Government to review New Hospital Programme in full as Reeves hunts for savings

The New Hospital Programme will be completely reviewed and a number of transport commitments scrapped, the chancellor has announced.

Addressing MPs this afternoon, Rachel Reeves said the true state of the UK’s finances had been “covered up” by the Conservative Party in government, who she accused of putting “party before country”.

Presenting the results of a detailed audit by the Treasury, she said an additional £35bn of budgetary pressure on government spending plans had been hidden by the previous government, resulting in a projected overspend of £22bn.

This gap, Reeves claimed, would result in a 25% increase in the budget deficit this year if left unaddressed.

Prior to the announcement, former Tory chancellor Jeremy Hunt had accused Reeves of being “beyond disingenuous” in claiming surprise at the state of the finances, pointing out that the Office for Budget Responsibility publishes its own assessment twice a year.

But Reeves claimed that there were specific project overspends that the OBR was not aware of in March, including £6.4bn on the asylum and removals system.

She set out a number of planned policies and investments that the government would axe in order to find savings, which will amount to £5.5 billion this year, and over £8 billion next year.

These include a review of transport commitments by secretary of state Louise Haigh, in advance of which a number of specific projects will be cancelled, including the A303 Stonehenge Tunnel and A27 bypass in West Sussex and the £85m Restore Our Rail programme.

The New Hospital Programme will also be subject to a complete review, with a “thorough, realistic and costed timetable for delivery”.

Just days ago, the health secretary accused the previous government of handing over a “fictional” timeline for the programme.

Rachel Reeves revealed that the next budget would take place on 30 October and include a full economic and fiscal forecast from the OBR.

She said there would be “difficult decisions” across spending, welfare and tax, but promised not to increase rates of NI, income tax or VAT.

Reeves said the budget would also include a multi-year spending review which will set departmental budgets for at least three years.

Reacting to the announcement, Marie-Claude Hemming, director of operations for the Civil Engineering Contractors Association, said the chancellor’s decisions were “disappointing” but would “not come as a shock” to an industry which has been aware of funding shortfalls 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,” she said.

She urged government to work with industry to identify ways to move schemes towards delivery and suggesting exploration of “new funding models”.

“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,” Hemming noted.

“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.”