Construction must seize this moment of opportunity

After two gruelling months, we have our new PM. Despite extensive hustings and endless media analysis, we still are not clear as to what Liz Truss’s immediate priorities are beyond tax cuts and fixing the energy crisis. Ten years ago, she authored sections of the libertarian polemic, Britannia Unchained, arguing for light-touch regulation, a prudent fiscal policy and “no fear of failure”. Truss as prime minister now faces calls to nationalise the energy industry as well as the need to raise additional borrowing that could total £100bn.

Ironically, with no wiggle room and time running out before fuel prices skyrocket, the “hands-off” radical will need to maintain an iron grip on events and policy implementation in order to get through the next six months. Only then will she have any chance of implementing her wider plans.

>> Also read: Truss faces net-zero dilemma in tackling energy crisis

>> Also read: Dear Ms Truss, work with us to build a better nation 

Trying to work out what these plans are is tricky. On the one hand she has spoken against HS2 due to escalating costs, yet she is supportive of the full-scale implementation of Northern Powerhouse Rail. On housing, she has backed building on the green belt, but now does not want to start a “planning war” on a key voter issue. On net zero, she is both a signatory of the Conservative Environment Network environment pledge and an advocate of gas as a transition fuel.

While she will give us less bombast and boosterism, she will still struggle to reconcile the contradictions that are inherent in the Tories’ election-winning switch to state-led investment in 2019 

Clearly, advocating policy in the world of Liz Truss will involve walking a tightrope between innovation and transformation on the one hand and ruthless pragmatism on the other. But, while she will give us less bombast and boosterism, she will still struggle to reconcile the contradictions that are inherent in the Tories’ election-winning switch to state-led investment in 2019.

So, are there new priorities that her government should pursue, and what expectations should the construction sector have of the new government? A change in national leadership, even at times as desperate as these, is a moment of opportunity – a moment when the direction of travel can change, and when fresh policy ideas can be accelerated. If there is any room in her over-flowing in-tray, what should we be calling out for?

Development and construction was barely out of the headlines during Boris Johnson’s tenure. Whether the theme was planning reform, the priorities of “build back better” or mega-projects such as HS2, the Johnson years will be remembered as a time when investment flowed and construction had the ear of ministers. Looking forward, Truss will still need to deliver against electoral promises including investment in the NHS and schools. The industry still has a crucial role, even if “cakeism” is replaced by “smaller state-ism”.

This shift will trigger a significant change in policy implementation, and it makes sense for the construction industry to align with new ways of thinking and the opportunities they might present. Where might these be found?

The first area for me is net-zero retrofit. The industry has rightly been calling for a national retrofit strategy, an approach which was well-aligned to the top-down instincts of the Johnson era. An industry strategy is definitely still needed, but it is more likely to be driven by supply-side innovation under the new regime.

Consumer behaviour is changed by incentives and one thing that we know about Truss is her interest in using the tax system to drive market transformation. Industry has long campaigned for the zero-rating of residential refurbishment and, if VAT is to be cut in 2022, it should be done in a targeted way. 

Minor steps were made this year with changes to the tax treatment of energy-saving materials but, with an energy crisis and a tax-cutting PM, it is time for another push for the zero-rating of refurb. Tax incentives appear to work. The SuperBonus scheme in Italy has triggered around €20bn of refurb since 2020, contributing to much-needed decarbonisation of an aged building stock.

The second area is planning. The broken planning system has contributed in part to spiralling house prices and the wider housing crisis. The present Levelling Up and Regeneration Bill is a disappointing compromise that is unlikely to deliver the additional homes needed to address affordability issues. 

All commentators agree that the challenges faced by Truss are unprecedented in peacetime. Her room for manoeuvre and available bandwidth is infinitesimally small

Truss talked on the campaign trail of introducing significant changes, focused on simplified planning requirements and incentives for development within defined geographical zones. There is no further detail and whatever direction planning reform takes, it will attract significant opposition. However, for the sake of the UK’s housing market, the ideas deserve a proper hearing. Perhaps this more hands-off administration will have the nerve to drive for the necessary change that has been delayed for so long. 

Unsurprisingly, my third priority is building safety, which is a critical policy area where we must continue to double down on effective regulation. Government and industry are still working through the processes, standards and competences needed to deliver safe homes and give the industry its licence to operate. 

In the context of the Truss administration, the quid pro quo to a hands-off approach must be regulation that works. The DLUHC must stay hands-on, and the industry must remain engaged until workable regulation is in place – contributing for example to the current consultation on gateways and the golden thread.

All commentators agree that the challenges faced by Truss are unprecedented in peacetime. Her room for manoeuvre and available bandwidth is infinitesimally small. In such circumstances, the only policy requests that will gain traction will be ones that provide solutions to the problems of the day. 

Construction rose supremely well to the challenge during the covid crisis. In our dealings with the new hands-off/hands-on government, we will do well to remember that, while the ends might not change, the means to get there might. 

Simon Rawlinson is s a partner at Arcadis and a member of the Construction Leadership Council