Mayors and councils need £32bn capital funding injection for decade of renewal

The government’s ambition to deliver a decade of national renewal will only be possible if it provides £32bn capital funding a year for mayors and local councils, new analysis from the New Economics Foundation (NEF) has found.

With the Chancellor expected to change the government’s fiscal rules to unlock funding for capital investment at next week’s budget, a new report from NEF outlines the scale of what is required to tackle regional inequality and improve lives across the country.

The report argues after decades of underinvestment, and with what investment there has been concentrated in London, regions across the country have been left with a substantial capital funding gap.

It says regions need £32bn each year over the next decade to invest in four critical devolved areas that provide the foundation of a good life:

• £11.8bn a year outside of London to deliver 92,000 new social rented homes required to meet housing need

• £3.4bn each year to retrofit the homes of all 3.18m fuel poor households

• £1.4bn a year in municipal and community energy projects between 2025 and 2029 to meet the UK’s renewable energy commitments, with £0.7bn between 2030 and 2034

• £15.6bn annually outside of London to invest in public transport and active travel to drive the shift needed to reach net zero

The analysis lays bare the inadequacy of the previous government’s ​“Levelling Up” programmes, which added up to £1.89bn annually – just three weeks’ worth of the annual investment needed.

NEF has recently argued that the Chancellor should commit to reforming the fiscal rules and taxing the wealthiest to unleash funds to invest in the economy. Meanwhile, recent NEF analysis showed the government’s new national wealth fund (NWF) could raise £100bn over the next ten years if it was free to issue its own bonds and its liabilities were removed from the public debt target.

Benedikt Straňák, lead author and researcher at NEF, said:

“The government has promised to deliver a decade of national renewal, but after years of underinvestment it faces a daunting challenge. Millions of people across the country have unmet housing need, our homes are poorly insulated, swathes of the country have grossly inadequate public transport and we continue to burn expensive gas for electricity.

“Our research lays bare just how big the task is. We cannot ignore the fact that we need to double recent transport investment outside of London and increase new housing investment in other regions by 4.5 times.

“However, it is not unsurmountable. With reform of the fiscal rules and more progressive taxation we could free up the funds to ensure people have warm and affordable homes, clean sources of cheap energy and access to decent public transport”

Researchers found that the combined investment needs in the four sectors varied significantly between regions outside of London. The East Midlands has the highest additional public investment need with £1,148 per person required over the next five years. The north-east was the second highest at £820.

ENDS

Contact

James Rush – james.rush@neweconomics.org

Notes

Estimated additional public investment needed per person per year from 2025 to 2029, by region and sector

Source: NEF modelling and existing research

The investment need estimates draw on detailed modelling in each of the four sectors covered: in retrofit and local energy, the report features new NEF modelling first presented here. In transport, the report features NEF modelling based on existing work by the Trade Union Congress. In housing, we use estimates by Professor Glen Bramley, first published here. The report and technical appendix show full details of the modelling.

The New Economics Foundation published analysis on Monday 14 October which showed that the government’s new national wealth fund could raise £100bn over the next decade if it was free to issue its own bonds and its liabilities were removed the fiscal debt target.

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