Hammond plans $40b splurge on housing and R&D

Britain's Chancellor unveils new investment fund and calls for urgent productivity rises

LONDON • Britain's finance minister Philip Hammond said yesterday that he would launch a fund to invest £23 billion (S$40.8 billion) in rail, telecoms and housing infrastructure over the next five years.

The National Productivity Investment Fund would be spent on infrastructure and research and development (R&D), the Chancellor of the Exchequer said in his first Autumn Statement to Parliament.

"Economically productive infrastructure directly benefits businesses, but families, too, rely on roads, rail, telecoms and especially housing," Mr Hammond said.

He confirmed a plan to spend an extra £2 billion on research and development by 2021, announced by Prime Minister Theresa May on Monday.

"Our task now is to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow," Mr Hammond told Parliament to cheers from lawmakers in his ruling Conservative Party.

Mrs May has vowed to trigger Britain's exit from the European Union by the end of March by activating Article 50 of the EU's Lisbon Treaty, which begins a two-year countdown to leaving the bloc.

  • Post-Brexit budget highlights

    Highlights of Chancellor of the Exchequer Phillip Hammond's post-Brexit budget.

    •Raising the minimum wage, known as the National Living Wage, to £7.50 (S$13.30) an hour from April, up from £7.20 now.

    •Investing £1.4 billion on building 40,000 "affordable" homes over the next five years.

    •Cracking down on fees imposed on tenants, a bitter complaint of many renters.

    •Allocating an extra £2 billion to investment in R&D to "help put post-Brexit Britain at the cutting edge of science and tech".

    •Reducing corporation tax to 17 per cent by 2020/21.

    •Spending more on infrastructure, such as roads and broadband networks.

Mr Hammond said that while the Brexit vote "will change the course of Britain's history", it "also makes more urgent than ever the need to tackle our economy's long-term weaknesses like the productivity gap". He told lawmakers that "the productivity gap is well known, but shocking nonetheless".

"It takes a German worker four days to produce what we make in five, which means, in turn, that too many British workers work longer hours for lower pay than their counterparts. Raising productivity is essential for the high-wage, high- skill economy that will deliver higher living standards for working people," he said.

The effect of unaffordable housing on the country's productivity made building more houses an urgent priority, Mr Hammond said, flagging plans for a £2.3 billion Housing Infrastructure Fund to help unlock land for housing.

A further £1.4 billion would be freed up for affordable housing, while housing providers would be allowed to build a wider variety of housing types, he said.

"Over the course of this Parliament, the government expects to more than double in real terms annual capital spending on housing," Mr Hammond said.

In March, the government's National Infrastructure Delivery Plan 2016-2021 flagged a pipeline of projects worth some £483 billion across a range of sectors that need to be delivered.

To soften the hit to living standards for poorer households as the economy slows, Mr Hammond said the government would raise the minimum wage to £7.50 an hour from the current £7.20, partially reverse planned cuts in benefits for low-earners and curb fees on renting property.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 24, 2016, with the headline 'Hammond plans $40b splurge on housing and R&D'. Print Edition | Subscribe