Given the increasingly constrained economic environment we find ourselves in, there was a high degree of nervousness in the North of England about what the Autumn Statement might bring in relation to previous investment commitments.
However, reflecting on the Chancellor’s speech, it feels like it’s mostly a case of business as usual, with previous commitments largely being protected - for the time being, at least. Investment in infrastructure is still seen as an important driver of future economic growth. So it was a relief for many to see funding for Phase 2 of HS2 from Birmingham to Manchester and core Northern Powerhouse Rail (NPR) being protected (albeit the scaled-back version presented in last year’s integrated rail plan). However, there was no mention of Liz Truss’s decision, during her brief spell as prime minister, to re-establish the plans for an NPR link via Bradford, so it’s unclear now if that is on or off the table.
Those northern authorities who spent time and effort over the summer preparing bids for the second round of Levelling Up funding will also be relieved to hear that that funding pot has been protected. However, with infrastructure delivery cost inflationary pressures increasing by the day, it’s unlikely that the original scale of ambition from LUF2 will be fully realised.
It was also reassuring to hear about an ongoing commitment to devolution deals with authorities across the country, including the trailblazer deal with Greater Manchester. Unfortunately, there was no further clarity given in the public statements about whether further devolution of powers and responsibilities will come with significant additional funding; however, it did point to more devolved and multi-year funding settlements in the next spending review in 2024, which I’m sure will be welcomed in principle by those combined authorities who will benefit.
There was some more good news about funding for innovation and research funding, particularly given the challenging environment associated with bidding for European research funding in a post-Brexit era. Funding for the UK’s nine Catapults will be increased by 35% compared to the last five-year funding cycle. However, it’s unclear whether there will be any significant focus on transport research and innovation or efforts to invest in regions outside of London through the wider application of innovation initiatives such as the current future transport zones.
It was disappointing to see only limited reference to the need to reach net zero and the scale of challenges ahead in terms of decarbonising transport, and it remains to be seen what impact the announcement to impose vehicle excise duty on electric vehicles from 2025 will have on the critical transition to a zero-emission road vehicle fleet.
There was also no reference to funding for new bodies, such as Active Travel England, which are at risk of being viewed as pet projects of the Johnson administration and may therefore be vulnerable to cuts identified as part of the “Efficient and Savings Review” referenced in the statement, to “reprioritise spending away from lower-value programmes, and review the effectiveness of public bodies”.
There’s a collective sigh of relief across the Midlands. This budget statement was always about what was at risk rather than any thought of new investment that might come to the region. Nothing which has previously been promised was taken away.
If you believed much of the pre-game press coverage, then the region’s flagship infrastructure investment ask, HS2, was once again on the table. Of course, in an era of fiscal ‘black-holes’ a multi-billion pound “white elephant”, to its most vocal detractors, was always going to be a target. But the Midlands is resilient, we’ve heard it before, and we continue to strongly make a case for the much-needed investment.
What may have caused some alarm was when it was mentioned HS2 was only described as “going to Manchester”. Jeremy Hunt perhaps forgot that last year’s Integrated Rail Plan HS2 was committed to also going to the East Midlands. We’ve checked the fine-print and spoken to people close to HS2, and there’s no suggestion, at the moment, that the leg to East Midlands Parkway has actually been cancelled. Still, it would’ve been nice for it to be explicitly name-dropped, if nothing else, just to calm the nerves of East Midlands observers!
Elsewhere there was specific mention of a forthcoming Trailblazer Devolution Deal for the West Midlands Combined Authority, although not yet agreed upon. However, we understand from sources in the Combined Authority that this would be more about new powers on housing, education and growth zones than any more major transport investment asks, so even when it comes (slated for early next year), there’s unlikely to be any major infrastructure headlines.
Perhaps just as interesting as another devo-deal for the West Midlands was that the East Midlands was not mentioned as one of the new areas getting devolution funding. That part of the region is still working through which authorities will come together and how any new combined authority might work, so still one to watch for in the future.
Finally, as much as it was positive that the Government reaffirmed that capital spending pots for new infrastructure were vitally important and would be maintained, in reality, the raging inflation in the construction sector effectively means there is less to go around. The Autumn Statement may not have officially cancelled any named projects, but without more funds made available, it feels inevitable that some planned infrastructure in the Midlands could, unfortunately, be cancelled in the future.
Perhaps a bit early for that sigh of relief.
The insurance business model involves using premiums to make investments that achieve a financial return while maintaining sufficient liquidity to meet claims on policies. For the last six years, insurers across Europe have followed Solvency II, a package of measures designed to regulate how insurers operate, with an emphasis on solvency and liquidity. Post EU exit, these rules have been under review by UK Government.
Infrastructure assets generate long-term, predictable cashflows — often inflation-linked — making them ideal matches for a life insurance liability.
Insurers invest in infrastructure, typically with the intention of holding them to maturity. Therefore, the industry has struggled with a regulation regime that punishes illiquidity, particularly as it excludes such assets from an initial recognition of profit on the predicted risk-free return through a “matching adjustment.”
As part of the Autumn Statement, the Government published its decision to significantly loosen those rules but accompanied by greater monitoring undertaken by the industry watchdog, the Prudential Regulation Authority.
The new regulations will extend eligibility in a number of ways that benefit both infrastructure and renewables assets, including
The timing of this is welcome. The Government’s 2021 Net Zero Strategy, “Build Back Greener”, forecasted an overall need for £90bn of private investment by 2030 but was declared inadequate in the summer by the High Court as its policies lacked timebound, measurable targets.
Visible, timebound regulatory changes, such as banning gas for newbuild homes and introducing zoning for heat networks by 2025 and banning petrol and diesel cars from 2030, are already mobilising significant investment in the heat networks and EV sectors.
With a revised publication date of March 2023, this improved strategy could provide the ideal framework for those insurers currently restricted by Solvency II to plan how more of the future premiums we pay for life and critical illness insurance may be targeted toward long-term infrastructure that helps address climate change.
Written by Neil Rutledge, Amberside Advisors
Lincolnshire County Council has appointed transport consultancy Steer Davies Gleave to undertake detailed market research to evaluate the success of the popular Lincoln to Grantham bus service.
The Lincoln to Grantham service, operated by Stagecoach, is part of a wider network of Interconnect services. It is branded as Interconnect One and was launched in 2003. Interconnect services are intended to stimulate a switch in travel behaviour from car to bus, increase social inclusion, and bring about a greater awareness of bus services generally.
A specialist market research team from Steer Davies Gleave`s Leeds office will carry out the study, which includes on-board surveys, a telephone survey of local residents and focus groups.
Thursday’s Autumn Statement included the news of the establishment of a new task force focused on achieving energy efficiency across the UK in order to hit decarbonisation and energy consumption climate goals.
The cynic in me was slightly underwhelmed. To coin a phrase, the road to hell is paved with well-intended Government task forces. However, this task force is being funded to the tune of £6 billion between 2025-2028, in addition to the £6.6 billion provided in this Parliament. This is a sizable commitment in anybody’s estimation and a significant step towards actually doing something about reaching our net zero carbon emissions targets.
But what comes next? What could stop this admittedly well-resourced task force from falling by the wayside, like so many others before it?
It strikes me that two things are needed to set this task force on its way. One, it needs to be comprised of the right people. But how do you know who the right people are? Well, that relates to the other thing: define the problem that needs solving.
Simply put, hitting our net zero goals is about behavioural change on a mass scale. It’s about change. It’s about communication. It’s about engaging, influencing and nudging. And it’s really not about education, technical solutions or financial incentives.
Britain is no stranger to large-scale public behavioural change programs. A quick hunt around the British Film Institute website reveals an archive (available for free) with a positive goldmine of public information adverts, many of which will bring a nostalgic tear to the eye of anybody over the age of 30. There are campaigns around safety, health (“AIDS, Don’t die of ignorance” probably being one of the most famous) and everything in between. And in 1944, there was a public information campaign solely focused on energy usage and consumption. Admittedly, advising people in this day and age to only use one lump of coal and not two may seem slightly outdated, but looking at this campaign through the eyes of 2022, much of it remains relevant: turn off devices that you’re not using, cook efficiently where possible, and make sure that you don’t waste heat unnecessarily.
If we look through a communication ‘lens’ at the job to be done, then essentially, the Government has a very large audience that is going to need convincing to change their habits around energy usage.
In the communication world, the first step is to segment your audience; understanding the different groups within our society that need to be influenced is essential before appointing people or organisations to the task force assigned with that job. There are literally millions of teenagers and twentysomethings who, as TikTok users, are influenced by individuals completely unknown to great swathes of the older population. Yet there will also be another segment of UK society to whom you could show the 1944 public information broadcast, and that would be enough to trigger the emotional connection of ‘pulling together to achieve a common goal’.
To me, as a 40-something working mother, having an organisation such as Mumsnet, or an individual such as Martha Lane-Fox, stand up on the task force and talk to me as an adult, honestly and openly, about the compromises I’m going to need to make in terms of inconvenience and loss of time (inhales sharply) in order to make more effective energy choices, will have a lot more impact than a politician lecturing me, and who is only on the task force by virtue of not getting on “I’m a Celebrity, Get Me Out of Here!”.
The Government is going to need to think laterally to build a relevant and effective task force that can both define the problem and develop utterly ingenious ways to solve it. If it was me and my £6 billion, I think one of the first appointments to the team would be Apple. I’d get them building a branded gadget or a widget or a gizmo at top speed; it doesn’t need to actually make a significant difference to climate change (although that would be nice), it just needs to have £1m of advertising behind it to make it ‘the’ thing to have as an ‘authentic’ climate activist, and I’m pretty sure a chunk of the population would be on board with reducing energy consumption.
But I’d also have a historian on the task force too. There is a mountain of historical learnings around what works when looking to change public behaviour (“Next slide please…”) – and more importantly, entire mountain ranges of information on campaigns that haven’t worked. It would be good if we could use some of that hard-won insight in this endeavour.
(And I would definitely have a working parent; these people know how to get stuff done!)
The detail needs to be worked out. But I remain hopeful, no matter what the quality or political persuasion of the current government. Putting it bluntly, HM Treasury does not allocate £6 billion to anything that it doesn’t feel has a real chance of making a difference to society. We just potentially need to look backwards in order to move forwards.
Written by Kathryn Middleton, Amberside Advisors
As expected, the Autumn Statement extended energy windfall taxes beyond the oil and gas industry to include low-carbon electricity generators, both renewables and nuclear, aiming to raise over £14 billion through a new Electricity Generator Levy. Although set at 45% of 'exceptional generation receipts', the proposals are less harsh than those trailed beforehand and have done little to dent the share prices of large UK energy companies such as SSE. What it does do is introduce further uncertainty for investment (and government ambition) in UK renewables beyond offshore wind.
The levy comes into force from January 2023 until a not-so-temporary 2028. Electricity sales above £75/MWh pay an additional 45% tax. Only larger generators are included (e.g. a 100MW solar farm), and a £10m annual allowance applies before the levy kicks in. Given fixed revenues, those with Contracts for Difference are excluded, but a glaring omission is the 40% of UK generation from gas.
How much impact this will have on investment will be clear over time, but alongside the effect of the rates revaluation of solar and wind assets that takes effect next April and major regulatory changes coming, this won’t make it easier to deliver the £50 billion a year of investment that the Government’s advisors, the Climate Change Committee, say is needed by 2030.
Reaction from the renewables sector has been negative, and whether the levy raises the £1 billion this year (to March 2023) and £4 billion next remains to be seen. However, the UK Government's ambitions, as set out in the Energy Security Strategy, such as solar capacity tripling by 2030, are only going to be met if short-term actions start aligning with these more strategic goals.
RenewableUK's CEO, Dan McGrail, said: "This windfall tax on low-carbon power risks deterring investment at a time when the chancellor should be incentivising clean energy. Unlike in oil and gas, under this levy, companies that are making significant investments in renewables will get no tax relief and will be hit by a higher windfall rate."
Written by St.John Hoskyns, Amberside Advisors
The Autumn Statement is disappointingly quiet on the increasing challenge of providing local public transport services, with apparently no mention of the bus, rail and rapid transit networks which provide vital and low-carbon connectivity to isolated communities and within our urban areas.
Commitments to the government’s transformative railway growth plans are naturally welcomed by the towns and cities which they will serve but have almost no impact on today’s travellers struggling with reduced public transport services and increased costs of living. Confirmation that successful bids to the second round of the government’s Levelling Up Fund will be announced before the end of the year is also welcome. However, the extent to which the competitively allocated infrastructure funding will benefit public transport passengers remains to be seen.
For the West Midlands and Greater Manchester, the potential for new ‘trailblazer’ deals to remove their combined authorities from competitive bidding processes certainly sounds beneficial but will depend on the scale of funding each receives and the flexibility given in how it can be spent.
Fundamentally only so much can be achieved for public transport through moderate capital spend; infrastructure improvements which improve journey times and reliability are needed, but rarely have such measures reduced operating costs and increased passenger revenues to the extent that service frequencies have improved. What would truly benefit local public transport users is additional – ideally ringfenced – funding that can be used to provide targeted support to services which provide vital connectivity but where revenue doesn’t currently sufficiently cover their costs of operation.
The Chancellor’s Autumn 2022 Statement was predominantly quiet about the UK’s aviation sector. If anything, the Statement was notable more for the things that it did not say.
Over the years, Air Passenger Duty (APD) has proven to be a well-used tool for Chancellor’s looking to raise additional revenues from the UK’s air passengers. Before COVID-19, revenues from APD had risen strongly over time, and the tax had seen various tweaks to its rates and scope.
The Autumn 2021 Budget announced an overhaul of Air Passenger Duty (APD) with the introduction of a new ‘ultra-long haul’ tax band for flights to countries with capitals over 5,500 miles from the UK from April 2023, along with a 50% cut in the rate for Domestic flights.
Following the flurry of changes in 2021, in contrast, the Autumn 2022 Budget has been silent on APD; the rates will remain unchanged in nominal terms except for the changes already to be introduced as a result of the Autumn 2021 Budget.
Recent sector hopes for movement on VAT-free international shopping, historically perceived as a bonus reason for people to choose to visit the UK, received no encouragement from the Chancellor. Scrapped by Rishi Sunak in 2020, Kwasi Kwarteng had proposed to reintroduce the measure in his brief spell in post, but this was reversed as one of the new Chancellor Hunt’s first actions, and as a consequence, it was no surprise when VAT-free shopping did not appear in the new Budget
The autumn financial statement provided little encouragement for the decarbonisation of transport, with confirmation that electric vehicles (EVs) will soon be liable for vehicle excise duty (commonly known as road tax).
Behind the headline, from April 2025, EVs will benefit from a low £10 tax rate in the first year of registration of a new vehicle (compared to first year tax of between £10 – £2,365 for petrol and diesel vehicles) rising to match the standard rate of £165 from the second year of registration.
Prior to the financial statement, it was rumoured that an announcement might be made regarding some new form of road pricing.
Road pricing, if implemented effectively, is a way to encourage more efficient car travel by moving the balance of car costs from standing costs to usage costs.
Currently, despite increases in fuel costs, the marginal costs of an additional trip by car are small once you have purchased, insured and maintained a vehicle. Comparably the marginal costs of public transport are high, but there are no costs associated with purchase, insurance and maintenance.
Moving a greater proportion of car costs from ownership to usage can help reduce car trips which could be more efficiently made by other modes. Effectively this can have the impact of a short urban trip by car costing the same or more than an equivalent public transport trip, encouraging modal shift to more efficient and sustainable modes including walking, cycling and public transport. This modal shift will need to be supported by services which can complement public transport, reducing the need to own a car, such as taxis, car clubs and shared micromobility schemes.
Changing from a pre-existing system can be hard, and despite careful planning, there can be perceived ‘winners’ and ‘losers’ from a change in costs.
To prepare for the inevitable changes required, starting a national conversation about the balance between tax-raising powers and the future transport system we need is vital. In order to start this conversation, work is required to:
We know from recent experience that local transport schemes can be divisive. We can plan for a positive and sustainable future, but we must work together on the potential solutions, starting now.
The 5th London Smarter Travel Awards were held on Thursday 11th July at a gala ceremony in the prestigious Lincoln`s Inn, one of London`s four ancient Inns of Courts. The Awards rewarded excellence to those organisations and individuals working tirelessly to promote sustainable transport across the Capital. The event was hosted by Transport for London's Peter Hendy and organised by transport advisors Steer Davies Gleave.
The London Smarter Travel Awards winners 2008 are:
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