax, as consulted on earlier this year, recognising that the proposed changes imposed costs on businesses and could potentially undermine the government’s housing targets. Instead, the government has committed to preventing the gap between the two rates of Landfill Tax from getting any wider over the coming years and will retain the tax exemption for backfilling quarries to ensure that housebuilders and the construction sector continue to have access to a low-cost alternative to landfill.

This is good news for both new towns and development more generally, as if the current landfill tax is expanded to include soil removed from sites, the cost of delivery of everything from a pipeline to a housing estate will rise significantly.

Depoliticising infrastructure

This government staked much of its early political capital on making the case that simplifying infrastructure delivery and attracting investment into schemes would underpin economic growth. Infrastructure remains one of the strongest levers available to drive that growth, as the Chancellor appeared to agree in her introduction to the Budget.

But there is a risk that the political capital spent so far has not been enough. Developers and investors alike want the government to go further and faster, particularly in planning reform and strategic delivery. The devolution of £13bn in flexible funding for seven mayors across England is a step in the right direction, but more will be needed to unlock delivery at scale.

Using the Budget to reinforce that ambition could have been the moment that puts major projects on the faster track they need but unfortunately this hasn’t been realised.

Conclusion

Although politics and infrastructure operate across different timeframes, yesterday’s Budget included positives for energy, transport and utilities. In this respect, the Chancellor has reaffirmed her commitment to growth through the built environment, and our sector should feel more confident in its ability to respond.

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