Chancellor Rachel Reeves confirmed that the government will fund the HS2 tunnels from west London to Euston in central London, among other transport and energy spending committments, during the Autumn Budget today (30 October).
There was no such commitment for the HS2 Euston station itself, but the Budget document says it is hoped that paying for the 7.2km twin-bored tunnel will “catalyse private investment into the station and local area”.
“Investment at Euston will be further supported through the appointment of Bek Seeley to chair the Euston Housing Delivery Group, to drive forward an ambitious housing and regeneration initiative for the local area”, it adds.
The Budget also commits to “maintaining momentum on Northern Powerhouse Rail by progressing planning and design works to support future delivery”, with further details to come “in due course”.
The Department for Transport has been afforded £30bn for 2025-26.
From this, Reeves provided positive outlooks for other rail schemes during the Autumn budget. She said that the Transpennine Route Upgrade would be delivered in full, electrifying the line all the way York and Manchester, via Leeds and Huddersfield.
Commitment to delivering East West Rail, the new rail line between Oxford and Cambridge, was pronounced by Reeves in her speech. Following the successful test run of the first train, EWR services will run between Oxford and Milton Keynes next year. The Budget adds: “The acceleration of the Marston Vale Line will ensure these services extend to Bedford from 2030. To deliver the next stages of EWR, the government is launching a consultation.”
She also said that £1.3bn would be provided for urban transport schemes through City Region Sustainable Transport Settlements. This will go towards projects such as renewing the Sheffield Suprtram, building the West Yorkshire Mass transit between Leeds and Bradford and constructing the new Liverpool Baltic railway station.
Transport for London will be the recipient of £485M from the DfT budget to support its capital investments.
On local roads, a near-50% increase in funding will be provided in 2024-25 with an additional £500M. This will contribute towards fixing the “crisis” on local roads that NCE has heard about from stakeholders, contractors and local authorities.
The government has thrown its weight behind dualling sections of the A47, where work has begun to improve connectivity between East Anglia and the North, and on the A57, where work will start in the coming weeks to improve journey times between Sheffield and Greater Manchester.
Roads investment in 2025-26 will be funded through an interim roads settlement, and the third Road Investment Strategy (RIS3) will be set out in the next phase of the Spending Review. The government will also move toward feasibility work on improvements to the A75 by providing up to £5M in 2025-26.
However, there have been some cancellations of road schemes. The Budget states: After a review the transport secretary has decided not to progress with the following unfunded and unaffordable road schemes on the strategic road network: “A5036 Princess Way, A358 Taunton to Southfields, M27 J8 Southampton, the A47 Great Yarmouth Vauxhall Roundabout and A1 Morpeth to Ellingham.”
When it comes to energy, Reeves emphasised that £70bn of capitalisation through the National Wealth Fund over the course of the parliament to “invest in the industries of the future, from gigafactories to ports to green hydrogen”.
There is also a settlement of £14.1bn for the Department for Energy Security and Net Zero (DESNZ) in 2025-26.
A particular investment of note is that the UK’s clean energy sector will receive £3.9bn funding in 2025-26 for Carbon Capture, Usage and Storage Track-1 projects to decarbonise industry and contracts with 11 green hydrogen producers.
The Budget document also revealed that a further £2.7bn of government funding will be given towards the Sizewell C nuclear power plant in Suffolk.
The government will provide support for the first round of electrolytic hydrogen production contracts, harnessing renewable energy to decarbonise industry across the UK. The settlement for DESNZ will provide £134M to support the delivery of port infrastructure to facilitate floating offshore wind.
The government’s portfolio of new financial investments will be delivered by expert bodies like the National Wealth Fund. Additionally, role of institutions will be “strengthened” when it to improve infrastructure delivery and capital budgets will be set for five years, with two-year extensions at every spending review, to improve certainty.
There will also be “greater transparency for capital spending, with robust annual reporting of financial investments based on accounts audited by the National Audit Office and made available to the OBR at every forecast”.
Wider funding commitments
Reeves said she has had to take some “difficult decisions on tax”. While personal National Insurance and VAT will not increase, £40bn will be realised in other tax increases such as increased employer contributions to National Insurance. These moves will “fund our public services and restore economic stability”, Reeves said.
She also said that the government will ensure that public funds go further by setting a 2% productivity, efficiency and savings target for all government Departments, which must be met next year. It will do this “by using technology more efficiently and joining up services across government”.
To start meeting the government’s target of building 1.5M new homes, over £5bn is being provided.
“Next year, we will increase the affordable homes programme to £3.1bn, delivering thousands of new homes,” Reeves said. “We will provide £3bn worth of support in guarantees to boost the supply of homes and support our small house builders.
“And we will provide investment to renovate sites across our country, including Liverpool Central Docks where we will deliver 2,000 new homes, and funding to help Cambridge realise its full growth potential.
“Alongside this investment we will put the right policies in place to to increase the supply of affordable housing.”
The chancellor also said that the government will “make progress” on accelerating £1bn of funding to remove dangerous cladding from buildings, following the Grenfell Inquiry.
During her address, Reeves promised “a significant real terms funding increase for local governmnets next year, including £1.3bn of additional grant funding to deliver essential services, with at least £600M grant-in-aid funding for social care and £230M to tackle homelessness and rough sleeping”.
She further revealed that Greater Manchester and the West Midlands will be the first authorities to receive integrated settlements from next year, “giving mayors meaningful control of the funding for their local areas and to support our high streets”.
Reeves said the Budget provides the devolved governments of Wales, Scotland and Northern Ireland with the “largest real terms funding settlements since devolution”.
Scotland will receive and additional £3.4bn, Wales will receive £1.7bn and Northern Ireland will receive £1.5bn in 2025-26.
Reeves confirmed mutli-year funding commitments to sectors with the biggest growth potential. This includes nearly £1bn for aerospace, over £2bn for automotives and up to £520M for a new life sciences innovative manufacturing fund.
More than £20bn worth of funding will be provided for investment in research, including at least £6.1bn to “protect core research funding for areas like engineering, biotechnology and medical science”. The innovation accelerators programme in Glasgow, Manchester and the West Midlands will be extended with over £500M in funding over the next year.
Financial nitty gritty
During her announcement to Parliament, Reeves was keen to emphasise that the Labour government will drive growth, “reverse the trend of capital underfunding” and that “the only way to drive economic growth is invest, invest, invest”.
Reeves made sure to stick the knife into the previous regime for handing over a £22bn funding deficit and has published a “line by line” break down of the “black hole”. She said that the Office for Budget Responsibility (OBR) accused the previous government of the “height of irresponsibility” for hiding the extent of the funding issues. Reeves claimed the OBR had said the Tories’ Spring Budget would have been “materially different” if it had known the truth of the funding issues.
The chancellor confirmed that the 10 recommendations from the OBR’s review, which has been published alongside Budget documents, will be implemented “in full”.
Plans for departmental spending beyond the current year, which Reeves said did not exist under the previous government, will be implemented. She said the Budget “marks and end to short termism”, with the OBR publishing five-year forecasts and, for the first time, detailed assessment of the growth impacts of the government’s policies over the next decade.
There is also a new Charter for Budget Responsibility, which has been published today and “will become a permanent feature of our framework”.
Reeves said that the OBR has confirmed that this Budget will “permanently increase the supply capacity of the economy, boosting long-term growth with every Budget” and added “every Budget that I deliver will be focused on our mission to grow the economy”.
To underpin that mission, the chancellor outlined “seven key pillars” of the government’s growth strategy.
First is to restore economic stability and second is “increasing investment and building new infrastructure” as this is “vital”. Alongside capitalising the National Wealth Fund, planning rules are being transformed to “get Britain building again”.
Reeves also said her remaining five pillars are working with regions to develop local growth plans, launching Skills England to improve employment prospects, launching the modern Industrial Strategy to expand opportunities for SMEs to grow, driving innovation by providing record funding for research and development and, finally, maximising growth benefits of the “clean energy mission” by securing key investments in CCS to “create jobs in our industrial heartlands”.
As confirmed last week, Reeves announced changes to government debt rules were changed, as expected, with Reeves announcing the government’s “stability rule” and “investment rule”.
“The stability rule means that we will bring the current budget into balance so that we do not borrow to fund day to day spending,” she explained. “We will meet this rule in 2029-30, until that becomes the third year of the forecast. From then, on we will balance the current budget in the third year of ever Budget held annually each autumn.
“That will provide a tougher constraint on day-to-day spending, so that difficult decision cannot be constantly delayed or deferred.”
She cited the OBR as saying that the Budget will be in deficit by 26.2bn in 2025-26 and in deficit by £5.2bn in 2026-27. Then, it will move into a surplus of £10.9bn in 2027-28, £9.3bn in 2028-29 and £9.9bn in 2029-30.
This means the government will meet its stability rule “two years early”, according to Reeves.
She further commented on public sector borrowing, saying that the OBR has today confirmed that borrowing in this financial year is now £127bn, “reflecting the inheritance left by [the Conservative Party]”.
She said that actions taken by government will see borrowing fall from 4.5% of GDP, where it is today, to 2.1% of GDP by the end of the forecast. There will be a consistent decrease in public sector net borrowing each year of the Parliament, from £105.6bn in 2025-26 to £70.6bn in 2029-30.
On the change to investment rules, Reeves said: “We will target debt falling as a share of the economy. Debt will be defined as public sector net financial liabilities – or net financial debt for short.”
She continued: “Net financial debt recognises that government investment delivers returns for taxpayers by counting not just the liabilities on a government’s balance sheet, but the financial assets too. This means that we count the benefits of that investment, not just the costs, and we free up our institutions to invest, just as they do in Germany, France and Japan.
“Just like our stability rule, our investment rule will apply in 2029-30, until that becomes the third year of the forecast. From that point onwards, net financial debt will fall in the third year of every forecast.”
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