Rachel Reeves has said £15.6bn will go towards regional transport projects in next week’s spending review, but there are other “good things” she’s had to say no to.
The chancellor said the cash marks the “biggest ever investment” by a British government in transport links outside of London and the southeast, with mayors to receive the funding directly to be spent on train stations, trams, and bus routes.
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Ms Reeves was speaking in Manchester ahead of laying out her departmental spending plans for future years on 11 June, a process known as a spending review.
She said that tax hikes and changes to the way borrowing for investment is accounted for meant £300bn extra is available over the coming years.
But she warned: “Does that mean that we’ll be able to do everything that we want to do? No…there are good things that I’ve had to say no to.”
She insisted this was not because of her self-imposed “fiscal rules” but because “of 14 years of Conservative maltreatment of our public services, our public realm, and of our economy”.
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The fiscal rules, which include a promise to match day-to-day spending with revenues rather than borrowing, meant Ms Reeves had to make cuts in her spring statement to balance the books, and there is speculation more are to come.
The chancellor did not say what departments could face a squeeze next week, but insisted spending on police will increase following concerns from police chiefs about their budgets.
She said transport was being prioritised because a lack of infrastructure outside of London puts England’s other cities “at a disadvantage compared to their European counterparts”, contributing to the UK’s stagnant growth.
The settlements include:
• £2.5bn for Greater Manchester for projects including new tram stops in Bury, Manchester and Oldham;
• £2.4bn for the West Midlands for an extension of the metro from Birmingham city centre to the new sports quarter;
• £2.1bn to start building West Yorkshire Mass Transit by 2028;
• £2bn for the East Midlands to design a new mass transit system between Derby and Nottingham;
• £1.8bn for the North East for a metro extension linking Newcastle and Sunderland via Washington;
• 1.6bn for the Liverpool City Region for new bus routes, including to the airport and football stadiums;
• £1.5bn for South Yorkshire including £530m to renew the region’s trams;
• £1bn for Tees Valley, including £60m for the Platform 3 extension at Middlesbrough station;
• £800m for the West of England, including £200m for mass transit links between Bristol, Bath, South Gloucestershire and north Somerset;
Some of the projects formed part of Rishi Sunak’s “Network North” plan, intended to compensate for the decision to scrap the HS2 line north of Birmingham.
Labour put a pause on the plans when they entered government to review the funds, so it was not clear until now if the money would be made available.
Shadow Treasury minister Gareth Davies accused the chancellor of “copying and pasting” announcements made by the Tories “to salvage her failing economic plan” following “U-turn after U-turn”.
He added: “The country is not falling for their lies anymore. Britain deserves better.”
Winter fuel changes to come this year
In a surprise announcement during questions from the media, Ms Reeves also said that changes to the winter fuel payment will be made this year after a backlash to the cuts made within a month of entering office last year.
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She denied she would be forced into another large tax raid to fund her plans, as the government is also seeking to increase defence spending.
“We made decisions in the budget last year to increase taxes by £40bn. We have absolutely no intention of repeating a budget on that scale again,” she said.
Asked if deputy prime minister Angela Rayner is fully behind her plans, following reports she has been pushing for wealth taxes, Ms Reeves said that it is “perfectly normal for government ministers” to come up with their ideas.
“Angela Rayner had ideas around, I think around £3bn of tax changes, some of them in housing, which is an area that she covers. But we did raise taxes by £40bn in the budget last year, much more than £3bn.”
The Daily Telegraph reported last month that Ms Rayner, who is also the housing secretary, proposed a higher corporation tax level for the banks and reinstating the pensioners’ lifetime allowance.
She is said to be exasperated at having to defend the government’s spending cuts amid a slump in the polls and a drumming at last month’s local elections, fuelled by a rise in Reform UK’s popularity.
Ms Reeves took aim at her critics on Wednesday, accusing Reform leader Nigel Farage of being “itching to repeat” the “fantasy economics” of Liz Truss, whose 2022 mini-budget sent markets into turmoil and upended her time as prime minister.
“I will never take those risks. Labour will never take those risks,” she said.
