All capital spending is under review before Jeremy Hunt’s autumn statement with a view to making billions in savings on infrastructure projects, with a senior cabinet minister hinting a key northern rail line could be scaled back.
No 10 denied reports on Friday that plans for the new Sizewell C nuclear power station could be scrapped, but big energy projects along with every other major infrastructure plan such as HS2 and Northern Powerhouse Rail will have costs reviewed.
The biggest ticket item under threat appears to be the northern rail scheme, which was a manifesto promise in the 2019 election. Grant Shapps told the BBC: “The line itself can deliver a 33-minute journey from Manchester to Leeds, quadruple nearly the capacity of that line, and do so without having to wait an extra 20 years beyond the delivery of what the upgrade can do.
“There wasn’t really much point in going and blasting new tunnels through the Pennines. It’s not true to say we’re not delivering on what we said we would do on levelling up the north.”
Hunt is looking at cuts to the £100bn-plus capital spending budget as he seeks to fill an approximately £50bn black hole in the public finances at his fiscal event on 17 November. “We are looking at all capital spending as part of the autumn statement,” one Whitehall source said.
Asked last week whether HS2, which is over budget, could also be subject to cuts, Michael Gove, the levelling up secretary, said: “I am sure everything will be reviewed.”
The chancellor is also examining the case for a rise in capital gains and dividend tax, including the headline rate and allowances, as well as freezing the pension lifetime allowance for two years, which was first reported by the Telegraph.
Nevertheless, the Institute for Government has said that approaches such as “cutting capital spending, preventative services or lower-profile services – could be counterproductive, reducing productivity or increasing pressure on other services”, noting that maintenance backlog costs for schools, the NHS, courts and prisons already stand at £23.7bn.
In an interview with the Times, Rishi Sunak warned the public that government “cannot do everything”. The prime minister added: “You have to make sure that as you’re doing things, you’re doing it in a way that’s fair and being honest with people that, of course, no government can fix every problem. Life is not that simple.”
The approach of cutting back on capital spending and cancelling tax cuts is the opposite to that of Liz Truss’s government, which was focused on growth at all costs. The Tory MP John Redwood, one of the backers of her economic programme, said on Friday: “I read the government is thinking of cutting investment. It should not cut projects to produce more energy as we are very short of domestic supply. It should cut the massively expensive HS2, where we have plenty of rail capacity for post-Covid demand.”
Labour cautioned the government against reneging on the party’s promises to the north of England when it comes to spending on rail projects.
Louise Haigh, the shadow transport secretary, accused the government of having “crashed the economy” and then making the north pay for the fallout. “A lost decade of broken Tory promises has left the north with second-rate infrastructure, and rail services in crisis, holding the economy back,” she said.
“Rishi Sunak told voters he would deliver Northern Powerhouse Rail, before abandoning it at the first opportunity. This Conservative government have no mandate, no platform and no plan – they crashed the economy, and now they want northern communities to pay the price.”
Ed Miliband, the shadow climate secretary, also told the government it would be “shortsighted” not to go ahead with Sizewell C, although Downing Street said this was not in doubt.
A senior Treasury source had told the BBC: “We are reviewing every major project – including Sizewell C.”
But No 10 and others later said it was not being scrapped or delayed. A government spokesperson said it was “seeking to approve at least one large-scale nuclear project in the next few years”.
