Out-Law News 2 min. read

There is 'no certainty that projects will be delivered' following Chancellor's infrastructure spending announcements, expert says

The Chancellor's Spending Round commitment to increase infrastructure spending contains "no certainty that these projects will be delivered", an expert has said.

Patrick Twist of Pinsent Masons, the law firm behind Out-Law.com, was commenting as George Osborne announced that £50bn would be allocated to capital spending in 2015/16 (68-page / 1.9MB PDF). This figure included an additional £3 billion per year from 2015/16 as a result of government departmental efficiency savings, he said.

"Announcing that additional money will be available for infrastructure projects over the rest of the decade doesn't mean it's going to be spent in the timescale that the Chancellor is talking about," Twist said. "Our economy might be out of intensive care but the infrastructure sector is on the verge of flat lining."

"Overall it's too late to make a real difference to the struggling construction sector in the short term as most of this money will be spent in the next parliament leaving the infrastructure sector in limbo until the next election. The lack of shovel-ready projects has been the bane of the National Infrastructure Plan since it was first announced. Today's announcement hasn't changed this position," he said.

The 2013 Spending Round sets out departmental budgets for the financial year 2015/16, across which an anticipated £745 billion in public funds will be spent. It proposes to reduce current spending by £11.5bn and increase capital spending on roads, rail, housing and other infrastructure by £3bn.

The plan maintains existing spending on health, schools and international aid, but introduces public sector pay reforms and a cap on welfare spending, excluding the state pension.

Chief Secretary to the Treasury Danny Alexander will set out the Government's capital spending plans in more detail the day after the Spending Round. However, Osborne's speech promised that the announcement would include "specific plans for more than £100bn of infrastructure projects".

"Today we raise our national game," Osborne said. "This will mean that Britain will spend on average more as a percentage of its national income on capital investment in this decade - despite the fact money is tight - than in the previous decade, when Government spending was being wasted in industrial quantities."

In his speech, Osborne allocated "the largest rise of any part of Government" to the Department for Transport's capital budget. It would receive £9.5bn from 2015/16, and that figure would be matched every year until 2020, he said. Plans would include "the largest programme of investment in our roads for half a century" and funding for rail projects, including the HS2 high speed rail project and a 'Crossrail 2' rail link from the north to south of London.

"Additional funds for rail infrastructure would be very welcome and Network Rail undoubtedly would be able to ensure that those funds are spent on capital projects," infrastructure expert Patrick Twist said. "There is a separate question here as to how these additional funds would need to fit in with the Office of Rail Regulation's requirement that Network Rail reduce its overall spend on assets."

"If the additional funds being available for roads are to be invested it will be important that Government doesn't use overly complex procurement models. Any new models will need to be as straightforward as possible. They will always need to address the intractable problem as to how road users may be required to take their car out of the garage. Maybe Danny Alexander will have the answers tomorrow," he said.

Planning law expert Richard Ford of Pinsent Masons noted the "precise divvy-up" in the Spending Round document between transport, science, schools, broadband and flood defences, as well as the Chancellor's commitment to over £3bn capital investment in affordable housing.

"Improved transport has beneficial effects for all of these priorities and we are keen to see that invested in vigorously," he said. "The investment market, particularly in relation to roads with tolling now progressing, clearly has an appetite and when the South East airports situation is resolved, that will be a further boost. There is clearly huge potential over the next few years," he said.

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