UK Budget 2018 - the RLB view

October 31, 2018.

UK Budget 2018 - the RLB view

This budget was short on detailed capital budget commitments, which is perhaps not surprising given the commitments being made between budgets to transport infrastructure, healthcare, housing infrastructure, etc.  Given the circumstances of the lead-in to Brexit, the Chancellor clearly welcomed the additional £7bn by which tax receipts for 2018/19 are now expected to outstrip the Spring expectations.

Private Finance Initiative (PFI) is all but over. However, Public Private Partnerships (PPP) are still in vogue as the government recognises that innovative ways to gain private sector funding to support social infrastructure is the only way to maintain a low-tax economy.  There appears to be a recognition that the private sector, whilst willing to take up some of the load, cannot fill the gap in public sector expenditure. So Help To Buy gets a two year extension to 2023 and government is promoting a further 13,000 homes through housing associations.

The Housing Infrastructure Fund gets a further shot in the arm. It will be interesting to see how quickly funding is allocated to regional schemes, in part because the special frameworks at city region level are complicated and difficult to drive politically… imagine how a planning overhaul could take cost and risk out of the housing investment process.

The Infrastructure Fund also gets further significant funding, albeit southern focused with no mention of Northern Powerhouse Rail and lots of commitment to the Oxford Cambridge Arc.  There is an extra £1bn most of which will go to submarine manufacture.  The roads programme will continue with a further £30bn announced.

In overview, the across-the-board spending spree seems on its face to have something for everyone, but the problem situations remain to be dealt with. The demise of High Streets is addressed somewhat, but whether the proposed additional funding and allowances are anywhere near sufficient remains to be seen. NHS and education funding did receive something of a boost, but the overall shortcomings remain largely untouched by the budget. The additional funding in education in particular is quite minor, spread across the country, and certainly doesn’t seek to solve staff shortages or buildings’ shortcomings. However, funding for 10 University Enterprise zones is an interesting announcement which could work incredibly effectively for universities which own assets and want to commercialise, for instance in the sci-tech start-up market.

Mr Hammond’s earlier admission that a Brexit no-deal scenario would require a fiscal buffer in order to protect the economy and to “minimise the negative effect of leaving” the EU, leaves the stark question of where the further stimulus funding comes from in the event of that no-deal. While money appears to have been pumped back into the economy at this interim stage, the unfolding of what Brexit actually means at the end of March could well give rise to a re-set, whatever the outcome, and whether a deal is reached or not.

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