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Budget 2021: A little more sparkle than expected?

An improving economic position with faster than forecast growth and less scarring than feared, has allowed an unexpected increase in spending. But we are now in an environment where the spectre of increased inflation has returned after many years away.

Levelling up (92 mentions in the 200 page report), skills (84 mentions) and net zero (57 mentions) were the dominant themes. There were also noteworthy announcements on transport spending.

The first 105 successful Levelling Up Fund awards were announced, across the four corners of the UK, amounting to £1.7 billion of the £4.8 billion total pot. Large awards of over £35 million were made to Derbyshire, Isles of Scilly, Renfrewshire and Liverpool City Region. Despite the notable broader distribution, London and the South East do still feature: four London Boroughs were successful with under £10 million bids but Newham hit the jackpot and secured nearly £40 million across two bids. Of the eight English Freeports, the first tax sites will be in Humber, Teesside and Thames who expect to start initial operations from November. Some 170 Towns Fund locations continue their implementation. However, we do have to bear in mind that Germany has spent £1.25 billion every week for 25 years to bring East Germany up towards the German average. But at least it is a start.

The transport commitments outside London do mark a step change and, together with the potential for local bus transformation, will allow Mayors and Combined Authorities to genuinely start to plan and implement more strategically and with more control. This is likely to be allied with further devolution from Michael Gove as the only sensible way to deliver long term levelling. It is also notable that the newly renamed DLUHC has been armed with planned budget increases of 4.7% over inflation for each of the next five years. 

Announced last week, the £5.7 billion investment package for eight English city regions aims to transform local transport networks using London-style integrated settlements. This includes £830 million to West Yorkshire (for schemes including the A61 improvements), £1 billion to Greater Manchester for schemes such as the next generation Metrolink, £1 billion to the West Midlands for schemes such as the Wednesbury to Brierley Hill metro extension and £710 million to Liverpool City Region for schemes such as battery power for new Merseyrail trains. 

With more than £3 billion of bus investment planned, including a commitment of £1.2 billion for bus transformation deals in England, the aim is to deliver London-style services, fares and infrastructure. Of course, London still needs a long term sustainable financing approach for TfL, otherwise London-style services will come to mean something else altogether.

The short term, albeit capped, discount on business rates (costing £1.8 billion) can only help some recovery of the battered retail, hospitality and leisure sectors but longer term the challenges of the high street remain. The High Street Heritage Action Zone programme in England will continue to help to revive 67 historic high streets.

With a commitment of £1.5 billion a year (on average by 2024/25) for the UK Shared Prosperity Fund (UKSPF), we are now more certain about the long awaited replacement to European funds which aims to help people access new opportunities in places of need.

Other notable announcements:

• There is a commitment in the National Infrastructure Strategy to spend over £100 billion a year on UK infrastructure.
• Grants worth £1.4 billion will be given to "internationally mobile" companies to invest in UK infrastructure.
• Some £24 billion is earmarked for "a multi-year housing settlement" with £11.5 billion focussed on building up to 180,000 new affordable homes and specific Combined Authority funds to subsidise the development of smaller brownfield sites.
• There is a commitment to £24 billion by 2024-25 for strategic roads including delivering upgrades such as the A66 Trans-Pennine.
• There is £8 billion to tackle potholes, resurface roads, repair bridges and deliver over 50 local road upgrades.
• An integrated Rail Plan can be expected "soon" as long as no leaves on the line no doubt.
• Funding to the Scottish Government will go up by £4.6 billion, to the Welsh Government by £2.5 billion, and there is an extra £1.6 billion for the Northern Ireland Executive.

And lest we forget that this all has to be paid for. From April 2022 the Residential Property Developer Tax (RPDT) will be a 4% charge on profits for the largest developers to help pay for building safety remediation. And the corporation and income tax increases start to bite from 2022/3 when an additional £3.8 billion will be captured, rising to more than £25 billion by 2025/26.

27 October 2021