Chancellor Rachel Reeves has confirmed that UK infrastructure projects including the £1.7bn A303 Stonehenge Tunnel “will not move forward” as the government looks to fill a £22bn hole that the government has discovered in its audit of public finances.
Other money saving measures announced by Reeves in her address to Parliament this afternoon include the cancellation of the programme to bring disused railways back into service, the A27 Arundel Bypass, curtailment of Boris Johnson’s New Hospital Programme and a pledge to spend less on external consultants.
Civil engineering contractors have said that the industry was “disappointed” by infrastructure cuts.
The chancellor told Parliament that the financial situation inherited by the new Labour government is far worse than anticipated and that the previous regime “covered up” the starkness of the budgetary situations for governmental departments.
The speech was made alongside the release of an internal audit of public finances by HM Treasury that shows a £22bn differential between incoming tax revenue and expected spending outlay for this year.
In her speech to Parliament, Reeves said that the previous government had £35bn of pressures on its budgets that it had not divulged publicly. She accused the former government of making “unfunded commitments after unfunded commitments” and “putting party ahead of country”.
One of the covered up funds disclosed by Reeves is a £1.6bn overspend in the Department for Transport which stems from hand outs to private rail companies to make up for losses during the pandemic.
She detailed “difficult decisions” – i.e. cuts – that she said would make up £5.5bn of savings this year and over £8bn next year.
She wiped several “unfunded” commitments off the government’s plans across sectors and departments. The infrastructure related cuts include £1bn of unfunded transport projects that were to be brought forward in the next year that will now be systematically reviewed by the transport secretary Louise Haigh.
“As part of that work, she has agreed not to move forward with projects that the previous government refused to publicly cancel despite knowing full well they were unaffordable,” Reeves stated.
These included A303 Stonehenge and the A27 Arundel Bypass. Deferral of the £320M A27 Scheme had already been revealed in the party manifesto in the lead up to the election.
The Restoring Your Railway programme cancellation will save £85M according to the chancellor, and Haigh’s review will now assess other projects individually.
The Restoring Your Railways scheme was intended to bring abandoned railways back into service, which has successfully delivered the renewed Dartmoor Line, the Levenmouth Rail Link and the Northumberland line.
Further lines that were hoping to be restored through the programme included the Ivanhoe Line, the Portishead Line and many more.
She accused the Conservative government of promising “roads that would never be built, public transport that would never arrive, hospitals that would never treat a single patient”.
When the previous government, in March 2023, “rephased” major infrastructure projects including Lower Thames Crossing and High Speed 2, the infrastructure sector blasted it as a “false economy”.
Stonehenge Tunnel
National Highways’ A303 Amesbury to Berwick Down (Stonehenge Tunnel) scheme has been a long embattled project due to the roads body’s plan to develop a major new road and tunnel under the Unesco World Heritage Site. The roads body has argued for the necessity of the scheme to reduce chronic congestion on the main road artery to the south-west.
There have been continual battles with campaigners, Unesco and the High Court over this scheme. It was initially granted a development consent order (DCO) in November 2020, against recommendations from the Planning Inspectorate. Campaigners took this to the High Court which overruled the DCO decision as it was deemed unlawful.
National Highways continued to work on the DCO for the scheme, improving its carbon credentials. A second DCO application was approved by the Department for Transport (DfT) last summer. It seemed the scheme, which is still officially listed as £1.7bn but hasn’t had its cost updated for some years, was set to start construction this year. However, it had a final legal hurdle to overcome, which was heard earlier this month.
Now all the effort – including £166M spent to date on developing the two DCO applications, appointing contractors and fending off legal appeals – has come to naught.
Reaction to cuts
Civil engineering contractors have said that the industry was “disappointed” by infrastructure cuts.
Civil Engineering Contractors Association (CECA) director of operations Marie-Claude Hemming said: “The Chancellor’s announcements are disappointing but will not come as a shock to industry, not least because a shortfall in funding for public projects has been evident for some time.
“The Labour Party rightly identified economic growth as its core mission, but as ever cancelling or pausing projects that will likely need to be delivered at a later date – and at higher cost – is putting off the potential for schemes to drive growth, create jobs and meet the needs of businesses and communities.
“As the UK’s public finances are clearly in a weakened state it is all the more important that government works with industry to identify how to move schemes towards delivery, rather than mothballing these crucial sources of growth.
“What’s more, it is frustrating that firms are expected to bear the costs of delay without regard to their forward planning in terms of workload and skills.
“Our industry thrives on certainty of investment, which is what enables CECA members to plan and deliver world-class infrastructure, upskill the workforce to meet projected need, and to ensure sustainable and stable business models.
“That’s why we’re looking forward to working with our members and the UK Government to review schemes that have been put on hiatus and see how they might be brought back online in due course, and to identify other projects that can be unlocked in all parts of the UK.
“Whether unlocking this investment – and its integration with the new housing Britain so urgently needs – will require new funding models is an open question that must be explored.
“Moreover the Chancellor’s announcement that she will set a multi-year spending review to provide certainty over three year periods will be welcomed by industry as a statement of intent to deliver economic stability in the longer term.
“Yet we urge the Government not to repeat the mistakes of previous administrations in taking an axe to capital projects without regard to future growth, and to work with industry to identify opportunities for investment that will not only deliver value for money, but will form the backbone of a net zero UK economy for years to come.”
Institution of Civil Engineers interim associate director of policy David Hawkes said: “The Institution of Civil Engineers has long been calling for more certainty, clarity, and long-term strategic plans for infrastructure.
“The announcements made today by Chancellor Rachel Reeves that the government will undertake a multi-year spending review and commit to reviewing spending every two years, are welcome. Whatever the level of investment and priorities that the government decides on, infrastructure professionals, stakeholders, and the public need clarity and commitment to deliver.
“Now, it’s essential that the government make decisions about the infrastructure that should be invested in, in line with the priorities outlined by the National Infrastructure Commission in its second National Infrastructure Assessment.
“The government must quickly produce a National Infrastructure Strategy to lay out a vision and framework for delivering on its missions to kickstart economic growth and reach net-zero.”
Railway Industry Association chief executive Darren Caplan said: “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.”
AA CEO Jakob Pfaudler said: “Efficient transport infrastructure covering both road and rail is essential to the economic viability of the country. Congestion wastes billions of pounds each year and can fuel inflation as the bulk of goods and passenger journeys are made by road. Government figures show 80% of freight travels by road and 86% of all passenger kilometres travelled used cars, vans and taxis.
“We understand the Government needs to make savings and we would prefer to see this come from large infrastructure projects such as the A303 Stonehenge Tunnel being delayed rather than from the commitment to fund and fix the roads to remove the scourge of potholes.
“In the AA Motorists’ Manifesto, we indicated that our members are not in favour of massive road building schemes but believe more can and should be done to improve the safety of the current road and motorway network.
“By far the most important issue for 96% of AA members, in terms of transport policy, is the state of the roads, so while we understand that some longer-term projects will be delayed, we still need the commitment from Government for more long-term, ring-fenced funding for more permanent repairs of our roads.”
GHD EMEA market development leader Jonathan Edwards 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.”
TSSA is an independent trade union for the transport and travel industries and its general secretary Maryam Eslamdoust said: “Rachel Reeves has some difficult decisions to make, thanks to the last fourteen years of Tory chaos. However, she cannot allow this to deter her from honouring Labour’s commitment to fix our railways for the benefit of passengers and transport workers.
“Infrastructure projects such as HS2 and the electrification of the railways offer longer term tangible economic and environmental benefits for the whole country.
“Rachel Reeves must avoid the mistakes of the previous government which only ever thought short-term. Long-term investment in the railways will deliver long-term benefits for the whole economy. Funding for rail infrastructure should not be cut, or we’ll all end up paying the price.”
Not all parties are displeased with today’s announcement about the Stonehenge tunnel not moving forward.
The Stonehenge Alliance campaign group chair John Adams said: “We welcome Rachel Reeves’ recognition that the country cannot afford this extravagant road scheme when schools are falling down and the NHS is in dire straits. However, she should have gone further. The road would be built at a loss and is a bad investment for UK plc. It should have been scrapped altogether.”
Historian and Stonehenge Alliance president Tom Holland said: “This monstrous white elephant should have been put out of its misery long ago. Until the Government officially terminates the project, it will continue to leech taxpayer’s money. A delay is not good enough. Cancel it now!”
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