PLMR’s expert team of sector specialists take you through everything you need to know about:

• The Growth Question
• Conservative Reaction
• Technology
• West Midlands
• East of England
• Food
• Devolved
• Education
• Energy
• Infrastructure
• Health and Social Care

 

📈 The Growth Question 📈

Rachel Reeves’ first Budget as Chancellor has, thus far, managed to avoid any major unravelling. However, as the dust settles on last week’s fiscal package and the direction of travel taken by the new Labour Government becomes clear, challenges certainly remain and concern from businesses – along with wider employers – has grown.

The scale of the tax increases announced by Reeves cannot be understated. A Budget committing to £40bn in tax rises represents the largest increase for a generation and reflects a Labour administration keen to pursue an alternative economic approach from previous governments.

Whilst the Budget hasn’t ‘unravelled’, it is fair to say it experienced a somewhat bumpy landing. The Labour Party spent its most recent years in opposition seeking to regain the trust and rebuild the support of the business community. A Budget that saw an increase in employer NI contributions; a significant increase in the National Living Wage; alongside wider tax raising measures including on Capital Gains Tax, will test how strong that support is with employers effectively asked to shoulder the burden of Labour’s tax increases.

The NI announcements have been received sceptically by employers and with organisations including charities, care homes, GP practices, and pharmacies in line to make increased contributions, there is every possibility this issue becomes a challenge for the Treasury in the coming period.

Under the banner of ‘invest, invest, invest’ this administration’s focus on infrastructure development – and the rebuilding and modernisation of public services – was a central focus. This goes to the heart of the Starmer administration’s ambitions – achieving economic growth (and the highest growth rate in the G7, in particular). With this in mind, arguably the most eye-catching figure from the Budget was the OBR’s downgrading of longer-term growth (albeit after a short-term upgrade). The ‘growth question’ is one that will now dominate thinking across government in an effort to counter these challenging longer-term forecasts.

Reeves has spoken of her aim to return the Budget to its traditional function of announcing ‘tax and spend’ and fiscal measures and that wider growth and economic policy announcements would sit outside of this. As such, with the first fiscal event now out of the way, we can expect attention to turn to the government’s wider programme of driving forward growth.

Supply side reform – such as the proposed planning reform, aimed at creating a more streamlined pro-development environment – is already underway and the government will want to move quickly to implement this. A reinvigorated Industrial Strategy is also being worked on.

Maximising the potential of the UK’s workforce through welfare reform will remain a critical priority – with a White Paper expected to be published in the next few weeks laying out the Government’s plans to “Get Britain Working”.

Having told health service that there would be ‘no cash without reform’ before providing an injection of £22.6bn for the NHS, the strategy for delivering the change to a community-based, digital, and preventative model of healthcare will be highly anticipated at the beginning of 2025.

The Chancellor is due to provide the annual Mansion House speech on 14th November, with expectations being floated around pension reform to encourage greater investment in infrastructure. We can expect this to mark the first stage of this new administration seeking to lay out its growth agenda. Following a Budget which has posed challenges for business, getting the ‘growth question’ right in the coming period will determine the success of this administration.

 

🌳 Conservative Reaction🌳

Badenoch Faces Political Challenges as She Seeks to Weaponise Labour’s Budget

The dust on the Budget has settled – just as it has on the Conservative Party leadership election. Kemi Badenoch is the new Leader of the Opposition and though she didn’t have the opportunity to respond to the Budget at the despatch box, she will be using the Budget as her sat nav to guide her towards the key attack points over the coming months in Opposition.

In her first interview as Leader with the BBC’s Laura Kuenssberg, Badenoch announced she will have the ‘opposite approach to Labour’ on the economy. The fault lines are being drawn.

Although her leadership run was very limited on policy, we are starting to see the embryos of a policy platform emerge – largely framed around opposition to this Budget.

First, Badenoch has signalled an intention to reverse the introduction of VAT on private schools, calling it a ‘tax on aspiration’.

She also signalled her belief that it is business that creates growth, not government – perhaps indicating a divergence of thinking around rises in employer National Insurance contributions and the Minimum Wage.

Badenoch’s positioning so far paints a familiar Conservative picture – a commitment to reducing state intervention in business and championing individual and corporate freedoms. This approach aligns her with a Thatcherite tradition, albeit adapted for the post-Brexit, post-pandemic political landscape. Her message is clear. Labour’s Budget is “taxing growth, not driving it,” as she put it in her BBC interview, setting up what is likely to be a relentless critique of Labour’s economic strategy over the coming months.

But Badenoch faces a political challenge. By and large, the Government’s big spending measures in the Budget are broadly popular. Especially around an extra £22bn for the NHS. So how does she navigate this effectively?

It’s early days, of course. At the time of writing, Badenoch has not yet even announced her Shadow Chancellor. However, the Conservatives need to offer a vision for the country that offers reform of popular public services, not just a blank cheque.

What this Budget has done is help Badenoch find ‘her people’. In this instance, it is individuals who feel they have got the rawest deal from Reeves’ Budget. Farmers, pensioners and small business owners.

Farmers will be seething at the reform of Agricultural Property Relief (APR). This particular measure has ignited significant concern among farmers and rural communities. Previously, APR allowed up to 100% relief from Inheritance Tax on qualifying agricultural property, facilitating the seamless transfer of farms across generations. But, the new policy introduces a cap, providing 100% relief only on the first £1m of combined business and agricultural assets, with assets exceeding this threshold subject to a 20% tax rate.

Badenoch may see this as a wider opportunity to stand up for those occupying “forgotten Britain” – which farmers now form part of. She has pointed out how the new levy could have a cascading effect on food prices, pushing up costs for consumers and further intensifying inflationary pressures. According to Badenoch, Labour’s farmer tax demonstrates a lack of understanding of agricultural economics and risks pushing many small, family-owned farms to the brink of bankruptcy. The challenge now for the Tories will be to make this issue resonate beyond the farmers who are immediately impacted.

In terms of pensioners, Badenoch will no doubt continue the work of the Conservatives under Sunak’s post-election leadership to seize on the Winter Fuel Allowance cuts. Options available to Badenoch are to propose a targeted increase for vulnerable pensioners, positioning the Conservatives as a party keenly attuned to the cost-of-living struggles facing millions, and re-positioning the party as ‘compassionate Conservatives’ once more.

Finally, Badenoch has been given the option for a sharp critique of the Budget’s increased financial pressures on small business owners, particularly the rise in employer National Insurance Contributions (NIC) from 13.8% to 15% and the hike in the minimum wage to £12.21 per hour.

She can argue that these changes, while aimed at boosting worker income, risk stifling small businesses already grappling with inflation and economic uncertainty. By framing these measures as ‘burdens on growth’, Badenoch positions the Conservatives as the party defending small businesses, which she calls the “lifeblood of the economy.” Her message would underscore a belief that policies fostering business expansion and job creation, rather than government-mandated cost increases, are the best route to prosperity for workers and employers alike.

This Budget has no doubt been politically clever. The average voter will see lots to like, whereas the concerns have been focused on relatively small groups with limited influence. The big challenge for Badenoch is to weaponise this Budget and use it to create a narrative that suggests Labour does not have the right vision to transform our economy. Time will tell if she has the political prowess to succeed.

 

🦾 Technology 🦾

Reactions from the technology industry showed cautious optimism last week, with an Autumn Budget which could be described as balanced, and perhaps even somewhat ambitious. The Chancellor combined funding with reforms aimed at promoting digital-led growth and improving public services in the UK.

As a reminder, the central announcements from the Budget included:

• £13.9bn for R&D by 2025-26 including for key initiatives such as Project Gigabit and the Shared Rural Network (SRN), each aimed at enhancing connectivity, particularly in underserved rural areas.
• The extension of the Made Smarter programme, with up to £37m to support digital adoption in manufacturing, ensuring small businesses can integrate advanced digital technologies.
• A significant investment in digital reform, including £2bn for NHS technology, focusing on efficiency in essential services, which aligns with the Chancellor’s repeated emphasis on leveraging technology to enhance public sector efficiency.
• The announcement of a National Data Library to unlock public data assets, a move expected to support AI and research initiatives and enhance the UK’s position as a leader in emerging technologies.
• Additional funding of £40m for university spin-outs and research commercialisation aims to sustain the UK’s global reputation in innovation.

While the Government’s focus on digital infrastructure and R&D has been welcomed by the industry, as with many British businesses, there have been quiet concerns about the financial impact of increased employer National Insurance contributions on the sector’s growth potential. The worry being that the increase may constrain the ability of businesses, particularly SMEs, to invest in workforce development and digital transformation.

For some too, the Budget did not go far enough to capitalise on and invest in the innovation in the sector. For example, Gerard Grech, Managing Director at Founders at the University of Cambridge, and former founder of Tech Nation emphasised the need for the UK to focus on leading in high-impact emerging technologies such as AI and climate tech, rather than catching up with global competitors.

In particular, many C-suite leaders have called out the Government for not having a clearer focus on AI in the Budget and have demanded specific investments in AI infrastructure to boost productivity and competitiveness across sectors.

Overall, while concerns about tax hikes, a more targeted approach to AI, and policies to support start-ups and investors are very real and important, they are not new for the sector. The Chancellor had the difficult task of balancing fiscal responsibilities while presenting incentives for the private sector to invest in the British economy and boost long-term productivity. This Budget takes a significant step towards embedding technology within the UK’s economic framework, with key investments in infrastructure, public service reform, and regional connectivity.

 

🚀 West Midlands 🚀

For regional growth, this cannot be the end point.

The Labour Government’s first Budget was an opportunity for Richard Parker – the first Labour Mayor of the West Midlands – to lay down a marker. It was an opportunity to show how the Government will support his agenda, and how he can draw down money from Whitehall to the region.

However, save for additional money for the Black Country Metro extension, there were no bespoke funding packages for the West Midlands and little in the way of a coherent England-wide regional growth strategy.

The West Midlands was offered a share of national funding pots – ranging from £1bn to protect bus routes, the £500m Affordable Homes Programme, and a share of the £240m Get Britain Working package.

The Government also re-committed to the HS2 link between Birmingham and London Euston, and the Combined Authority’s Integrated Settlement – with further details expected to be announced in the coming months.

Simply, there must be more to come.

During the election campaign, regional and local devolution was a cornerstone of the Labour Party’s approach. Following the publication of the Industrial Strategy Green Paper, regions will be expected to develop their own, bespoke, Local Growth Plans.

If the ambition set out in Labour’s manifesto is to be achieved, significant funding must be unlocked to deliver these plans. It must mean more money for transport infrastructure, more funding to unlock brownfield regeneration, and even more focus on skills.

In the West Midlands alone, there are major inward investment opportunities which will not come forward without such funding being made available. That means homes not built, jobs not created, and opportunity deferred.

Private finance is of course fundamental, but for most major projects confidence must be instilled through public sector investment up front. That might mean a new rail station or funding for affordable homes to de-risk investment.

In many areas of the region – particularly the Black Country – the investment market is unproven and public-private partnerships are the only way to share risk in a way which supports delivery. Backing such partnerships should underpin the next steps for Rachel Reeves and Keir Starmer.

The Labour Party manifesto promised a great deal, and it remains early in the political cycle. However, if the Government is to enable its plan and meet its ambition the next steps are crucial. Local Growth Plans must be supported with real cash, and a laser-like focus on delivery.

 

⭐ East of England ⭐

If growth is the mantra of the Labour Government, then infrastructure and investment are the beacons being lit across the East of England – from the Fens to the Broads.

As the winners and losers of the Budget start to emerge across the country, business leaders in the East are dissecting what the flurry of policies and pledges mean for them.

But like a hopeful detectorist in BBC sitcom The Detectorists (Suffolk-based and Suffolk/Essex filmed), they may find only a few treasures.

‘A tough Budget’

In the immediate aftermath of the Budget, the region’s chambers of commerce were largely critical, labelling it a “tough budget for business”.

Norfolk Chambers voiced disappointment at the lack of new infrastructure commitments, save for the East/West Rail.

Hertfordshire Chambers stated that much now depends on upcoming industrial and trade strategies, as well as devolution efforts.

Suffolk Chambers lamented that transport funding continues to prioritise the North, leaving key rail junction upgrades in Ely and Haughley untouched.

For the East, which contributes over £150 billion GVA to the UK, less isn’t more.

Agriculture on alert

The East is England’s agricultural powerhouse, recording the nation’s highest Total Income From Farming last year at £1.03 billion, outperforming several regions combined.

However, concerns are growing about the inheritance tax’s impact on family farms. The Country Land and Business Association estimates that 70,000 farms might be affected, while the Treasury suggests only a few hundred.

Meanwhile, more farmland has entered the market here, raising fears of widespread sell-offs, though many buyers are reportedly local farmers.

With 25 million chickens, one million pigs, and nearly a million turkeys, the region’s farmers are weighing their options on how to respond.

Roads and Rail

The Chancellor confirmed that East West Rail will link Oxford, Milton Keynes and Cambridge, opening land for housing and labs in the Cambridge life sciences hub.

However, longstanding issues with the Ely and Haughley junctions went unaddressed, despite the potential impact on freight from the Port of Felixstowe, the UK’s busiest container port.

Improving these connections could ease congestion and boost capacity for both passenger and freight travel across the East and beyond.

Energy and NHS

There was good news for West Suffolk Hospital in Bury St Edmunds which will be rebuilt as part of a £1 billion plan. Funding pledges also included support for Sizewell C, advancing the region’s energy sector.

Infrastructure Investment

Ongoing concerns about regional underinvestment were echoed at the recent Suffolk Convention, where PLMR’s Head of Public Affairs, Simon Darby, discussed the historical funding gaps in the East.

This comes as the A12 was recently ranked the country’s worst A-road, underscoring the need for more infrastructure support and maintenance.

Conclusion

The East of England – a mix of agricultural strength and technology-driven industry – is watching closely to see if Labour’s first budget in a generation will bring promised growth.

Infrastructure, energy, and transport remain key battlegrounds, along with advancing flood defences and agricultural resilience. The clock is ticking to see if these ambitions will materialise.

 

🍽️ Food 🍽️

How has the food and drink sector responded to Labour’s first Budget?

After a fairly uninspiring Budget for the food and drink industry, reactions across the sector have been mixed, with many feeling unprotected from challenging tax rises and increased National Insurance contributions, leaving in question the knock-on impact on food inflation, food security, and recovery from the cost of living crisis.

Some retailers and wholesalers welcomed the Chancellor’s commitment to investing into the sector through a more long-term approach to tax and regulation, with the Food and Drink Federation (FDF) proclaiming “driving investment and growth [as] critical to ensuring the continued success of the UK’s largest manufacturing sector, and protecting the nation’s food security.” The extended retail, hospitality, and leisure relief for business rates was well-received, and a welcomed source of protection for smaller shops.

The Chancellor’s commitment to tackling retail crime across the supply chain was received positively, following long campaigns from the British Retail Consortium (BRC) and Usdaw. The decision to freeze fuel duty was also hailed as important relief for transport within the supply chain, and proposals to raise the Soft Drinks Industry Levy inline with inflation were welcomed as a first step, although calls for the Government to do more as part of commitments to improving the nation’s health remained.

As expected, the trailed increases to employer National Insurance (NI) contributions, minimal wage, and new employee regulations were met with mixed responses. Employers’ National Insurance contributions are due to rise by 1.2 percentage points to 15%, but the threshold for companies to start paying NI will also change, from £9,100 to £5,000. It is likely that food producers and retailers will now have to pass this cost onto customers in the form of higher food prices, impacting many still struggling with the cost-of-living crisis.

In response, UKHospitality argued that both NI and minimum wage rising simultaneously could prove very costly at a “precarious time” for the hospitality sector, leading to a £1.9bn cost increase due to wage rises only and an annual bill of £3bn. Similarly, the British Frozen Food Federation said members will disapprove of these policies and the Federation of Wholesale Distributors argued there would be an estimated increase of £110m to direct wage costs across members in the sector.

On the alterations to alcohol duty, the Campaign for Real Ale was pleased with the decision to cut draught alcohol, but the British Beer and Pub Association (BBPA) has argued that it will mean a £500m increase to the cost of doing business for the industry, and The Wine and Spirits Trade Association (WSTA) reflected voices from the sector about duty hikes for non-draught creating a continued struggle for many.

Dominating the headlines following the Budget has been the response from farmers, with many feeling betrayed by reforms to Agricultural Property Relief (APR) and funding for nature-friendly farming. The NFU warned tax hikes will lead to higher food prices and damaged farmers’ confidence, whilst the Country Land and Business Association said policies will harm 70,000 UK farms, family businesses, and destabilise food security.

In response, Daniel Zeichner, Minister for Food Security and Rural Affairs, said it is “the largest ever budget directed at sustainable food production and nature’s recovery”, confirming a commitment to Environmental Land Management schemes; the Sustainable Farming Incentive; Countryside Stewardship Higher Tier, and Landscape Recovery, alongside pledging £5bn over 2024-25 and 2025-26 for a sustainable agricultural sector.

Overall, with a Budget and Government focused on economic growth and investment, the UK food and drink sector is left wondering how it fits into this, with many undoubtedly finding it difficult to balance investment in their business and rising costs across the board.

 

🗳️ Devolved 🗳️

Last week, I was walking across Parliament Square and bumped into a delegation of politicians from Stormont, who were in London to protest against the Labour Government’s decision to pause funding on the various City Deals, ahead of the Budget.

In the Chancellor of the Exchequer’s first Budget last week, she announced that the funding would be reinstated, bringing sharp relief to those who are managing the much-needed and cross-sectoral plans for regional economies across NI.

Rachel Reeves also announced an overall funding package of £1.5bn for Northern Ireland to improve public services (with Scotland receiving £3.4bn and Wales £1.7bn).

Much like that delegation who visited Westminster last week, Northern Ireland stands slightly outside the sphere of influence here, forever in need of financial intervention from London.

This funding is much needed. Northern Ireland has very specific challenges, that require urgent attention.

We have had a long period of political instability, reaching back over the past decade or more – Stormont has been without Government as much as we’ve had Government since 2011. And when the Executive is in place, it has been unable or unwilling to take difficult, long-term decisions. This has left many public services in Northern Ireland on their knees, none more so than the health and care sector.

Although the Executive has recently launched a Budget Sustainability Plan, an Investment Strategy, and a proposal on lifting the rates cap (taxes paid by households and businesses based on their value) to raise additional funding, these measures will not be nearly enough to transform public services here; provide a stable footing for the finances of the country in the long term; and means we will continue to rely on intervention and support from Westminster to tackle our short term problems.

But it doesn’t have to be this way. Northern Ireland continues to attract Foreign Direct Investment (FDI); is considered a good place to live and work and do business; and has a reputation for delivering high quality of life standards, despite its troubled past. It has world-leading academics, strong individual sectors of industry, and lower costs of doing business.

However, despite the additional funding allocated within this week’s budget, Northern Ireland remains in a perilous position, rooted in political fragility and long-term financial instability. Without targeted support from Westminster, a long-term financial plan from the Northern Ireland Executive, and the bravery of MLAs to take difficult, unpopular decisions in the long-term national interest, politicians from Stormont will forever be standing on Westminster Square, waiting for intervention from the Treasury.

Much has been said in the past six months on the small victories of having an Executive back in place, and essentially keeping the show on the road; but I’m reminded of Bernard Crick’s essay In Defence of Politics, in which he says: “People who urge us to remember that our only task is simply to keep the ship afloat have a rather curious view of the purpose of ships.”

 

🎓 Education 🎓

Education initially appeared to be one of the big Budget winners, with some high-profile, big-number pots of cash announced. But it’s now clear that the impact of these announcements is uncertain. It’s a bit like one of those old magic eye pictures where, once you squint, a different picture appears to that which you first saw.

One of the headline announcements was the £2.3bn increase to core school funding. But Luke Sibieta from the Institute for Fiscal Studies said this will be “swallowed up by ongoing cost pressures”. With £1bn of that earmarked for SEND (and likely plugging council budget black holes), and £450m covering this year’s teacher pay rise, there will be £850m left. This will be distributed to schools via the National Funding Formula. But those allocations won’t be published until the end of November.

On Friday morning, the Department for Education also announced an end to academy conversion grants and the trust capacity fund (TCaF). The first covered the administrative costs of a school joining an academy trust, whilst the latter provided capacity building funding for trusts to bring support to more schools – especially schools in very high need of urgent turnaround.

The removal of these funding pots will make it much harder for weaker schools to get the support they need to improve. The direct losers in this are the children in these schools – many of which have high levels of disadvantage, and others which are small, rural schools and as such as are increasingly unviable and vulnerable if not part of a trust. Leora Cruddas CBE, the Chief Executive of the Confederation of School Trusts, said, this was “a short-sighted decision that will weaken the school system” and “will impact the capacity of the system to keep improving”.

The new Government’s continued commitment to expanding the funded entitlement for childcare is welcomed. However, the workforce announcements, including the rise in National Insurance Contributions, National Minimum Wage and National Living Wage, will be of note for most nursery providers.

The Budget also saw the Chancellor announce several measures for further education (FE) and skills in England, with Skills England linked to economic growth and productivity. On FE, Rachel Reeves announced additional funding worth £300m as part of a wider investment in the Department for Education – perhaps making up for overlooking FE and colleges in recent pay announcements. However, set against the additional £2.3bn for schools’ core budgets, the FE allocation seems to keep, if not widen, the gap between pre- and post-16 education.

The Lifelong Learning Entitlement was confirmed to be going ahead from January 2027. Meanwhile, £40m will be added for shorter and foundation apprenticeships and a push to “bring together employment and skills services” to improve the support available to those inactive as a result of poor health.

Despite significant investment into education, higher education was largely forgotten. Reeves committed to protecting £6.1bn of core research funding in areas like engineering and medical science, and to invest over £20bn in research and development. While there was no mention of increases to tuition fees or supporting financially struggling universities and exemptions from National Insurance in the Budget, the sector will be pleased to see an inflationary increase to undergraduate tuition fees announced by the Education Secretary this afternoon. No Chancellor wishes to increase tuition fees given its political weight, yet the HE sector will undoubtedly be pleased to avoid further real-terms decline in fee income.

 

⚡Energy⚡

Energy in the budget

This was an agenda-setting budget. Ed Miliband, and the green economy, emerged as winners as Rachel Reeves sought to side-step political challenges and set a narrative for investment and growth.

However, for as much as the budget gave; it did not give. It left many questions unanswered which, successful or not, will provide ample opportunity for the opposition to hold Government to account on energy.

Where the budget delivered:

Billions more for energy spending

Ed Miliband has well and truly won the fight on energy, investment, and growth. The largest year-on-year budget increases were given to the Department for Energy Security and Net Zero (£3.3 billion), followed by the Department for Health and Social Care (£1.8 billion) and Department for Science, Innovation and Technology (£1.4 billion).

GB Energy

GB Energy will receive £100m of investment in 2025-26, in addition to £25 million to set up in Aberdeen. This is long short of the £8.3bn of capitalisation promised for GB Energy in this parliament.

It was also confirmed that the National Wealth Fund (formerly UKIB) will undertake investment on behalf of GB Energy while it is being set up, to make investments “as quickly as possible” and draw on their “pipeline of projects”.

The use of the National Wealth Fund has done little to address confusion over how GB Energy is different to the UKIB; and will do little to placate Conservative attacks on how it is delivering for taxpayers.

Windfall tax clarification

Made much of in the manifesto, the Energy Profits Levy (EPL) rate will increase by 3% to 38% from 1st November, with its expiration now the 31st March 2030. Labour have also closed the “loophole” left by the previous Government that enabled fossil fuel producers to reduce their taxes through investment allowances.

While the market responded better than anticipated, the OBR estimate that the cost of the levy will see a 26% reduction in investment in oil and gas and a 9.2% reduction in gas production. As gas production decreases, so too will the amount of tax received. All in all, welcome fuel for Conservative attacks and industry pushback on Labour’s approach to the North Sea.

Where questions remain unanswered:

What’s left of the Warm Homes Plan?

While the Government confirmed an initial £3.4bn for Warm Homes Plan between 2025-27 and 2027-28, including an increase to the Boiler Upgrade Scheme, there remains questions about the rest given the £6.6bn promised. This will be determined in Phase 2 of the spending review – with an update expected in Spring.

What about energy bills?

The OBR expect a rise in inflation from around 2% at the end of this year to an average of 2.6 per cent in 2025. This, they state, is partly driven by “higher gas and electricity prices”. The Ofgem price cap is also anticipated to increase by 3% in January. The budget did not outline any support for energy bills, such as a social tariff, and with electricity prices expected to rise this could cause challenges for Labour.

Will we ever see progress on nuclear?

In the hours following the budget, Shadow Energy Secretary Claire Coutinho got into a spat with Energy Minister Michael Shanks on X (formerly Twitter) about the future of nuclear in the UK.

Coutinho highlighted that there has been no update on Sizewell C or SMR projects. Indeed, the budget states that “a Final Investment Decision on whether to proceed with the project will be taken in Phase 2 of the Spending Review.”

Shanks responded that the Conservatives had not built any new nuclear in 14 years and that the budget confirmed £2.7bn for Sizewell for next year – touché. However, the Treasury later confirmed this was not new money.

 

🛣️ Infrastructure 🛣️

Infrastructure businesses have now had a few days to mull over last week’s Budget and what it means for their sector. The general reaction is still positive, but hardly euphoric.

Unlike some other industries, construction companies and civil engineers generally heard good news last Wednesday. Over the last few months, the new Government has been at pains to stress that it will build its way to growth, and Rachel Reeves offered more of this messaging in her speech. Promises on housebuilding, hospitals, schools, HS2 and elsewhere were well-received. And the change to the fiscal rules to allow more spending on the nation’s fabric continues to look like a very positive development.

However, it is hard to get past the fact that other than fiddling with technical definitions of net debt there was nothing truly radical in the Budget. Many of the specific pledges on railways and roads, and on broadband and housing, had been made before or so heavily trailed in advance they felt ridiculously familiar. Comments about nuclear, CCUS and other energy technologies were nothing new, whilst the announcement about hydrogen projects was welcome but arguably should have been made several years ago.

Meanwhile, as we flagged last week, promises to change the planning regime, reform the labour market and change the way Government manages major projects are half-formed at best. Until we see much more detail it is going to be hard to be too excited.

For the sector the view now is that there is a lot more still to learn. When will the National Infrastructure and Service Transformation Authority be set up, and how will it function? How will the National Wealth Fund work? What’s the purpose of GB Energy? Will Metro Mayors be given serious powers to raise and spend money on infrastructure? How does the programme of renewal in the water sector fit into all of this? What will the impact of the Industrial Strategy be? What impact will the Clean Power Mission 2030 have? And so on, and so on.

Most players in the sector are wary after previous governments promised big spending on new projects only to review, scale back or delay them, often at very short notice. This capriciousness has deterred investment and innovation and often left other markets looking like much safer bets. If Labour wants infrastructure spending to go up, then the single best thing it can do is establish a stable environment for investment and generally look like it is taking infrastructure seriously.

That’s why a lot of the reaction to the Budget has been to look ahead to the ten-year National Infrastructure Strategy, promised for next year. If this looks like a credible and deliverable plan then it will go a long way towards rebuilding confidence in the sector, particularly if it acknowledges that nothing much will change if we don’t have enough people, and we don’t fix boring problems like capacity in planning departments and regulatory agencies.

Most observers would agree that Labour is right to focus on infrastructure as a route to driving up productivity and kickstarting economic growth. The Budget was positive but it’s just a tiny part of what the sector needs. On to the next round of announcements in the Spring.

 

🧑‍⚕️ Health and Social Care🧑‍⚕️

The headline from the Budget with regards to health and social care was the major increase in NHS funding, with day-to-day spending rising by £22.6bn and capital spending by £3.1bn by 2026.

This was the largest real terms growth in NHS funding outside of the COVID years since 2010, giving a clear signal that ‘fixing the NHS’ is central to the Labour leadership’s plans in Government.

The capital investment will include £1.5bn for new surgical hubs and diagnostic scanners and significant sums for estate maintenance, tech and digital, pandemic preparedness, and new mental health crisis centres.

Elsewhere, the Budget set out a pro-investment vision for the life sciences sector that will be key to unlocking further investment in R&D and supporting the latest medical innovations to be launched in the UK. Commitment to the Life Sciences Innovative Manufacturing Fund and a boost for NIHR funding have been welcomed across the sector.

So, what’s the catch?

Much of the rhetoric from Wes Streeting and the Labour leadership to date has focused on the need to reform the NHS before new funding is committed. Streeting himself has warned against ending up with ‘an NHS with a country attached to it’.

Previous increases in NHS spending have been swallowed by hospital deficits. Whilst the NHS budget has steadily grown, levels of productivity and patient outcomes have not.

Moving from analogue to digital, from sickness to prevention, and from hospital to community has therefore been the central idea behind Labour’s vision for the health system. Labour wants to do things differently, reform the system, and deliver an NHS that is fit for the future.

It is a surprise, then, that the funding announced at last week’s Budget goes precisely to the areas of the NHS that the Government says it wants to move emphasis away from. Pouring new money into day-to-day spending seems at odds with Labour’s vision for reform, especially with no mention made in the Budget of prevention or social care.

The reality is the situation on the ground across the NHS is dire. Waiting times are still too high, there is not enough capacity, and there is a political need to make urgent improvements.

Until this situation improves, the urgent needs of today may continue to trump the need to transform the NHS to be fit for tomorrow. In the Spring, the Government will publish its new 10-year plan for the NHS alongside the multi-year Spending Review. This will be a huge moment for health policy and delivery where we expect to hear Labour’s plans for reform over the long term.

However, the increases in employer NI contributions have elicited a strong reaction from the wider sector, especially charities, GPs, and care homes. The Chancellor was repeatedly asked about this issue across the weekend, and over 1,000 charities have signed an open letter voicing concerns over the impact of last week’s Budget on the sector. The Treasury has subsequently pushed this issue back to Wes Streeting, saying that the £22.6bn earmarked for day-to-day spending can be used to cover these increased staffing costs, for example via the renegotiation of the GP contract which was already planned. However, doing so will mean that less of the money will reach the front line or seed-fund the wider reform programme, ultimately limiting Streeting’s wider plans for the NHS.

Moreover, it means social care is once again left out in the cold, with most publicly funded providers working with Councils rather than NHS bodies, exacerbating already significant funding challenges in the sector and with no easy resolution in sight given Local Authorities already constrained budgets. In response, Renaissance Care has taken legal advice around a potential action on the grounds of subsidy control and competition law, given the planned employer NIC carve out for the NHS (which operates many care services in Scotland), whilst other providers have warned of closing services, limiting investment in homes, or reducing pay differentials which would ultimately make a career in care less appealing.

Organisations across the health and care sector have an opportunity to engage with the Government on this agenda. We would be pleased to speak with you on how we can support your organisation to have its say on the future of the NHS.