Transport has rarely featured so prominently in a Budget. Today, the Chancellor covered all the bases on transport at the front of his Budget speech: from infrastructure and new technologies to air quality and devolution. This prominence is for two reasons: firstly, the Chancellor clearly believes that there are productivity and economic gains to be had from infrastructure development, which in turn supports new skills in the green economy; but secondly, because Britain is feeling the pressure of meeting both the fifth carbon budget and air quality regulations.
Straight after the Chancellor had told the Commons about the Office for Budget Responsibility’s economic forecast, he launched into the Industrial Strategy and the future of mobility. Productivity was poor, he said, and argued that the key to raising wages is about raising investment – both public and private – and skills. On investment, Hammond reflected on the rail and road investment that the Government has made and he said the National Productivity Investment fund (NPIF) would be extended and raised to £31bn to allow this to continue.
He then segued on to mobility, talking about his ambitions for driverless and electric vehicles. Hammond announced a new £200m Charging Investment Infrastructure Fund (matched with £200m from industry), alongside £100m to guarantee continuation of the Plug-In Car Grant to 2020 and £40m for charging research and development. He also announced plans to clarify the law so that people charging vehicles at work will not face benefit-in-kind charges.
On air quality, Hammond said that a new tax would be levied on new diesel cars. From April 2018, the first year VED rate for diesel cars (not vans) that don’t meet the latest standards will go up by one band. Drivers buying a new car will be able to avoid this charge as soon “as manufacturers bring forward the next-generation cleaner diesels.” It is anticipated that this levy will fund the Government’s new £220m air quality fund for the implementation of local air quality plans (being designed now following the recent Air Quality Plan.)
Perhaps as a way of reaching a younger generation, that shifted to Labour at the 2017 General Election; as predicted Hammond announced a new railcard for 26-30 year-olds. Hammond then announced that, as has become a theme in recent years, that the fuel duty rise planned for April was to be cancelled – though it was apparent that such a policy now jars with the Government’s wider air quality plans.
On devolution, the Chancellor committed to a new £1.7bn Transforming Cities Fund, half of which will go to the new directly elected “metro” mayors. He also announced a second devolution deal with Andy Street in the West Midlands and a new devolution deal with North of the Tyne, including the replacement of the 40-year-old rolling stock on the Tyne and Wear Metro at a total investment of £337million.
Hammond has proven to be a very different Chancellor to his predecessor, with a willingness – perhaps even an eagerness – for Government to play an active role in the economy. However, his proposals carry a risk. His commitments may not be borne from high-minded idealism, but from political practicality.
The need to improve productivity and drive up the economy through Brexit has led the Chancellor to make a range of commitments through the NPIF on infrastructure that will likely be focused on that which is quickly realisable – which is not necessarily the infrastructure that the UK needs most.
Commitments like a 26-30 Railcard will be popular, but will not reduce congestion on the rail or reduce fares, and promises to freeze fuel duty will work against their stated aims to encourage the uptake of cleaner cars. The Government’s ambition on battery electric vehicles also risks undermining less mature technologies, which could use the investment more.
Hammond had to do well today to secure his own position – but the transport commitments the UK needs most are counted in decades, not months. Today was about short-termism and the political reality.