“If we cannot afford it, we cannot do it.” That was the message from the Chancellor Rachel Reeves as she announced a raft of cuts to government programmes and policies to plug a projected Government overspend of £22 billion.
Among the transport projects to be scrapped includes the Restoring Our Railways Scheme, which is said will save £85 million, although individual projects can be assessed. Other projects axed includes the A303 (Stonehenge tunnel) and A27 Arundel bypass.
She said in total there are £1 billion of various transport projects committed to next year that are “unfunded” and that the Transport Secretary will undertake a review of those commitments.
Findings from a Treasury audit commissioned by the Chancellor exposed billions of pounds of unfunded commitments from the previous Government, including the Rwanda scheme, the Advanced British Standard and the New Hospital Programme.
The previous Government also failed to increase Departmental budgets to cover public sector pay settlements, which were £11-12 billion higher than accounted for at the last Spending review. All of which were made on top of pressures resulting from higher inflation, increased asylum costs and funding for Ukraine.
Taking immediate action, the Chancellor announced £5.5 billion of savings this year and £8.1 billion next year to tackle the overspend. She also commits to set out full fiscal plans, alongside a Spending Review, at the Budget on 30th October.
Chancellor of the Exchequer, Rachel Reeves said: “This is not the statement I wanted to give today, and these are not the decisions I wanted to make. But they are the right decisions in difficult circumstances.”
Immediate savings include £800 million this year and £1.4 billion next year from scrapping the Rwanda migration partnership and scrapping retrospection of the Illegal Migration Act, £70 million this year by cancelling the Investment Opportunity Fund and other small projects, £185 million next year from cancelling the Advanced British Standard and £785 million next year from stopping unaffordable road and railway schemes. The Chancellor also announced a review of the underdelivering New Hospital Programme.
To provide certainty for public sector workers and help put an end to devastating strikes costing billions of pounds, the Chancellor accepted the independent Pay Review Body recommendations and confirm pay uplifts averaging 5.5 per cent for public sector workers.
The Chancellor also set out plans to ensure Spending Reviews are set every two years to cover a three-year period, with a one year overlap with the previous Spending Review, helping build in greater certainty and stability over public finances. Transparency over in year spending pressures will also be enhanced, with more information being provided to the OBR. In the House the Chancellor also re-committed to a single major fiscal event a year.
Responding, the Conservatives wrote on social media: “Labour made all of their spending commitments in full knowledge of what they could and couldn’t afford to do. It’s beyond disingenuous for the Labour Chancellor to now pretend to be blind to this reality and hope the public forgets what they promised.”
There were two rail related developments on Monday, one by Chancellor Rachel Reeves to Parliament on spending, and another written report was published by HS2 Ltd, regarding its annual 2023-24 accounts.
Commenting, Railway Industry Association Chief Executive Darren Caplan said: “The annual accounts published today by HS2 Ltd show that the decision in October 2023 by the previous Government to cancel the Manchester to Birmingham leg of HS2, and rescope the plans for trains to get to Euston, resulted in the writing off of more than £2bn of rail work which could have been spent supporting thousands of jobs and billions of pounds of GVA. This in turn would have seen significant tax revenues coming back into the Treasury.
“The report is a reminder to the new Government that these losses can only be recouped if plans to deliver crucial north-south rail capacity in the decade ahead are developed and the specific HS2 connection between Old Oak Common to Euston is confirmed in the coming weeks. Otherwise what should have been a world-class national rail infrastructure asset will simply become a high-quality Acton to Aston line.
“Elsewhere, the Railway Industry Association and our members will be closely following the announcement by Rachel Reeves of a three year spending review, and news that the Restoring Your Railways programme is cancelled with individual projects now under review. We support the need for a strategic review of transport schemes, and urge the government to make sure that the spending review takes account of the crucial role rail investment plays in supporting jobs, local growth, connectivity and decarbonisation within and between the UK’s nations and regions. As the National Infrastructure Commission recently noted, a lack of rail capacity is at risk of holding back growth in key cities.”
Neil Middleton, Railfuture Vice-Chair said: “This is a very disappointing news, the Restoring your Railways fund is a key way for Louise Haigh, the Transport Secretary to deliver on her strategic priority ‘transforming infrastructure to work for the whole country, promoting social mobility and tackling regional inequality’. Bringing a rail station to community delivers exactly that – the ability to get to new job opportunities. I’ve noted the small print – that these projects will be reviewed, and by implication might still go ahead.
“Restoring Your Railway bids such as the Campaign to Re-open the Ivanhoe Line involve restoring passenger services to freight lines and we think these will often have a great case to proceed. We hope to hear that many bids will still happen, albeit with new funding arrangements.”
Ben Curtis from Campaign for Better Transport, said: “This is a hugely disappointing decision. Rail is one of the greenest forms of transport and crucial to the economy. Growing the rail network is vital to economic growth and reducing carbon emissions. The Restoring Your Railways Fund was key to getting much-needed lines and stations reopened, like the reopened Okehampton Station which has transformed journeys on the Dartmoor Line, creating an additional 550,000 journeys in just the first two years of operation. We urge the Government to reconsider.”
Jonathan Edwards, EMEA Market Development Leader at GHD, said: “The Labour government, has a commitment to ‘get Britain building’, supercharge transport infrastructure, and prioritise rail connectivity across northern England. This will come at a cost, and I think we are about to see that cost today. Previous pledges were light on detail and the feasibility of swiftly turning political vision into action, but what was clear was that public finances would not allow every programme and project to continue.
“By selecting which projects not to support, the Chancellor is making it clearer where Labour intends to focus government investment, and the industry will now have to react. These announcements may be necessary for a new government and a consequence of realignment based on political direction for the UK. However, infrastructure projects and the public and private sectors that deliver them most desperately need long-term certainty and commitment. Without long-term thinking and commitment, investment cannot be sought, skills cannot be developed, and projects cannot be effectively and sustainably planned or delivered.”
Andrew Baldwin, Head of Policy and Public Affairs at the Association for Project Management (APM) said: “Reports that major infrastructure and transport projects were approved with no access to funding is concerning; that project scopes have been unrealistic from the outset is even more alarming. In effect, these projects were doomed to failure from their inception. This is not how you deliver successful projects.
“As highlighted in APM’s manifesto, ‘Respond, Reinvent, Reform’, the approach to how projects are delivered in the UK must be reformed through joining up thinking across government. Processes need to be streamlined with projects fully costed and the funds in place before signing off.
“We know now that the new Government will need to cancel some projects. We are supportive of plans to conduct reviews, as it is important they are judged on the long term benefit they provide to society, and not just on short term costs, however un-funded they might be.
“And we must learn from past projects and utilise the findings from independent reviews, such as those from the National Audit Office (NAO), when assessing future project business cases to ensure they are realistic.
“The Office for Value for Money (OVM) will scrutinise projects before they are funded, but as part of that we must insure we have the right people with the right skills working on projects in government, with qualifications in project management as a core requirement for each team.
“With announced cuts to spending on outside consultants, it is now essential that the Government plugs the skills gap across departments. To do that, we need to reform our approach.
“Project reforms are needed and must be designed to create the right conditions for project success, because when projects succeed, society benefits.”
Rain Newton-Smith, CBI Chief Executive, said: “The Chancellor’s statement has given a sobering assessment of the pressures on the public purse. Despite the country’s economic recovery beginning to pick up steam, the central message remains clear: the Government cannot afford to take a backwards step in its central mission to deliver the long-term sustainable growth the country needs.
“The big choices and bold moves laid out in the King’s Speech are an important first step, now we need a relentless focus on delivering those priorities and breaking down critical barriers to investment.
“Part of that mission must include a continued focus on investment in capital and infrastructure, which not only helps crowd-in private finance but boosts productivity and growth over the longer term. Given the catalytic impact on business investment and confidence, the government cannot afford to take a short-term view on vital infrastructure projects.
“Business stands ready to be a key delivery partner with the government in its mission for growth. By working with business, the new government can deploy the capability and capacity of industry to deliver the connected transitions across net zero, the digital economy, and the future of work needed to put the economy on a pathway to sustainable growth.”
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