Response to the Spending Review: Five Things the Government Should Do Next to Build Back Better

As the Chancellor said today in announcing the Spending Review, the health emergency is not yet over, and the economic emergency has only just begun. There is an urgent need to kickstart the economic recovery, create jobs in the short-term whilst building the foundations to create a more productive, competitive, sustainable and inclusive economy over the long-term. There is much to welcome in the Chancellor's announcements today. There is now a need to build on this investment to create a coherent longer-term plan to build back better. Central to the Government’s mission is to deliver on the promise of levelling-up. There are five calls to action for what should be done next.

First, there should be a clear cross-government plan to make levelling-up a reality. The ￡4bn levelling up fund is good news for towns and cities, particularly for those hit hard by Covid-19 restrictions. We will have to wait and see for the detail. Mayors, combined authorities and councils need to have have an important role in working with MPs on the plans for how it is spent. To maximise its impact local places will need to bring forward coherent investment plans that cut across topics such as transport, housing, innovation, business growth, skills and regeneration. As Baroness Valentine argued recently, Government should coordinate policy and investment here across different departments. There is the potential to build a national consensus around the levelling-up agenda, bringing together national and local government, business, and community groups. We are seeing interesting international examples, such as New Zealand’s Building Nations initiative to develop a national plan for infrastructure.

Second, the National Infrastructure Strategy (NIS) is welcome; now implement it. The NIS rightly identifies the need to focus and prioritise infrastructure investment to drive productivity growth of our main regional cities. This would enable more people to move job without move house, firms to access a skilled workforce across a wider area and to connect to innovators and markets. We need investment to strengthen the role of city centres as hubs for knowledge intensive jobs. Our recent work has predicted the huge productivity and economic boost will get from workers returning to offices in city centres, and how city and town centres and workspaces can be reshaped post-Covid to support the economy. We need to integrate at a local level investment plans for different infrastructure projects. This should include government working with metro mayors and councils to agree investments to get our cities, local transport networks, people and businesses ready for major schemes such as HS2 and Northern Powerhouse Rail (NPR), such as the coherent growth strategy around the proposed NPR station in Bradford City Centre that Arup have produced. The investment in housing growth announced today emphasises the need for Homes England, Combined Authorities and councils to continue to be proactive in working with developers to bring a pipeline of quality housing schemes forward.

Third, we need to reboot the Industrial Strategy, and empower local areas to build on our strengths in science, technology and innovation to accelerate growth. The commitment to increase and rebalance R&D spend, the new UK Shared Prosperity Fund, the new hospital building programmes, investments in universities, and initiatives to improve skills training, apprenticeships, and the new work programme all need to be brought together. This can best be done by combining a clear national route-map with greater devolution. Government at all levels should get behind plans for innovation districts and real-world testbeds. There should be a concerted approach on strengthening the capability of the UK supply chain in 5G and green industries. A cross-government initiative should build partnerships with places to support innovators and entrepreneurs to solve big societal challenges such as climate change, supporting an ageing population, and harnessing new technologies. The rapid innovation around vaccine development has shown what is possible.

Fourth, realise the potential of the transition to Net Zero as a catalyst for economic growth. The National Infrastructure Strategy provides further detail of the investments that can support the Government’s Ten Point Plan for a Green Industrial Revolution. There is huge potential for investment in off-shore wind, the hydrogen economy, carbon capture and storage, electric vehicles, building retrofit, small modular reactors, heat networks and carbon sequestration to benefit UK businesses. This will create opportunities for towns and cities across the UK, for example through our work on the Grimsby Town Deal and Humber Local Industrial Strategy we are showing how a green revolution can be a model for places. A concerted effort is needed to support innovation and boost the capabilities of UK businesses and supply chains to realise the opportunities, and to reskill people to access green jobs.

Finally, we must continue to reform the approach to decision-making and project financing and delivery. The importance of the proposed changes to the Treasury Green Book today are not to be understated, and are in line with Arup’s suggestions made earlier in the year. They will make the appraisal process focussed more on the “why?” not just the “what?” of infrastructure, take into account spatial impacts, issues such as climate change, and to consider better the benefits from large transformational projects such as HS2 and NPR. But there also need to be change in the culture and structure of decision-making, which is currently too centralised in Whitehall and fragmented across different government departments. Greater devolution of budgets, decision-making, and additional fiscal powers to enable local areas to capture the benefits of infrastructure investment are all needed. The Government’s commitment today to implementing new devolution deals and city and growth deals is to be welcomed, but more could be done. There are some good proposals in the National Infrastructure Strategy for improving the way private investment can be leveraged, including reviewing regulatory regimes and energy pricing. The creation of a National Infrastructure Bank, located in the north, is a positive step. The proposals for accelerating the planning and construction of infrastructure projects under “project speed” are good, and the sector will need to innovate to deliver on this important objective.

In summary, whilst there is much to be welcomed in today’s announcement, there is now a need to develop a clear, coherent and compelling plans for levelling-up and to build back better. There should be a strong focus on joining-up policy and investment across Government departments and by working with and through more empowered city region and local government. There has been important progress to reform the approach to decision-making, investment and project implementation, but there is more to do. There have been positive steps today to support levelling-up, but the Spending Review is only for one year, so some of the necessary long-term decisions remain to be taken. The UK has underinvested in its infrastructure for too long. It is only through sustained investment and further reform of decision-making, including devolution, that the Government will be able to realise its big priorities.