The statement was a mixed bag for infrastructure – positive reforms were tempered with ongoing uncertainty and looming cuts to spending.
Chancellor Jeremy Hunt has set out the UK government’s latest spending plans in the 2023 Autumn Statement.
Hunt’s announcements focused on supply-side reforms to the economy, including changes to the planning system, particularly on the electricity network.
They also put emphasis on providing incentives for companies to up their capital investment.
The Office of Budget Responsibility (OBR) also published its latest update on the outlook for the economy and public finances.
These show a revised upward forecast in growth for 2023 – at 0.6%. However, they feature sharp downgrades for economic growth in 2024 and 2025 compared to what was forecast earlier in the year, at 0.7% and 1.4% respectively.
This lower growth is due to inflation, which is now expected to be more persistent and domestically fuelled than previously thought.
This means interest rates will likely need to remain high, raising the cost of servicing the UK’s debt.
Here are five takeaways for infrastructure from the 2023 Autumn Statement.
1. An updated National Infrastructure Strategy in 2024
Much of what affects infrastructure was not outlined verbally by the chancellor at the despatch box in Parliament, but in the detailed Autumn Statement and its supporting documents.
Encouragingly, the government confirmed it’s planning to respond in full to the National Infrastructure Commission’s (NIC) second National Infrastructure Assessment (NIA2) next year.
This will take the form of an updated National Infrastructure Strategy.
The grey cloud hanging over all of this is the government’s decision, made last year, to freeze capital budgets in cash terms from 2025/26.
This is in place of increasing them in line with inflation, which effectively means cuts to public investment in infrastructure.
This comes at a time when the NIC has clearly identified that spending on infrastructure (from the public and private sectors) can solve many of the challenges the UK faces.
Not investing now means better outcomes for the public will take longer to materialise.
2. Grid upgrades welcomed
The chancellor confirmed that the government is acting on the electricity networks commissioner's proposals to accelerate the deployment of new energy infrastructure.
The aim is to halve how long it takes to build new transmission infrastructure from around 14 to 7 years. This is critical to achieve the scale of delivery required for net zero.
The Transmission Acceleration Action Plan sets out the government’s approach, including:
- a Strategic Spatial Energy Plan to bridge the gap between government policy and infrastructure development plans;
- new principles to standardise infrastructure and equipment, making projects quicker to design and deliver; and
- a streamlined regulatory approvals process.
Communities close to new transmission infrastructure will also benefit from up to £10,000 off their electricity bills over 10 years.
A separate Connections Action Plan aims to drastically reduce delays in connecting new power sources to the grid.
More detail on planning reforms
Implementing these plans will require reforms to the planning process, which the chancellor also set out in more detail.
These measures address several of the recommendations made by the NIC in its Nationally Significant Infrastructure Project (NSIP) Action Plan and NIA2.
If implemented, they could return the consenting time for NSIPs to two and a half years on average.
The government is designating low carbon infrastructure as a critical national priority in updated Energy National Policy Statements (NPSs) published today.
While it agrees with the NIC’s recommendation that there should be at least five-yearly reviews of NPSs, it won’t introduce legislation that requires this.
A further assessment of the current process will explore options to make future NPS reviews more flexible and streamlined.
3. Failure to fill in the blanks on transport connectivity
Transport details stood out by their absence in the Autumn Statement.
Following the government’s decision to cancel the northern leg of HS2, the ICE asked the government to commit to a review of the rail schemes for the North and Midlands.
However, no additional detail was confirmed by the chancellor.
The government needs to soon confirm the objectives that sit behind Network North and why those projects announced have been chosen.
The ICE has set out the need for a coherent and long-term framework for transport policy.
A National Transport Strategy could end the stop-start approach to investment and picking of pet projects.
4. Support for private investment
The chancellor confirmed that full expensing – in the form of firms being able to write off business investment in plant and machinery against their tax bills – will be made permanent.
This means that for every £1 that a business invests in equipment, they can claim back 25p in corporation tax – representing a tax break for capital investment.
Firms investing in capital-intensive low-carbon sectors such as solar and offshore wind will benefit.
The OBR estimates this measure will lead to £14bn extra business investment over its five-year forecast horizon.
Separately, the government has announced a consultation on proposals to strengthen the economic regulation of the energy, water and telecoms sectors, focusing on encouraging investment and growth.
This is something the ICE focused on in 2020, calling for greater alignment between long-term government policy and the regulation of utility companies.
5. Devolution progress continues
Alongside finalising several new devolution deals, the government has also provided details on how it will deliver and extend devolution in England.
A Memorandum of Understanding outlines the approach to the single funding settlements for the West Midlands and Greater Manchester combined authorities.
These will be implemented at the next Spending Review.
The government also published a new ‘Level 4’ framework for extending devolution to other combined authorities.
Eligible administrations will be able to access deeper powers, including new levers over local transport.
This is in line with the NIC’s long-standing recommendation to hand more powers and funding to local areas to deliver their own infrastructure.
The ICE’s view
In its recent National Infrastructure Assessment (NIA2) the National Infrastructure Commission emphasised the need for ‘pace over perfection’.
This is because the UK urgently needs to make progress on its long-term goals like decarbonising the infrastructure system.
But for those looking for direction from the chancellor on how the UK will pick up the pace, the Autumn Statement was disappointing.
Infrastructure will play a big role in the challenges the UK needs to overcome, but to make progress, clarity and investment are necessary.
While the commitments on grid infrastructure and incentivising private investment are welcome steps, the statement provided little additional clarity on key pledges like Network North.
And any positive steps forward must be tempered with the government’s choice to maintain capital budgets in cash terms, which effectively means a cut in infrastructure spending due to the ongoing impact of inflation.
With a Spending Review imminent, further uncertainty about whether infrastructure promises will be met could be around the corner.
The British public want to see networks and services transformed for their benefit.
Reducing uncertainty must be a priority going forward.
In case you missed it:
- The latest Infrastructure Policy Watch explores the Australian government’s recent decision to cut 50 projects from its infrastructure pipeline.
- The ICE outlines how private investment can unlock the potential of Cambodia’s infrastructure.
- ICE Policy Fellow Janet Greenwood warns of the dangers of silo thinking in infrastructure development.