Sunak is facing even more of a tricky budget balancing act than usual

Chancellor Rishi Sunak is facing some difficult decisions over his budget.

Economic uncertainty building and growing Covid concerns present a challenging backdrop to the chancellor's budget writes ACE’s director of policy, Matthew Farrow.

The last few days has seen an unprecedented number of budget announcements openly trailed by the chancellor as he seeks a warm glow of media praise in the run up to his big day. 

The tactic of pre-releasing more and more announcements is clearly designed to prevent commentators from scrutinising the small print and the detail. Rishi Sunak’s team hope that the positive reaction to treat after treat will outweigh the more forensic, and sceptical, post-budget analysis. Clearly, we won’t be able to judge the budget and its impact on our sector until we see department totals. In the meantime, it is worth considering what the chancellor should do and what should we look out for.

Levelling up was the phrase on everyone lips at the Conservative party conference and there's no doubt that Rishi Sunak will couch much of his spending plans in these terms. 

First, while there has been plenty of talk about promoting brownfield development as part of efforts to level up and some grant funding has been released, a recent report by ACE’s sister organisation the Environmental Industries Commission (EIC) showed that long-term economic viability remains marginal. EIC has proposed reforms to land tax reliefs and that the proposed infrastructure levy should be designed to encourage brownfield.     

Second, Sunak should consolidate the myriad of small-scale funding schemes that local authorities have to bid for. Too many councils spent far too much time chasing small pots of money with strings attached, which actually distract them from developing an effective and realistic regeneration strategy. The new National Infrastructure Bank could be a vehicle for pulling these funding streams into a coherent whole.

Thirdly, he needs to boost the capability of local authorities to develop and implement realistic levelling up plans. While larger cities tend to have the skills and internal capability, smaller towns where the needs are often greater struggle. National Infrastructure Commission analysis has shown that spending by local authorities on transport strategy and planning has fallen by 80% over the last decade. Beefing up this capability would be money well spent. However, as this is recurrent rather than capital spending, the chancellor is more limited in his options.

In terms of capital spending, the weekend saw announcements of £6.9bn for transport schemes outside London, although the chancellor later admitted only £1.6bn of this was new money. It is pretty certain that we will see further announcements for infrastructure on Wednesday, but I think we need to focus on the big picture. Notably, is the government keeping to its commitment to keep infrastructure spending not just relatively high but stable and predictable? At ACE we will certainly be cross-checking tomorrow's announcements against what was in the infrastructure pipeline published only a month ago. 

Finally, the mood music around the eastern leg of HS2 has been downbeat for some time. Ministers have repeatedly refused to reaffirm their commitment to it and have also been vague about prospects for Northern Powerhouse Rail. Yet the prime minister was only 18 months ago making clear to MPs in parliament that HS2 and Northern Powerhouse Rail only made sense as combined twin propositions. 

Sunak’s plan for this budget was always to reclaim tight control of spending post pandemic to enable a war chest to be built up in the run up to the next election. This would allow him to be seen as the party’s saviour with room for election-winning tax cuts. In purely political terms the plan makes a lot of sense. However, with so much economic uncertainty building up and a nagging concern that we may not be out of the Covid woods just yet, tomorrow will be even more of a tricky balancing act than budgets usually are. 

Matthew Farrow is director of policy at the Association for Consultancy and Engineering.