Friday, 20 December 2013

Infrastructure investment boosted as Autumn Review disappoints


A shorter version of this article first appeared o 20 December  on the Sustainable Building web site.

A week before the Autumn Statement, insulation company Rockwool issued an open letter to Mr Cameron pressing him not to abandon the Energy Companies Obligation (ECO) scheme that requires electricity suppliers to fund energy efficiency makeovers for vulnerable households. This followed similar moves by the UK Green Building Council and the Association for the Conservation of Energy (ACE) who warned that up to 10,000 jobs could be at risk if the ECO scheme is diluted.

The call coincided with the Office for National Statistics's release of new figures showing cold weather caused an estimated 31,000 additional deaths in England and Wales last year, with people over 75 the most vulnerable. This presents a 29% increase on the previous winter.

The updated Infrastructure UK plan, unveiled on 4 December, also detailed investment for energy, flood defence, waste, water, transport, and communications infrastructure up to 2030 and beyond, the Treasury proclaimed. The Chancellor conceded  next day in Parliament that the Office for Budget Responsibility is “absolutely right today to draw attention to the weakness of housing supply in this country.”

The Chancellor George Osborne told Parliament that “Britain’s economic plan is working, but the job is not done. We need to secure the economy for the long term, and the biggest risk to that comes from those who would abandon the plan.”

He added “There were those who said it was a “fantasy” to believe that businesses could create jobs more quickly than the public sector would have to lose them. What they should have said was that it would be fantastic if it happened. So I have good news for them. Businesses have already created three jobs for every one lost in the public sector, and the OBR report today forecasts that this will continue, with 3.1 million more jobs being created by businesses by 2019, which, in its words, “more than offsets” the million or so reduction in the public sector headcount.”

He told MPs that the autumn statement was “fiscally neutral.” In a subsequent Parliamentary answer on 17 December, junior Treasury minister Nicky Morgan revealed  to Labour MP Paul Flynn that no sustainability assessment of the Autumn Statement had been conducted.

Mr Osborne stressed that ministers “are going to be spending more on capital as a proportion of national income on average over this decade than over the whole period of the last Government,”  adding “ We have to say that we are prepared to push the boundaries of scientific endeavour, including in controversial areas, because Britain has always been a pioneer.” Going green, he stressed, does not have to cost the earth

He asserted that “some of the most important infrastructure for British families is housing and we must confront this simple truth: if we want more people to own a home, we have to build more homes,” claiming “our hard-won planning reforms are delivering a 35% increase in approvals for new homes, but we need to do more.”

To coincide with Autumn Statement the Government announced £1 billion package of loans to unblock large housing developments on sites mainly in Manchester and Leeds. He also announced that Aldermore and Virgin, two challenger banks, were expected to join the Help-to-Buy scheme this month.

Responding, shadow chancellor Ed Balls accused Mr Osborne of “all boasts and breathtaking complacency.” On energy bills, he said “after the Government’s panicked and half-baked attempt to steal Labour’s clothes, we know that they are not only not very good at shooting badgers, but not very good at shooting other people’s foxes either.”

He begged the question: Does he really think he can get away with tinkering at the edges, moving green levies his own party introduced off the bills and on to the taxpayer, and—surprise, surprise—letting the energy companies completely off the hook? Instead, he argued, “they have shown that they are willing to stand up for the interests of the energy companies.”

Lib Dem deputy leader, Simon Hughes ( now a justice minister) asked the Chancellor “when he does his review, promised in the autumn statement, of local councils’ ability to deliver more affordable housing, will he look at some very good examples of housing associations that, by using private sector investment and private sales, have hugely increased their capacity to build social housing—not just at affordable rents, but at social and target rents as well?

Mr Osborne responded that “money should be available on a competitive basis to those councils that are going to work with housing associations, for example, to deliver the sort of innovative schemes that he champions.”


Senior Labour backbencher and former energy minister, Dame Joan Ruddock, asked George Osborne: "Why does the Chancellor think it is appropriate to reduce the number of solid wall insulation tasks for energy companies, thus destroying thousands of newly created jobs, rather than tackling the excessive profits of the greedy energy companies that have their hands in all our pockets?"

Osborne responded: "To compensate for the fact that we are rolling back some of the levies... we have set out schemes today that will reward home owners who use energy efficiency measures to improve the efficiency of their home. Those include an additional bonus for solid wall insulation. There is also extra money for public sector organisations and private landlords to make their buildings more efficient."

In a subsequent Parliamentary answer on 17 December, junior Treasury minister Nicky Morgan revealed to Labour MP Paul Flynn that no sustainability assessment of the Autumn Statement had been conducted.

Home Insulation
The consumer watchdog Which? estimates that around 14 million homes - over half the total housing stock - still do not have adequate insulation.

Andrew Warren, director of ACE, said Which? is right to highlight that few homes have been insulated to date, but pointed out that the average British home is now using 25% less energy than it was eight years ago.

"This great improvement is largely down to the measures installed under mandated schemes," he added. "What needs to happen is that these energy saving measures are installed swiftly in the 11 million homes yet to benefit."

Former Green Party leader Dr Caroline Lucas observed: "The Chancellor has turned doublespeak into a new art form today with his mind-boggling claim to be helping the fuel poor by slashing the very programmes they depend on to insulate their homes"

Paul Ellis, chief executive of the Ecology Building Society, said: "It's right that the government should seek to address the shortage of housing in this country, but again, we need to see energy efficiency as an intrinsic consideration of these developments... We need to see a longer perspective from the government, rather than a focus on quick wins."

David Nussbaum, chief executive of WWF-UK, asserted: "The prime minister has just come back from China, where this year already more than half of the new power capacity added to the grid has come from renewable energy. Sadly, he returns to find his own chancellor determined to push Britain back to ever more reliance on fossil fuels."

Infrastructure investment
The updated Infrastructure UK Plan, unveiled on 4 December, contained information on over £375bn of planned public and private sector infrastructure investment including flood defence, up to 2030 and beyond. This was bolstered by the announcement that six major insurers plan to collectively invest £25bn in UK infrastructure over the next five years.

Chief Secretary to the Treasury, Danny Alexander, said: "[This announcement] is a massive vote of confidence in the UK economy. It supports the wider £100 billion public investment to rebuild Britain over the next seven years that I announced at the Spending Round 2013. Underground, overground, on shore, offshore, wired or wireless, tarmac or train track. You name it, we're building it right now."

The contracts will be delivered from within the Levy Control Framework, and is consistent with the plans announced this week reducing the average household bill by £50 a year by early 2014.

Moreover, a £1bn package of loans is intended to unblock large housing developments on sites mainly in Manchester and Leeds. Aldermore and Virgin, two challenger banks, are expected to join the Help to Buy scheme this month.

The Autumn Statement also announced the creation of a new specialist planning court to fast-track key strategic decision, that is expected to come into operation in the middle of 2014.


In Parliament, Barry Gardiner, a former special advisor on climate change to Labour leader, and now a shadow environment minister, Ed Miliband, asked “while the Chancellor was speaking, 30-year-high storm surges have been battering the coast of Britain. If he looks at the national infrastructure plan, he will find that the rate of coastal realignment is happening, in the view of the Energy and Climate Change Committee, at only one fifth of the pace necessary to avoid wholesale flooding that will cost billions of pounds to the economy. Will he look at that issue again, and at the funding for flood defences that this year has been reduced from £633 million to £527 million?, to be told by Mr Osborne: “I will certainly look at the report [he] mentions. …On the broader point, we are investing in flood defences. We have recently increased the investment going into flood defences, and that is all part of the long-term infrastructure plan that this country needs.

Otto Thoresen, director general of the Association of British Insurers, said: “Insurers have a key role to play in contributing to the UK’s economic growth, as providers of long-term capital investment. Providing capital for infrastructure projects will help drive a competitive, healthy and resilient UK economy. The future infrastructure pipeline - which only includes projects and programmes worth over £50 million -  shows that planned investment in infrastructure has increased to over £375 billion from £309 billion last year. Of the 646 projects and programmes in the updated pipeline 291 are already under construction.”


The 2014 budget will be on 19 March 2014.


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