Amid the autumn freeze, will transport get the economy moving?

We’ve had the one of the warmest autumns on record, yet the chancellor’s autumn statement sent a chill through everyone, particularly those in the public sector.

There was widespread concern that the deficit plan clearly hasn’t worked – with growth downgraded yet again for 2012 from 2.5% to just 0.7%, with borrowing set to be so much worse than anticipated, and senior economists casting doubt over whether the chancellor will meet his revised target of eliminating the structural deficit by 2016-17.

While it wasn’t quite a Plan B, nonetheless, the chancellor had to show his commitment to growth, and there was some interesting news in the statement for local government and for capital transport projects.

But first came the bleak news for the public sector, with real cuts to salaries and wages, which will only have hardened the resolve of those going on strike the following day. The 1% cap on public sector pay follows two years of a pay freeze and came with the threat of an additional 3% employee pension contribution. All this when the cost of living is soaring.

And alongside all this was a further 710,000 further jobs expected to be axed by 2015. Where these jobs will be found in the public sector is a serious issue – with many sectors already feel they are cutting to the bone, and unable to provide the public with the support they need. Geographically, those areas most dependent on the public sector – often those with the least resilient local economies – could suffer even further with the consequences of rising unemployment and reduced local spending power.

The 1% cap on public sector pay has also prompted fears that the sector’s 2013-14 and 2014-15 settlements could be reopened – just as local government thought it had dealt with the worst settlement in generations – it appears the front-loading may just have been a foretaste after all.

But there was some optimism in the statement in the form of the chancellor’s commitment to infrastructure, particularly transport – a clear, if belated, realisation that growth doesn’t happen by itself. While critics will say that this investment pales in comparison with what was already underway from the last government, it may at least start to provide the climate for some kernels of growth.

George Osborne announced a further £1bn for the government’s Regional Growth Fund, which had been criticised recently for delays in the money actually getting out to the projects, as well as a new £100m fund aimed at creating superfast broadband in ten UK cities.

He also proposed allowing city mayors to borrow against the income they receive through the community infrastructure levy as part of its commitment to deliver tax increment financing powers, ‘where they can make a significant contribution to national infrastructure priorities’.

And the good news for councils is that they could potentially seize this agenda and play a major role in delivering this, given the vacuum left by the RDAs, which LEPs are struggling to fill. Perhaps in recognition of the fact that LEPs will only work with sufficient financial freedoms and powers, the chancellor also announced the government had approved 100% capital allowances for the enterprise zones in the Black Country, Humber, Liverpool, the northeast, Sheffield and Tees Valley.

Mr Osborne also confirmed the Treasury had approved proposals from both the Lancashire and Humber LEPs to form enterprise zones around the BAE systems sites and had accepted a proposal to expand the enterprise zone in the northeast to include land around the Port of Blyth in order to attract investment in renewables.

He added the Treasury would also support proposals from the mayor of London for an enterprise zone around Battersea that would utilise TIF, and for the extension of the Northern Line to Battersea., considering allowing the mayor of London and partner authorities to borrow against the community infrastructure levy to support the scheme.

There was a boost for other transport projects too, including an extra £170m of funding for local authority major transport projects to enable all the projects in the development pool for the spending review 2010 period to go ahead, as well as an extra £50m to be distributed to all local transport authorities outside London.

There was £290m from Network Rail to electrify the Transpennine railway route from Manchester to Leeds next year, and £4m to accelerate the upgrade to the Tyne and Wear Metro.

Combined with £25m to help bus companies and local authorities in England buy new low carbon buses, there was a sense that transport infrastructure was one of the few areas to get a little boost. Too little too late some would say, but in the harsh climate we are facing, the country needs to keep moving to try and at least stay warm.

Photo by (Mick Baker)rooster