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On Tuesday 30th July 2024, the Chancellor Rachel Reeves made a statement to Parliament in which she blasted the Conservatives for leaving her with “the worst inheritance since the Second World War”, including a projected in-year overspend of some £22 billion.

 

Reeves then revealed that one of the major casualties of this inheritance will be spending on infrastructure projects, including the A303 Stonehenge Tunnel, the A27 Arundel Bypass and the Restoring Our Railway programme. She stated that a total of £1 billion worth of transport projects committed to next year are “unfunded” and advised that the Secretary of State for Transport will conduct a thorough review of those commitments over the coming weeks. She also confirmed that former Prime Minister Boris Johnson’s pledge to build 40 new hospitals by 2030 is under review.

 

Do these decisions make good economic sense, or could they provide to be a false economy?

 

Infrastructure projects can be a highly effective economic stimulus. Whilst in some cases the lead-in time for their design, approval and procurement can be lengthy, ‘quick wins’ such as the maintenance of existing assets, enhancing the energy efficiency of public buildings, and the acceleration of schemes that are already underway can deliver significant short-term benefits.

 

Smaller projects are also likely to benefit Small and Medium Enterprises and hence maximise local economic benefit in both the delivery and utilisation phases. 

 

Investment in such projects plays a vital role providing social and economic productivity and promotes opportunities for spatial equality and growth, particularly for more rural and deprived locations where infrastructure projects can reduce spatial isolation.

 

It is important to deliver these projects via a proportionate procurement process to ensure a deliverable infrastructure pipeline by a suitably equipped supply chain and to better manage risk.

 

Therefore whilst the new Chancellor’s shelving of certain capital projects may relieve the short-term pressures on the Treasury’s books, it may store up longer-term problems – particularly for a Government that aims to deliver 1.5 million homes over the course of this Parliament.

Read moreMoreRead moreGovernment's commitment to national infrastructure and economic growth continues

30.01.2025

Government's commitment to national infrastructure and economic growth continues

After Rachel Reeves announced government support for a third runway at Heathrow in a bid to create 100,000 jobs, DHA Environment's Tim Spicer looks at what else the government is doing to deliver their 'Plan for Change' milestones, which include 150 decisions being issued on major infrastructure projects by the end of the Parliament.

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