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7 March 2019

Labour could scrap infrastructure spending commitments in draft budget exercise

John McDonnell is reviewing how he would use the party's £250bn National Transformation Fund in office.

By Patrick Maguire

John McDonnell could scrap infrastructure investment commitments from the Labour manifesto as the party reviews its capital spending plans in preparation for its first budget, the New Statesman has learned. 

The Shadow Chancellor and his team are to take a “year zero” approach to the National Transformation Fund, Labour’s £250bn infrastructure investment programme – which would pay for HS2 and other large-scale projects – as the party reviews and updates the costings of its existing policies and drafts a budget ahead of an anticipated snap election. 

Shadow ministerial teams have been told to collate their capital spending plans ahead of meeting with McDonnell’s team, and have been warned that there is no default assumption that capital commitments from Labour’s 2017 manifesto – which, as the NS revealed last month, is also being re-costed – will be retained.

Instead, McDonnell and his team will reassess bids for capital spending against a set of criteria on “economic justice, people and planet” with a view to maximising the “transformative potential” of the National Transformation Fund. 

Some shadow cabinet sources privately complain the extra borrowing capacity the fund provides for has been treated as a chequebook for any capital investments by other departments, regardless of their capacity to transform the country.

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Labour’s 2017 manifesto said the fund would take advantage of “near-record low interest rates” to “deliver the investment that every part of Britain needs to meet its potential, overcoming years of neglect”. 

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Capital spending commitments included completing HS2 and extending it to the North of England, a “Crossrail for the North” between Manchester and Newcastle, and a new rail line between Brighton and London, as well as a massive state-funded housebuilding programme. 

Jeremy Corbyn has since pledged that a Labour government would set aside £12.8bn to cover the cost of a nationwide home insulation programme in its first term – part of a drive to reduce carbon emissions by 60 per cent over 12 years, and create 400,000 new skilled jobs.

While there has been no suggestion that specific policies are certain to be axed and many 2017 capital commitments will remain, McDonnell’s review is likely to find that some are irrelevant, bad value for money or incompatible with Labour’s commitments on the environment. 

As with the ongoing review of the party’s “grey book” – the 8-page companion piece to the manifesto that set out how Labour’s £48.6bn of new spending commitments would be funded in practice – the process could spark a turf war for funding within the shadow cabinet.