Budget Briefing Note 2021
3 March 2021

Budget Briefing Note 2021

BUDGET 2021: WHAT IT MEANS FOR INVESTMENT IN INFRASTRUCTURE

1. INTRODUCTION

In the Budget today the Chancellor had to set a course to take the country out of the ravages of the pandemic, at the same time as laying out measures to bring the public finances back into order and put the country on a road map to recovery. Therefore, whilst much of his speech focused on the response to and financial consequences of COVID, it none the less contained a number of important announcements on future infrastructure investment and the Government’s commitment to levelling up.

2. INVESTING IN THE FUTURE ECONOMY

The Government renewed its commitment to support the development of the green economy and drive increases in productivity, especially outside London and the South East:

  • The new UK Infrastructure Bank was confirmed and will be based in Leeds. It will finance schemes in both the public and private sector and will have an initial £12bn of funding to support £40bn of investment.
  • Eight new English Freeports were announced and will be based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside. Further Freeports are expected to be confirmed by the devolved assemblies. Freeports will enjoy a simplified planning regime, infrastructure funding, cheaper customs arrangements, lower tariffs and taxes, and tax breaks.
  • Over £1 billion funding for the Towns Fund to support the long term economic regeneration of a further 45 towns in England.
  • A new Civil Service Campus in Darlington, to host HM Treasury, BAES, MHCLG and others.
  • Three Growth Deals in Scotland – Ayrshire, Argyll & Bute, and Falkirk, and three in Wales - North-Wales, Mid-Wales and Swansea Bay.
  • Global Centre for Rail Excellence – The government will match fund up to £30 million, subject to business case, towards the construction of a rolling stock and infrastructure testing complex in Wales.
  • Confirmation of the Levelling Up Fund, and the publication of its Prospectus
  • Intra-city transport settlements – The 2020 Budget committed the government to invest £4.2 billion in intra-city transport settlements from 2022-23, through five-year consolidated funding settlements for city regions. The Budget confirms capacity funding in 2021-22 to support those city regions with appropriate governance arrangements already in place to begin preparations for settlements. This will enable them to develop integrated investment-ready transport plans that will deliver on local priorities such as tackling congestion and driving productivity. This will provide
    • £8.6 million to Greater Manchester;
    • £5.6 million to Liverpool City Region;
    • £5.2 million to Sheffield City Region;
    • £3.5 million to Tees Valley;
    • £4.1 million to West of England,
    • £8.9 million to West Midlands and
    • £7.4 million to West Yorkshire.
  • A66 development funding – The government will provide £135 million to accelerate the start of construction on the A66 Trans-Pennine upgrade to 2024.
  • Birmingham Interchange Station – The government will provide £50 million to develop proposals for transport improvements around the High Speed 2 Birmingham Interchange Station. This will help support regeneration at Arden Cross in Solihull.
  • Investments in local railways and stations – £59 million towards the construction of five new stations in the West Midlands, cutting journey times from Willenhall, Darlaston and south-west Birmingham into the city centre. This Budget will also unlock more than £40 million of funding to reinstate passenger services on the Okehampton-Exeter line, subject to final approval of costs and contracts.

3. THE LEVELLING UP FUND

The Government also published the Prospectus for the Levelling Up Fund, originally trailed as part of the Comprehensive Spending Review. This provides £4.8bn from DfT, MHCLG and Treasury to invest in high value local infrastructure, and whilst it is open to all areas, it is intended to be focussed on ex-industrial area, coastal communities and deprived towns. Funding will generally be up to £20m though it will invest larger amounts (up to £50m) in high value transport projects by exception. A flat £125,000 of capacity funding will be allocated to all eligible local authorities. This capacity funding will be provided with the primary intention of supporting the relevant local authorities to develop their bids for later rounds of the Fund.
The first round of funding is now open, with a submission deadline of 18th June 2021, and is focused on three themes:

  • Transport investments including (but not limited to) public transport, active travel, bridge repairs, bus priority lanes, local road improvements and major structural maintenance, and accessibility improvements. Government are requesting proposals for high-impact small, medium and by exception larger local transport schemes to reduce carbon emissions, improve air quality, cut congestion, support economic growth and improve the experience of transport users.
  • Regeneration and town centre investment, building on the Towns Fund framework to upgrade eyesore buildings and dated infrastructure, acquire and regenerate brownfield sites, invest in secure community infrastructure and crime reduction, and bring public services and safe community spaces into town and city centres.
  • Cultural investment maintaining, regenerating, or creatively repurposing museums, galleries, visitor attractions (and associated green spaces) and heritage assets as well as creating new community-owned spaces to support the arts and serve as cultural spaces
  • The assessment process will focus on the following key criteria:
  • Characteristics of the place – each local authority will be sorted into category 1, 2 or 3 based on assessment metrics, with category 1 representing the highest level of identified need.
  • Deliverability - will be based on supplementary finance, management and commercial cases, with bids able to demonstrate investment or which begin delivery on the ground in 2021-22 financial year prioritised in the first round of funding.
  • Strategic fit with local and Fund priorities – this should be addressed in the strategic case of submissions and should include support from stakeholders.
  • Value for money – an economic case should be submitted to explain the benefits of the bid and how it represents value for money

4. UK COMMUNITY RENEWAL FUND

In a second funding announcement the Government has also today published the Prospectus for the UK Community Renewal Fund, which forms part of the UK Shared Prosperity Fund which is intended to fill the gap formed by the loss of the EU Structural Funds.

The Fund will provide £220m to spend in 2021-22 to enable up to 100 identified priority places to pilot programmes and new approaches ahead of the introduction of the Shared Prosperity Fund. The full list of eligible places can be found at:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/966243/List_of_100_priority_places.pdf
In order to support places to develop their capabilities to maximise the benefits of local investment a portion of the Fund will be reserved for capacity funding. This will provide up to £2 million in total for bid co-ordination and appraisal as part of the UK Community Renewal Fund, available to the lead authorities of each of the 100 priority places, to help them coordinate and appraise bids.
Funding will be provided for a range of projects, which align with one of the following priorities:

  • Investment in skills
  • Investment for local business
  • Investment in communities and place
  • Supporting people into employment.

Within the communities and place priority, programmes to improve rural connectivity, support regeneration and place making and contribute towards net zero are particularly welcome.
90% of funding available through the UK Community Renewal Fund is revenue funding, with a small amount of capital funding.
The deadline for the first round of bids is 18th June 2021.

5. SUMMARY

In today’s Budget the Chancellor set out the first tentative steps to creating a new economic geography. Greater certainty of long term budgets for Mayoral Combined Authorities, a UK Investment Bank and major civil service campus, both to be based in the North, and publication of the long-awaited Levelling Up Fund Prospectus show the Government beginning to deliver on its election commitment to deliver investment and support improvements in productivity in the North of England. The announcements made today will not on their own be enough to fulfil that promise, but they may at least provide the foundation for greater and more ambitious investment decisions in future Budgets when the immediate priority of responding to this pandemic has abated.

Image © Tom Jeffs

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