Infrastructure: HS2 - green light for new rail, roads and schools

Autumn Statement

George Osborne managed several surprises on his infrastructure plans, even though the Government’s spending on roads, rail and schools as the way out of the financial crisis has been well-trailed.

Many of Mr Osborne’s announcements on these projects, such as a £1bn extension to the Northern Line to Battersea Park and a similar scheme for the Olympic Park, were genuinely new. Those two examples will also please the London Mayor, Boris Johnson, who is considered a long-term rival to Mr Osborne as David Cameron’s successor.

About one-fifth of the £5.5bn of extra capital spending will go to schools, while a further £1bn will be invested in upgrading roads such as the A1, which Mr Osborne said would bring “the route from London to Newcastle up to motorway standard”.

Mr Osborne also confirmed plans to extend the £33bn High Speed Two rail link, which will see journey times between London and Birmingham reduced to just 49 minutes, to the North-west and North Yorkshire. This has long been the plan, though Mr Osborne’s timing to confirm later phases of HS2 was notable given that it comes in the week that a series of legal challenges against the project have been launched in the High Court.

A City source suggested that this announcement proved just how reliant the Government is on infrastructure spending to dig the country out of the economic mire. One Whitehall official recently joked that the government seems hooked on quantitative easing – printing money – and capital spending, quite the opposite of what would be expected from ministers who have so often talked of austerity.

Mr Osborne also tried to quash any suggestions that this government cared less about restoring the country’s creaking infrastructure than the previous Labour administration. He went as far as to describe his infrastructure plans as “a revolution… equipping Britain to win in the global race”.

The Chancellor said that the Coalition is spending £33bn a year, against £29bn in 2005-10. However, much of Labour’s rebuilding programme, such as constructing 100 new hospitals, took place in its first two terms from 1997 to 2005.

The statement also highlighted the infrastructure investment platform, which is to be launched next year and is expected to encourage pension funds to back projects during their risky construction phase.