On 5 December 2012, the Chancellor of the Exchequer, George Osborne, gave his Autumn Statement, setting out the government's economic and fiscal plans to build a stronger economy. The government also published the National Infrastructure Plan update 2012, the Plan for Growth Implementation Update 2012 and the much-heralded new PFI materials, A new approach to public private partnerships and the Standardisation of PF2 Contracts Draft. (Free access)
On 5 December 2012, the Chancellor of the Exchequer, George Osborne, gave his Autumn Statement, setting out the government's economic and fiscal plans to build a stronger economy. The government also published a number of supplementary documents, including the National Infrastructure Plan update 2012, the Plan for Growth Implementation Update 2012 and the much-heralded new PFI materials, A new approach to public private partnerships and the Standardisation of PF2 Contracts Draft.
The 2012 Autumn Statement acknowledges that the UK economy is still recovering from the "most damaging financial crisis in generations, after a decade of growth built on unsustainable levels of debt". Not only that, but across the world, recovery over the past three years has been slower than forecast.
As the executive summary to the 2012 Autumn Statement says, the government's economic strategy was set out in the June 2010 Budget. That was designed to reduce the deficit, restore stability, equip the UK to succeed in the global race and rebalance the economy. The 2012 Autumn Statement aims to maintain that strategy and sets out the further action the government will take on growth, fairness and protecting the economy.
Although much of the 2012 Autumn Statement had already been announced (or leaked), for the construction and engineering industries, there was some positive news, with a £5.5 billion capital package and support for long-term private investment, including in new roads, science infrastructure, free schools and free academies.
If you don’t yet subscribe to PLC, you can request a free trial by completing this form or contacting the PLC Helpline.
2012 Autumn Statement
On 5 December 2012, the Chancellor of the Exchequer, George Osborne, gave his Autumn Statement, setting out the government's economic and fiscal plans to build a stronger economy. The government also published a number of supplementary documents, including the National Infrastructure Plan update 2012, the Plan for Growth Implementation Update 2012 and the much-heralded new PFI materials, A new approach to public private partnerships and the Standardisation of PF2 Contracts Draft.
The 2012 Autumn Statement acknowledges that the UK economy is still recovering from the "most damaging financial crisis in generations, after a decade of growth built on unsustainable levels of debt". Not only that, but across the world, recovery over the past three years has been slower than forecast.
As the executive summary to the Statement says, the government's economic strategy was set out in the June 2010 Budget. That was designed to reduce the deficit, restore stability, equip the UK to succeed in the global race and rebalance the economy. The 2012 Autumn Statement aims to maintain that strategy and sets out the further action the government will take on growth, fairness and to protect the economy.
Although much of the 2012 Autumn Statement had already been announced (or leaked), for the construction and engineering industries, there was some positive news, with a £5.5 billion capital package and support for long-term private investment, including in new roads, science infrastructure and free schools and free academies.
Cash boost for construction
In the 2012 Autumn Statement, the government announced a £5.5 billion capital package and support for long-term private investment, including in new roads, science infrastructure and free schools and free academies (Autumn Statement, paragraph 1.77). It is thought that cuts planned to government department budgets (excluding education, health and international development) will help fund this.
The 2012 Autumn Statement made a number of announcements on housing, both to enable new housing stock to be built (120,000 new homes have been promised) and to give greater access to funding for first-time buyers. For more information, see Legal update, 2012 Autumn Statement: property implications.
Industry partnerships
The 2012 Autumn Statement indicates the government plans to work with individual sectors to "develop approaches that best suit the needs of each industry". Industries identified for these "industry partnerships" include construction, as well as professional and business services, oil and gas, offshore wind, civil nuclear, automotive and aerospace sectors (Autumn Statement, paragraph 2.159).
The NIP update 2012 does not include significant new policy announcements since the National Infrastructure Plan 2011 (NIP 2011), but continues to develop and implement the government's existing policies. It includes detailed data in its Annexes relating to progress made against NIP 2011 targets, the future pipeline of infrastructure projects and the government's work on costs and performance indices.
The NIP update 2012:
Highlights the government's recent actions including:
a framework for local government to implement rural broadband projects, as well as continuing the super-connected cities programme (which PLC IP, IT and Communications continue to report on);
Announces that, subject to completion of due diligence and formal contracts, the UK Guarantees scheme will provide £1 billion to the Mayor of London to allow the Northern Line Extension to Battersea scheme. See also the 2012 Autumn Statement (paragraphs 1.100 and 2.123). (For more information on UK Guarantees, see Legal update, Government announces boost for infrastructure investment and credit support for UK exporters.)
Seeks a new approach to PPP projects in the context of the government's "PF2" announcements (see PF2).
Reiterates that the government is:
considering new ownership and financing arrangements for the strategic road network, with progress to be reported as part of the 2013 Budget (this seems to mean a delay from an announcement originally envisaged for autumn 2012, see Legal update, Government announces reforms to UK strategic road network) (see also the 2012 Autumn Statement, (paragraph 1.86)); and
hoping to reduce the time taken to plan and deliver new roads by up to a half, using the M1, M3, M6 and A160/180 projects as pilot projects for a new delivery model. See also the 2012 Autumn Statement (paragraph 1.85).
Allocates £600 million to science research and development through the Research Council.
Announces that Paul Deighton, Commercial Secretary to the Treasury, will lead a review with UK Infrastructure (UKI) and the Major Projects Authority to assess whether central government can deliver infrastructure. The Commercial Secretary's report will be due for publication at the 2013 Budget. See also the 2012 Autumn Statement (paragraphs 1.96 and 2.129).
The government plans to publish a further national infrastructure delivery update (as it did in March 2012) in spring 2013, with an annual update to the NIP along with the 2013 Autumn Statement.
In the 2011 Autumn Statement, the government announced its plans for major investment in roads and rail. The 2012 Autumn Statement continues to build on those road investment commitments, with an additional £1.5 billion, of which £1 billion will be invested within this spending review period, to enhance and improve the road network and reduce congestion. The latest commitments include:
£378 million to upgrade key sections of the A1, bringing the route from the M25 to Newcastle up to motorway standard.
£157 million to expand capacity through building a new link between the A5 and M1 in the east of England and dualling the A30 Temple to Carblake in the south west.
£150 million to tackle congestion at junction 30 of the M25 in London starting in 2015.
£270 million for priority national and local projects to remove bottlenecks and support development.
£333 million for essential maintenance of national and local road networks to renew, repair and extend the life of the roads.
£42 million to develop the pipeline of potential Highways Agency road schemes for investment in the next spending review period.
£42 million to invest in the Sustainable Transport Fund for cycling infrastructure, including cycling safety.
(Autumn Statement, paragraphs 1.84 and 2.26-2.30.)
The government's aim is for a new, faster and more transparent model of infrastructure procurement, with:
An 18-month time limit on PFI bidding processes. If the process is not complete during this time, the funding may be lost.
PF2 project companies publishing their revenues and profits.
A projects approval tracker, set up by the Treasury, which will be published online and enable industry to check on progress of bids and see how business proposals are progressing.
Centralised procurement units managing procurement in certain sectors, such as education (see Education and school buildings), health and the armed forces.
The government has indicated that a number of draft forms will be published for consultation, including a standard form services output template, a pro forma payment mechanism and a shareholder arrangement. The new forms will see the government take stakes in the majority of PF2 schemes to ensure any excess profits are shared with the taxpayer. The government equity stakes will be managed by a central unit at HM Treasury, and will see the government take a place on the board of project companies.
The 2012 Autumn Statement states the first programme to use PF2 will be the £1.75 billion privately financed element of the Priority Schools Building Programme (Autumn Statement, paragraph 2.128).
The Plan for Growth originally announced measures that would lead to new construction through increased investment and the opening up of more land for development. Section 13 of the update identifies a number of measures that have been completed or where progress has been made, such as publishing NIP 2011 (see Infrastructure strategy).
In the 2011 Autumn Statement, the government announced a number of measures aimed at SMEs and mid-sized businesses, to help build strong supply chains. To build on these measures, in the 2012 Autumn Statement, the government has announced:
A new Business Bank (with £1 billion of funding) to ensure businesses, particularly small businesses, can access finance and support (Autumn Statement, paragraphs 1.77-1.78 and 2.116). The Secretary of State for Business, Innovation and Skills will set out further details later in December 2012.
A range of other measures to ensure improved access to finance for small and medium sized businesses (Autumn Statement, paragraphs 1.103-106).
Red Tape Challenge
In April 2011, the government launched its Red Tape Challenge, a wide-ranging project aimed at identifying unnecessary regulations. Since then, thousands of regulations have been under the spotlight, including many that affect the construction industry.
The 2012 Autumn Statement indicates that a second phase of the Red Tape Challenge will be launched in spring 2013 (Autumn Statement, paragraph 1.125).
The cuts to public spending announced by the government over the last two years have hit the construction and engineering sector hard. The UK economy has also been hit by a series of shocks that have significantly weakened the economic and fiscal outlook. The 2012 Autumn Statement acknowledges that the UK economy is still recovering from the "most damaging financial crisis in generations, after a decade of growth built on unsustainable levels of debt".
Although much of the 2012 Autumn Statement had already been announced (or leaked), for the construction and engineering industries, there was some positive news, with a £5.5 billion capital package and support for long-term private investment, including in new roads, science infrastructure, free schools and free academies.