The Budget 2021: What does it mean for infrastructure?
By World Infrastructure Journal-
With a steady slew of leaks over the past week, the latest budget from Chancellor of the Exchequer Rishi Sunak failed to deliver any shock factor. However, with substantial levels of new funding, and the promise of an ‘investment-led recovery’, this Budget has some positive news for infrastructure.
Stamp Duty holiday up to the value of £500,000 extended until the end of June
Government guarantees on 95 per cent mortgages
With an extensive backlog of property purchases to be completed before the temporary cut on stamp duty was due to end, the move to extend the scheme and taper its removal has not come as much of a surprise. Currently, buyers only have to pay tax on the value of a property above £500,000. But the return of full Stamp Duty, dreaded by potential buyers across England and Northern Ireland, will be gradually phased back in by the 1 October 2021. It is hoped this will be enough time to complete all the transactions in progress and meet the demand still out there. However, those paralegals stuck with many more months of transaction paperwork ahead of them will have to wait a little longer than the rest of the public for that long-awaited holiday.
As part of the bid to turn “generation rent into generation buy”, the Chancellor also announced plans for a Government-guarantee on 5 per cent deposits. From the beginning of April, most UK lenders including HSBC and Barclays will begin to offer 95 per cent mortgages for those who cannot put down the average 10 per cent deposit.
Yet this will only be up to the value of £600,000 which fails to cover the growing cost of properties in London and is not only open to first-time buyers. Many have raised concerns that this demand-side housing policy runs the risk of inflating house prices, which will put those attempting to genuinely put their first foot on their ladder at an even greater disadvantage.
There are also concerns over the lack of protection for those where renting is very much still a reality. Since the pandemic began, rent debt has grown to £288 million and over 715,000 households currently on universal credit are still unable to pay. Baroness Kennedy, Director of campaign group Generation Rent called the budget “tragic” and said: “we needed [Rishi Sunak] to help keep a roof over renters’ heads. ”
The London Renters Union said: “This is a landlord’s budget that extends Stamp Duty tax cuts for buy to let landlords and encourages profiteering in our housing system. But it does nothing to protect the [one million] people in rent debt from eviction. ”
Super-deduction for companies who can ‘deduct’ up to 130 per cent of investment costs from tax bills
National Infrastructure Bank to open in Leeds
Opening of the £4.8 billion Levelling-Up Fund
£1 billion of funding for regeneration ‘town deals’
Up to £30 million for the Global Centre for Rail Excellence in Wales
The ‘Super-deduction’ is big news for hard industry who are greatly in need of materials investment. Starting in April and running for the next two years, every £1 invested into new equipment will cut tax bills by 25p and could potentially be worth up to £25 billion for the UK economy. This could crucially help companies whose profits have been hit hard by the pandemic and incentivise modernising and improving equipment throughout the recovery.
A National Infrastructure Bank, which has long been hinted at, finally got the go-ahead by the Chancellor today. Set to open in Leeds as part of the long-term plan to move civil servants out of London, this has been given £12 billion in capital from the Government. It is hoped that the bank will fund up to £40 billion worth of public and private projects, especially in the green infrastructure sector. More details of exactly how the bank will operate and who will be able to access the funds remain unknown - as well as who will be on the next train from London to run it.
The green book?
New green recovery bond to support climate projects
Bank of England to reform net zero emissions mandate
£15 billion green bond to help finance projects that tackle climate change and environmental challenges
£20 million in offshore wind development
£68 million for low carbon energy storage development
£4 million for green energy crops
£4.8 million for hydrogen hub development in Holyhead
Green investment, while relatively new in budget-years, has come to be a staple part of any government announcement. With plans to make the UK net-zero by 2050, these latest steps come as a welcome move towards a greener economy. This extra funding even goes as far as retail investors who can access the green bond to finance their de-carbonisation transition.
With the climate crisis seemingly looming ever-closer, whether this will make a considerable difference remains to be seen. Some have criticised the decision to keep fuel duties at zero, suggesting that any raises could incentivise the public to buy hybrid or electric vehicles. This may have helped ease the transition to 2030 which the Government said would be the end of selling new petrol and diesel vehicles in the UK. However, for a society who have readily flocked to their cars in the pandemic due to fears over public transport, this move would hardly have been popular.
Ed Miliband, Shadow Secretary of State for Business, Energy and Industrial Strategy suggested that the budget did not go far enough, saying: “The Chancellor turned his back on the green stimulus that the jobs and climate emergency is crying out for”.
Help to Grow scheme for companies to access a digital and management boost
50 per cent off digital enhancing software for businesses
Increased funding available for re-skilling courses which government will contribute 90 per cent towards the costs
Review of R&D tax reliefs
Immigration reforms to attract foreign science talent
After leaving the European Union, Prime Minister Boris Johnson vowed to become a “science superpower”. Rishi Sunak reiterated that again by setting out new measures to attract talent to overcome the growing skills gap in the UK. New immigration reform is set to ‘fast track top talent’ in a variety of areas where domestic talent is failing to meet demand– research, engineers, science, and tech. With greater investment into re-skilling and apprenticeships, this could hopefully be a move towards an economy based on a much higher level of skills than currently exist in the market.
Yet for digital, which has been hurtled into the spotlight by the pandemic, and its shortcomings laid bare, there was a glaring lack of infrastructure investment. While development of digital skills is crucial as we move into a more digitised society and workplace, this can only go so far if the infrastructure to access it, is simply not there. Those in 2G areas will be disappointed by the lack of connectivity investment in the budget – if they’re not still waiting for it to load that is.
There will undoubtably be frustration from renters, climate activists, digital workers, those who must live and work in the significant gaps that the ‘investment-led recovery’ simply does not cover. Yet Rishi Sunak’s latest budget did seem a positive step in recognising the potential of infrastructure to lead the country’s recovery. It can only be hoped that, as the extent of the financial burden that was reiterated today becomes reality, infrastructure continues to be a guiding force towards that highly-anticipated ‘building back better’.
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