Budget boosts infrastructure, the oil and gas industry and small businesses

3 min read

Chancellor George Osbourne has announced measures to attract investment to the Northern Powerhouse and cut taxes for the oil and gas industry in his 2016 Spring Budget.

£60million has been announced to develop HS3, a high speed rail network that aims to cut journey times between Manchester and Leeds. He said more than £230m will be earmarked for road improvements, including a fourth lane on the M62 and plans to develop a tunnel road from Manchester to Sheffield.

Osbourne said. “We're building the roads, we're laying the track. We're making the Northern Powerhouse a reality and rebalancing our country,"

A further £80m, has been allocated to develop Crossrail 2 that will connect South-West and North-East London and is expected to increase tube capacity and reduce the pressure on Victoria and Waterloo stations.

Dr Colin Brown, director of engineering at the Institution of Mechanical Engineers, described this announcement as: “very welcome news.

“However it is vital that these investments fit within a wider integrated transport strategy. At the moment major infrastructure projects are being developed in isolation and a holistic approach would better serve passengers, tax payers and businesses,” he continued.

Nick Roberts, chief executive officer for UK & Europe for Atkins, argued: “The creation of new and improved infrastructure is the means to the end, not the end itself, so the focus needs to be on delivering these schemes quickly in order to start generating the economic benefits we need now.”

Richard Threlfall, UK head of infrastructure, building and construction at KPMG, added: “The jam was carefully but thinly spread across the North-South divide as the Chancellor endorsed further development work on both Crossrail 2 and HS3.

“Neither scheme will become reality before the 2030s but Crossrail 2 will proceed quicker because much of the preparation has already been done. HS3 meanwhile remains a concept searching for definition. The Chancellor continues to walk the tightrope of nudging forward the Northern Powerhouse concept he has championed, whilst knowing that in the short term little can be delivered to satisfy the expectations he has raised.”

The oil and gas industry has been given a boost thanks to the Chancellor effectively abolishing Petroleum Revenue Tax that the industry pays on its profits. He also promised to reduce the supplementary charge on oil and gas extraction. These two measures together come to around £1billion.

Osborne said: “The oil and gas sector currently employs hundreds of thousands of jobs in Scotland and across the country. I made major tax reductions last year, but the oil price has continued to fall, so we’re acting now for the long term.”

Small business were also given a boost thanks to the abolition of business rates on companies that occupy a property with a rateable value of £12,000 or less, meaning 600,000 businesses stand to benefit from paying no rates while 250,000 will have their rates cut from April 2017. Corporation Tax will also be cut to 17% in 2020, down from 20% in 2010, benefitting over 1m businesses.

Monies raised by a 0.5% increase, from 9.5 to 10%, on the standard rate of Insurance Premium Tax on insurers will be allocated to flood defence spending in York, Leeds, Calder Valley and Carlisle, adding £700m to the flood defence budget.

The budget also launched first stage of a competition to identify suitable developers for small modular nuclear reactors (SMRs) in the UK and said it would publish a SMR delivery roadmap later this year. It also plans to allocate £30 million for an SMR-enabling advanced manufacturing R&D programme.

Further notable announcements from the chancellor include teaching maths to 18 for all pupils, a package of infrastructure measures to ‘prepare the country for the arrival of 5G technology, trials of autonomous lorry ‘platooning’ and driverless cars to take place by 2017; a £15million ‘connected corridor’ of infrastructure between London and Dover that will be able to communicate with in-vehicle systems; and the abolition of the Carbon Reduction Commitment, revenues from which will be derived from a rise in the Climate Change Levy – a tax on energy delivered to non-domestic users – from 2019.

Dr Brown described the plans to make it compulsory for students to be taught Maths until the age of 18 as: “Very positive news. Engineers use maths as a tool for solving real-world problems and this should be better reflected in school education. Many more school pupils will develop greater numeracy if they have an opportunity to experience problem-based learning.”

Paul Davies, head of policy at the Institution of Engineering and Technology, agreed: “By studying maths until 18, it is likely we will see more young people achieving the qualifications to allow them togo on to study engineering at university – which is good news for the country’s skills shortage and the economy.

“But our latest skills survey shows that both school and university leavers don’t have the right technical and practical skills for industry, so it’s vital that the maths taught to 16 to 18 year olds has a clear practical application in the workplace. It’s no good just forcing kids to study more mathematical theory that they can’t put into practice. We also need to think about where we are going to find the teachers, given schools are struggling already to find enough maths teachers.”

Alex Hirom, construction and engineering partner at Bond Dickinson LLP said: "This is a good budget for the UK construction sector as the Treasury announces an increase in funding for flood defences through an insurance levy; and a number of major projects including Crossrail 2 in London and Northern Powerhouse projects including HS3.The sector will welcome the Government's support for a pipeline of projects stretching into the 2020s."