Do not run away with the idea that the chancellor has borrowed the clothes of Donald Trump and ordered an infrastructure splurge. Ploughing £23bn into a new national productivity investment fund sounds impressive until you remember that the HS2 high-speed railway, funded separately, is due to cost £56bn at the last count.
Remember, too, that the £23bn will be spent over five years, so an average of £4.6bn a year. And note that the spending is weighted towards the later years; in the first year, 2017-18, the figure is just £2.4bn.
Of that sum, affordable housing will claim almost half and the outlay should properly be seen as a necessary response to government figures that showed the number of affordable homes built in England last year fell to the lowest level for 24 years.
Hammond, in his speech, said he had deliberately avoided turning his statement into a long list of individual projects being supported. But was that to avoid boring his audience or because government is still uncertain about what it wants to build?
Some of the known elements – the £1bn to explore 5G broadband and the upgrade to rail and road links between Oxford and Cambridge – already feel over-familiar. Does the government even know how it plans to spend all its £23bn? Decisions on almost a third – the £7bn earmarked for 2021/22 – will only be made “in due course,” according to the Treasury document.
“The missing component in the autumn statement was a new pipeline of transparent, viable projects for much heralded high-value investment,” said John Hicks, director of AECOM, an infrastructure services firm that has worked on 2012 Olympics and Crossrail. Andrew Jameson of MUFG, which invests in infrastructure around the world, made a similar point: “It is disappointing that the statement did not indicate any real signs of a properly-defined pipeline of core infrastructure projects, likes schools and hospitals, which has been lacking in recent years and is much needed in the UK.”
In Hammond’s defence, one could argue that the government has a plan to get there eventually. He said between 1% and 1.2% of GDP will be invested every year from 2020 in economic infrastructure, which is defined as transport, energy, flood defences, water, waste and digital communications, areas covered by the new-ish national infrastructure commission.
A ratio of 1%-1.2% compares to 0.8% of GDP being spent currently, so Hammond’s commitment is meaningful. But four years is a long time to wait for a bigger set of projects that businesses like to term “shovel ready”. And the shame is that so much could have been done, and earlier, if successive governments had not been bewitched by big-budget HS2. Those dull but easy-to-do road and rail upgrades will do more to meet Hammond’s productivity ambitions than the new high-speed railway.
Estate agents shouldn’t cry foul
Estate agents’ share prices tell the story: they will be hurt by the ban on letting agents’ fees charged to tenants. London-based estate agent Foxtons fell 14%; Countrywide, the UK’s largest agency, was 5% lower.
Their trade bodies queued up to warn that the fees will just rebound on tenants via higher rents. Maybe they will, in part, but the process should not be mechanical. Estate agents will first have to persuade landlords to pick up fees previously charged to tenants. Some landlords, one suspects, will make the reasonable point that the agents have only themselves to blame for milking the market. Many of those landlords have their own complaints about agents’ price-gouging tactics.
The chancellor’s ban is welcome. It does not guarantee to improve the lot of tenants. But it will make fees more transparent, which is definitely an improvement.
• This article was amended on 25 November 2016. An earlier version misnamed Andrew Jameson as Andrew Johnson.
