MPA welcomes the Chancellor's continuing emphasis on promoting investment set out in his Autumn Budget. The confirmation of the National Roads Fund and financing of Road Investment Strategy 2, the development of the National Productivity Investment Fund and further measures to increase housing supply are significant policies for the construction and minerals products industries, although delivery will of course be the key policy test.
In the short term, the additional funding for local road maintenance acknowledges the scale of disrepair and should be the first step towards more sustainable levels of local road funding in the 2019 spending review.
The further freeze in the Aggregates Levy rate at £2 per tonne in 2019/20 is also welcomed, although the stated policy of future indexation does not reflect the lack of environmental justification for the Levy. We remain concerned at the vulnerability of UK Energy Intensive Industries such as cement and lime to planned and potential carbon taxation.
MPA Chief Executive Nigel Jackson said:
"The Chancellor has huge challenges to address and the OBR's forecast that GDP per capita will rise by less than 1% pa to 2023 is a sobering backdrop. In these circumstances it is more critical than ever that the measures announced to sustain and increase public and private investment are implemented and that Government remains mindful of the need to minimise business costs. Forecast economic growth remains lack lustre and there is no room for complacency particularly given the current assumptions the Chancellor has made with regards to Brexit. Boosting growth and building investment confidence must remain of paramount importance."
Notes for Editors
Below are industry-related headlines:
UK Economy & Public Finances
- OBR updated the UK growth forecast for the next five years to 1.6% in 2019, 1.4% in 2020 and 1.5% pa on average to 2023;
- Borrowing this year forecast to be £11.6bn lower than forecast in Spring Statement in March 2018, thanks to stronger tax receipts and lower than expected public spending;
- Public sector net borrowing (the deficit) is forecast to fall from 9.9% of GDP in 2009/10 to 1.2% in 2018/19, then to increase to 1.4% in 2019/20, and then falling back to 0.8% in 2023/24;
- On a pre-measure basis, the deficit would have fallen steadily over the forecast period and moved into surplus in 2023/24. Instead, the effect of new measures, including the pledge for extra funding to the NHS which is funded entirely though borrowings, result in a deficit of £19.8bn in 2023/24 (0.8% of GDP);
- Public sector net debt is expected to fall from an estimated 83.7% of GDP in 2018/19 to 74.1% in 2023/24. In cash terms however, net debt increases by £86bn over the period;
- The direct impact of measures including the NHS funding pledge is to add £68bn to public sector net debt by 2022/23;
Policy & Tax Announcements
- Aggregate Levy frozen at £2 per tonne in 2019/20, saving the industry £11.3m in 2019/20, bringing the total savings since 2010/11 to a cumulative £719m compared with RPI indexation;
- EU ETS: If the UK leaves the EUETS in 2019, Government would introduce a Carbon Emissions Tax on all stationary installations participating in the EUETS on 1 April 2019. A tax rate of £16 per tonne of carbon dioxide emissions would be applied to emissions above installation emission allowances;
- Fuel duty frozen and no reference to the taxation of red diesel;
- Road investment: Confirmation that in England vehicle excise duty will finance a £29 billion National Roads Fund, which will fund Highways England's Road Investment Strategy 2 from 2020/21 to 2024/25 and investment in the Major (local) Roads Network;
- Road Maintenance: £420 million extra will be allocated immediately for local road and bridge maintenance in 2018/19 in England. For context, existing levels of Central Government support for local road maintenance is c. £1 billion pa and such support accounts for about 45% of local road maintenance budgets, so this is a significant sum;
- Housing: Increasing the Housing Infrastructure Fund by £500 million to unlock more housing sites;
- Housing: The Letwin Review of Build Out rates has found that major housebuilders are not engaged in speculative landbanking but has made recommendations to force more differentiation in the types and tenures of housing available on large sites.
- Housing: The Help to Buy Equity Loan scheme will continue in its present form to March 2021. From April 2021, a new scheme will apply to first time buyers only and be subject to new regional property price caps. The scheme will end in March 2023;
- Various initiatives to promote regional growth and development;
- Annual Investment Allowances increased from £200,000 to £1 million for two years from January 2019;
- The Chancellor announced no more Public Finance Initiative (PFI) contracts to be awarded, but existing contracts will be honoured.