Chancellor announces £5bn capital spending to boost growth

29 Nov 11
The government will spend an extra £5bn on infrastructure projects by 2014/15, with road and rail improvements a priority, George Osborne announced.

By Richard Johnstone | 29 November 2011

The government will spend an extra £5bn on infrastructure projects by 2014/15, with road and rail improvements a priority, George Osborne announced.

The increased investment, a major plank of today’s Autumn Statement, will prioritise 40 infrastructure projects and programmes deemed to be of national significance for growth.

These include ten specific road improvement schemes, along with a decision to write down the government’s debt on the Humber Bridge, allowing the toll for cars to be halved from £3 to £1.50.

Among the planned public transport improvements, some of which will be funded by an additional £1bn spending by railway operator Network Rail, is the electrification of the Transpennine Express route between Manchester and Leeds.

Government backing for a new rail line between Oxford and Bedford was also announced. This is the western leg of the East-West rail project, which has been proposed by members of the East West Rail Consortium, including local authorities, since 2003.

Welcoming the announcement, the consortium published information from the Department for Transport saying it will decide how to take forward this scheme in summer 2012.

Osborne’s infrastructure plan also proposes improving the rail network’s resilience to winter weather.

‘This all amounts to a huge commitment to overhauling the physical transport infrastructure of our nation,’ he said.

Transport pressure group Campaign for Better Transport said that the announcement of what it called ‘big dirty road projects’ would increase the economy’s dependence on oil.

Chief executive Stephen Joseph said: ‘What's really needed is tackling the backlog on local road maintenance and smaller transport projects that make best use of what we have but the government has cut funding in those areas.’

Osborne also confirmed a new scheme to encourage UK pension funds to invest up to £20bn in national infrastructure, including in 500 projects backed for construction in the next decade and beyond. However, concerns have been raised that it could take years for any of this funding to have an impact.

The CBI backed what it said was an emphasis on capital spending.

The business group also welcomed the announcement that the government would ‘explore all options’ for airport expansion, with the exception of a third runway at Heathrow.

Some of the extra infrastructure cash will also be provided for school building projects. Some £600m will be used to fund 100 additional free schools, set up by parents or community groups, with the same amount provided to councils that have the greatest need for new school places.

A government plan to ‘reinvigorate’ the Right to Buy programme was also confirmed.

Osborne said that he would ‘bring… back to life’ the scheme to allow tenants to buy council houses, with a pledge that a new affordable home would be built for each one bought to ‘get Britain building’.

The plan was welcomed as part of a scheme to ‘unfreeze the housing market’, by the CBI, but accounting firm RSM Tenon warned that the plan could reduce the number of homes available for social rent.

Head of social housing David Taylor said:‘The challenge will be to recycle the receipt from the sale to replace the asset that has been sold. If 50% discounts are being offered then it will be extremely challenging to replace the asset where only 50% of the value of the house or flat will be received.’

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