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Five things to look out for in the spending review

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26 June 2013: George Osborne announces the spending round for 2015/16 today. Here's our five things to look out for in it.

1. Infrastructure: big new roads or small schemes and road maintenance?

As part of new infrastructure spending, George Osborne wants to announce big new road schemes. But he doesn't have the money to pay for lots of them outright - his plans depend on tolling (see below) but balancing getting enough money in without pricing drivers off the new roads is difficult and controversial.

More effective in boosting the economy and jobs would be to tackle the £10bn backlog of potholes with a Road Repair and Renewal Fund. Lib Dems have also been pushing funding for smaller schemes, including the Local Sustainable Transport Fund and cycling.

Look out for: How the balance falls between announcements of big road schemes (A14 in Cambridge, Lower Thames Crossing and others), smaller scale programmes like the “pinchpoint” fund and more road maintenance, and transport funding for local councils. What influence do the green-tinged Lib Dems have on the Quad of Cameron, Osborne, Clegg and Alexander? Will Boris Johnson manage to fight off calls for cutting his transport budget?

2. Beeching for the Buses?

Both the main sources of public funding for bus services in England are under real pressure:

 

  • Bus Service Operators Grant (BSOG) from DfT goes to all those running bus services as a rebate on some of the fuel duty they pay.
  • Local government formula grant from DCLG, which councils use to fund socially useful bus services (around one in five of all bus services) along with other services such as social care.

Look out for: Cuts in BSOG maybe with a promise of a new long term funding arrangement – though the cross-party Environmental Audit Committee has opposed any further cuts in bus funding. To reduce the impact of cuts in DCLG’s council grants (reportedly 10% on top of previously announced cuts), Government will need to find some way to help local councils tackle social care, which is eating up more and more of their discretionary budgets like support for buses.

 

3. Rail fares: an end to above-inflation rises?

The Coalition Agreement promised to make rail fares fairer. The DfT's rail fares and ticketing review was due to report earlier this year but was put back until after the Spending Round (now promised before the Summer recess starts on 18 July).

Look out for: If the Chancellor has half an eye on the threat to marginal commuter constituencies he might announce an end to above inflation increases. The Office of Rail Regulation's requirement that Network Rail make £2bn of extra savings from 2014 could make the space needed for this.

4. Privatising the strategic road network?

Backed by the Chancellor, last year David Cameron announced a feasibility study on a greater role for private ownership and finance for the strategic road network. DfT ministers and officials would take much of the flak for such an approach and are far less keen. A middle way with the Highways Agency turned into a more independent government owned company with a longer-term funding settlement like the railways is being considered.

Look out for: Lots of noise about roads reform – with a Green Paper set to follow next week. George Osborne may want to announce a big idea to show that the Government is serious about infrastructure and override DfT objections to privatising the strategic road network. This will be politically very controversial with both environmentalists and motoring groups opposed to these plans.

5. More rail investment?

Rail has continued to see high levels of investment. The electrification plans already announced could be extended. The new stations fund has been popular and might be increased. Lib Dems are also keen on new lines and will try to use the additional funding for capital for reopened stations or lines.

Look out for: More money for further electrification, new stations and possibly a commitment to reopen lines closed by the Beeching report, in its 50th anniversary year. Also a restatement of commitment to HS2.

 

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