The UK government’s Growth Plan prioritises speeding up infrastructure planning – but will it be enough to achieve economic ambitions?
Today, the new Chancellor of the Exchequer Kwasi Kwarteng MP delivered what’s being dubbed as a mini budget centred on growth and tax cuts.
The Growth Plan’s main aim is for the UK to reach a 2.5% trend rate of growth.
The Chancellor announced three key priorities: cutting taxes, reforming the supply side of the economy (including deregulation), and reducing debt as a proportion of GDP over the medium-term.
This is set against the backdrop of the Bank of England recently raising interest rates by a further 0.5%, and warning that the UK may already be in recession.
Here we outline five announcements from the Growth Plan that impact infrastructure.
1. Speeding up infrastructure planning
The government will introduce the Planning and Infrastructure Bill in the coming months. This new legislation is meant to speed up the delivery of infrastructure projects.
- reducing the burden of environmental assessments
- reducing bureaucracy in the consultation process
- reforming habitats and species regulations
- increasing flexibility to amend a Development Consent Order once it’s been submitted
The government has confirmed that planning consent for onshore wind will be brought in line with other infrastructure. This paves the way for increased rollout of the cheapest form of renewable energy generation in the UK.
Updated National Policy Statements for energy, water resources and national networks, and a cross-government action plan for reform of the Nationally Significant Infrastructure Projects (NSIPs) regime – all announced by the previous government – will continue to be prioritised.
The list of accelerated infrastructure schemes that will benefit from the reforms feature over 80 road projects. Other projects focus on decarbonisation, rail, oil and gas, hydrogen and offshore wind.
2. Is fracking back on the agenda?
The government has announced an end to the pause on extracting reserves of shale, otherwise known as fracking.
As a policy, fracking continues to poll poorly with the wider public, and extraction is unlikely to significantly reduce energy bills.
Just 17% of the public support fracking, compared with 80% or more for various renewable technologies.
It's unclear whether fracking sites could be designated as NSIPs, thereby bypassing local planning rules.
With gas prices as high as they currently are, the transition to a net zero energy system will ultimately result in a significant national cost saving.
Looking forward and progressing investment into renewables, rather than backward toward fossil fuels, will improve the UK’s long-term energy security.
3. Additional support for energy efficiency
The government will expand the Energy Company Obligation (ECO) – which requires energy companies to install energy saving measures in fuel-poor homes – with a £1 billion boost over three years, starting from April 2023.
The new funding will be targeted at the most vulnerable households, aimed at the least energy efficient homes in lower council tax bands.
The government will also open applications for £2.1 billion of funding over the next two years to support local authorities, housing associations, schools and hospitals invest in energy efficiency and renewable heating.
Rather than scrapping green levies, as announced in Prime Minister Liz Truss’ recent speech on the energy price guarantee, the government has shifted green levies into general taxation.
ICE previously called for a greater focus on energy efficiency in our work on the energy security strategy. This additional support is welcome at a time when households are urgently looking to reduce bills in a cost of living crisis.
4. The Energy Bill Relief Scheme – what’s next for businesses?
The Energy Bill Relief Scheme will run for six months, providing a discount on wholesale gas and electricity prices for all non-domestic customers, including businesses, charities and the public sector.
As previously outlined in our blog on the new government’s energy announcements, the short-term intervention for businesses will provide immediate relief this winter.
However, longer-term plan cost reductions, which can be achieved by increasing focus on renewable energy and demand-led measures, are necessary.
The Chancellor returned to the previous government’s levelling up policy, stating that levelling up relies on the private sector and announcing the intention to cancel plans to increase corporation tax.
Yet, if tax cuts fail to stimulate growth in the long-term, businesses will need more extensive support than this six-month scheme.
5. Investment zones
The government has agreed in principle to establish ‘investment zones’ within 38 areas. These are intended to drive growth and unlock housing development.
Investment zones will include lower taxes and accelerated development sites, allowing areas with ‘appropriate governance’, such as Mayoral Combined Authorities, to have greater control over local growth funding.
This policy appears to be the new government’s preferred approach to addressing regional inequalities.
It remains to be seen what happens with the Levelling Up and Regeneration Bill and the previous government’s ambitions in this area.
ICE's view on the UK’s Growth Plan
It’s encouraging that the new government views infrastructure as central to achieving its growth ambitions.
Speeding up the planning regime for major infrastructure is a welcome move. The Climate Change Committee identified earlier this year that the slow pace of planning for major infrastructure is acting as a barrier to the UK’s net zero ambitions.
However, economic benefits and environmental objectives must reinforce each other for either to succeed.
Infrastructure projects should help achieve national objectives while being clearly aligned with the UK’s climate mitigation and adaptation needs.
Away from the planning side, we also need to focus on delivery and achieving the best outcomes from infrastructure investment.
ICE research has shown that government over relies on cost (and to some extent time) to determine project success, while project scrutiny also focuses on completion against budgets and not the wider benefits.
More weight should be attached to the whole-life benefits of projects and programmes. We need to recognise the importance of economic, social and environmental value instead of only focusing on achieving lowest capital cost in delivery.