Spending review announces investment in infrastructure, the NHS, full fibre network and skills

Delivering the Spending Review today, Chancellor Rishi Sunak said “Our health emergency is not yet over, and the economic emergency has only just begun; so our immediate priority is to protect people’s lives and livelihoods.”

Chancellor Sunak’s Spending Review was “a realistic statement which lays bare the immense challenges the Chancellor and the economy faces in the near term”, according to Stephen Phipson, Chief Executive of Make UK, the manufacturer’s organisation.

But there was no mention of Brexit in the speech, which is looming large over many of the region's businesses, and that's a concern, according to business support organisation Business West.

Business West Policy Manager Claire Ralph said: “Given Brexit is just six weeks away it was surprising the Chancellor made no mention of this – despite the subdued growth figures assuming an EU trade deal."

For Amanda Dorel (pictured below), regional director for the West Midlands at Lloyds Bank Commercial Banking it was promising to see the Government putting money behind its commitment to invest in infrastructure at a local level as part of the levelling-up agenda.

She said: “This will provide a much needed boost to the West Midlands following what’s been a particularly difficult year. As the manufacturing heartland of the UK, a number of businesses across the region could benefit from investment or support to ‘build back better’ following the pandemic. We will remain by the side of the business community across the region to help them make the most of the opportunities that come their way.”

But Business West's Claire Ralph said: “As a region, Business West is disappointed with the government’s lack of capital investment announced yesterday. Some minor funding has been allocated to the West of England Combined Authority for local transport improvements through the Transforming Cities Fund. Elsewhere it was thin pickings - with our regional leaders having to bid against other English regions for a share of the new £4 billion Levelling Up Fund for local infrastructure projects to support our area’s economic recovery. We hope this doesn’t all ‘head North’.

The Spending Review confirmed an additional £38 billion for public services to continue to fight the pandemic this year, and a further £55 billion to departments to respond to Covid-19 next year, including £2.6 billion for the devolved administrations.

Investment targeted at controlling and suppressing the virus - and saving lives - includes funding to enhance testing capacity, purchase vaccines, increase supply of key Covid-19 medicines, and purchase and distribute PPE.

The Chancellor also announced £100 billion of capital spending on infrastructure next year and a £4 billion Levelling Up Fund.

He also announced a £6.3 billion cash increase in NHS spending in 2021-22, compared to 2020-1, as well as funding for new diagnostic equipment, support training for the NHS workforce, refurbish and maintain infrastructure, and eradicate mental health dormitories. This is in addition to £3 billion of investment to support NHS recovery.

Among other announcments, he will provide an additional £400 million to help recruit 20,000 additional police officers by 2023.

The capital investment of £100 billion includes almost £19 billion of transport investment next year, including £1.7 billion for local roads maintenance and upgrades, almost £15 billion in research and development, including funding for clinical research to support delivery of new drugs, treatments and vaccines. £4.2 billion will be spent on NHS operational investment next year to allow hospitals to refurbish and maintain their infrastructure, and £325 million of new investment in NHS diagnostics equipment to improve clinical outcomes

More than £260 million will be invested in the continuing transformative digital infrastructure programmes, including the Shared Rural Network for 4G coverage, Local Full Fibre Networks, and the 5G Diversification and Testbeds and Trials Programmes.

Make UK's Stephen Phipson, added: ““Industry will commend the Chancellor for addressing this difficult balancing act with a package of measures designed to get boots and shovels on the ground, especially the National Infrastructure Bank and Levelling up Fund to boost growth in those Regions which have been hardest hit.

“There remains a case, however, to also put in place consistent, longer-term sector specific support that mirrors our international competitors. Key strategic sectors, in particular aerospace and automotive, employ substantial numbers of high value, well paid jobs in areas of the country that are essential to the levelling up and re-balancing of our economy. They are advanced technology companies whose skills will be vital in developing the green and digital futures which will help solve many of the societal challenges we face. To ensure they are at the vanguard of this new economy, it’s vital their futures are secured with short term support now.”

The Chancellor also announced an increase in the National Living Wage, by 2.2 per cent to £8.91 an hour from April 2021. Alongside that, 2.1 million public sector workers who earn below the median wage of £24,000 will be guaranteed a pay rise of at least £250. Also the business rates multiplier will be frozen in 2021-22, saving businesses in England £575 million over the next five years.

For retailers, though, disappointment, that the Chancellor did not choose to reverse the decision to end tax-free shopping for international visitors to the UK. Helen Dickinson, Chief Executive of the British Retail Consortium, said that she felt the policy will deliver a relatively small saving for the Treasury at the expense of a far greater return to the UK economy, and will damage the UK’s position as a top destination for international shoppers."

But she was encouraged that the government is considering options for further rates relief for businesses affected by Covid. "Many retail businesses have been shuttered for the past month, depriving them of £8 billion in sales. A return to full business rates liability in April would be impossible for some firms to meet and freezing the multiplier in 2021/22 does not solve this problem. The Government should adopt our proposal for business rates relief at 50 per cent which reflects the fall in retail property values and brings market reality into the system, while generating much needed revenue for the Treasury. This, along with an extension to the moratorium on debt enforcement, to encourage constructive dialogue between landlords and tenants on rents, will support the resilience of the retail industry. This would allow the industry to invest in the future and play its part in the economic recovery of the UK."

She added: “We support the Government decision to adopt the Low Pay Commission’s recommendations for a moderate increase to the New Living Wage. Many retailers are already paying wages above the NLW and will continue to do so into the future.”

Business West's Claire Ralph is worried about the future: “The Government’s plan for paying for the crisis will emerge in the Spring but at the moment he is keeping businesses very much in the dark.”