UK government to fund HS2 Euston link and increases pothole repair spending

UK Chancellor Rachel Reeves (Image: Lauren Hurley / No 10 Downing St)

The news came as UK’s first female Chancellor of the Exchequer, Rachel Reeves, unveiled her first Budget, setting out the government’s proposals to changes in taxation and spending.

The previous Conservative administration had scrapped planned sections of HS2, leaving it running from London to Birmingham only. And a link between Old Oak Common in west London and Euston in central London was made contingent on private investment, in a bid to save £6.5 billion.

Transport

But Reeves today announced that the government was committed to funding tunnelling work to London Euston, after transport secretary Louise Haigh had previously said it would make “absolutely no sense” to terminate the line at Old Oak Common and make passengers travelling to central London change trains.

Meanwhile, Reeves pledged a £500 million increase to road maintenance next year to deliver repairs to an additional one million potholes a year on the country’s crumbling roads network.

There was also an additional £100 million investment in cycling and walking infrastructure in 2025-26, as well as an additional £200 million for City Region Sustainable Transport Settlements, bringing local transport spending for Metro Mayors in 2025-26 to £1.3 billion.

But the Budget also cut several road transport schemes totalling £1.3bn, with the Treasury arguing “there is not a clear value for money case to invest”. Those projects to be axed are: the A5036 Princess Way, A358 Taunton to Southfields, M27 J8 Southampton, the A47 Great Yarmouth Vauxhall Roundabout and A1 Morpeth to Ellingham.

Housing

The Chancellor said the government would invest £5 billion more in its housing plan, including a £500 million boost to the Affordable Homes Programme, taking it £3.1 billion, and £3 billion worth of support and guarantees to increase the supply of homes and support small housebuilders.

The government has also pledged to provide investment in the renovation of sites across the country including Liverpool Central Docks, to deliver 2,000 new homes.

Schools

On the lagging schools construction programme, documents accompanying Reeves’ Budget speech indicated that 100 new projects were due to start in 2025, with £1.4 billion provided for the school rebuilding programme, which the government claimed was a £550 million increase on this year. The plan is to rebuild a total of 518 schools under the programme. The government also confirmed a total of £2.1 billion to improve the condition of the school estate, an increase of £300 million on 2024-25. 

Hospitals

And when it came to hospitals, the government said it would reveal details of a review of the New Hospital Programme, which aims to rebuild hospitals with crumbling reinforced autoclaved aerated concrete (RAAC), soon. The government said it wanted to put the programme on a “more sustainable and deliverable footing”, and confirmed that £1 billion has been set aside to tackle dangerous RAAC.

Employers’ costs increase

There was pain for all employers, including those in the construction sector, following Reeves’ announcement that they would shoulder the large part of a £40 billion taxation increase. Employers’ national insurance contributions will increase from 13.8% to 15% on a worker’s earnings above £175 from April. The threshold at which employers start paying the tax on each employee’s salary will be reduced from £9,100 per year to £5,000.

The minimum rates that employers are expected to pay their workers will also increase. The National Living Wage (the minimum wage for over 21s) will rise from £11.44 to £12.21 from April 2025. For 18 to 20-year-olds, the minimum wage will rise from £8.60 to £10 an hour. And apprentices will see pay jump from £6.40 to £7.55 an hour.

Reaction

Richard Risdon, managing director for UK and Europe at Mott MacDonald, welcomed news of changes to fiscal rules, which involve more regular spending reviews and a commitment to share departmental spending with the Office for Budget Responsibility (OBR).

He said, “Today’s confirmation on the changing of the fiscal rules, which could free up significant funding for major projects, shows that the government has recognised that growth is not possible without investment in infrastructure. This has the potential to create a longer-term approach to investment that is comparable with other nations in Europe.”

He also welcomed the news on HS2 and on schools construction, saying, “Hearing the government’s commitment to progress HS2 from Birmingham to Euston demonstrates their understanding of the role of connectivity in delivering economic growth and opportunities.

“Nonetheless, as I have said, the biggest challenge to realising these infrastructure investment plans is still the people. Boosting funding for the schools rebuilding programme by £1.4bn to target rebuilding 500 schools is critical to creating the right environment for our young people to thrive. However, it will take time for that young talent to come through into our sector and we urgently need government to work with us on the skills issue. I welcome the further commitment to Skills England in the Budget as we cannot build this vital infrastructure without the right people.”

Institution of Civil Engineers (ICE) interim associate director of policy, David Hawkes said, “The Chancellor’s approach to infrastructure investment as spending that delivers economic, social, and environmental value for the country, versus just being a cost, is welcome. It’s something the ICE has repeatedly called for.

“Other positive measures include modelling the Budget’s impact for 10 years instead of five. Long-term thinking is key to the country achieving its goals. It’s also good to see the government highlight the need for private investment and that it will support regional leaders to drive growth in their areas.

 “Now the question is, will the investment announced today be enough for the UK to meet its economic, social, and environmental objectives?

 “In its forthcoming 10-year infrastructure strategy, the government must present a vision for infrastructure investment, including how projects will be prioritised. Ahead of that, it must also clarify how the new National Infrastructure and Service Transformation Authority (NISTA) will improve delivery.”