Tech and HS2 spending risks hitting the buffers as Hunt swings the axe
Field
Liz Truss’s departure has done little to calm the nerves within Whitehall. Staffers spent much of the preceding week nervously eyeing budgets as Jeremy Hunt sought to balance the books.
Officials know that whoever occupies Downing Street in the next few days, one inescapable truth persists: the “eye-watering” spending cuts proposed by the Chancellor remain firmly in the Treasury’s cross hairs. A £40bn black hole will need to be funded and Hunt has demanded Whitehall departments come up with plans to cut spending by as much as 15pc.
Among the lowest of all low-hanging fruits is the UK’s £40bn R&D budget, the bedrock of Dominic Cummings’ dream to make post-Brexit Britain the global capital of science and tech. Shortly after his appointment, Hunt said he cared “very much” about research spending but did not commit to protecting it in its entirety.
“Jeremy went out of his way to say he absolutely ‘gets’ and supports science and technology,” says George Freeman, the former science minister. “He’s also had to be very clear that there are some very tough decisions to be made.
“I am very worried that the Treasury may conclude that political pressure means there is very little room to find savings on pensions, petrol, welfare or defence, and there’s a real risk of Treasury ministers saying ‘we’ve met the 2.4pc GDP target’ and announce a cut of £10bn to £12bn to the Horizon R&D budget.”
Hetan Shah, chief executive of the British Academy, shares Freeman’s fears: “Our biggest concern is the new funding that will allow us to either associate with the Horizon Europe programme or develop a home grown alternative.”
Horizon Europe is the EU’s £80bn flagship research programme. Last year, Brussels blocked the UK from the scheme, but ministers said that funds already pledged by the project would be protected. Worries about innovation funding were heightened after the Office for National Statistics revealed that the UK may have hit its target of spending 2.4pc of GDP on research five years early. A report in September said the UK had underestimated national R&D spending by £15bn.
“R&D could be on the cards,” says one lobbyist. “We’ve technically already hit the 2.4pc GDP target.”
A second lobbying source says they believe the £800m Advanced Research and Invention Agency (Aria), which was dreamt up by Cummings as a way to cement the UK’s position as a scientific superpower, will be spared. Jacob Rees-Mogg, the Business Secretary, is said to personally favour the effort. “It is right up his street,” the source says.
Projects at the Department for Transport, which with an annual budget of £30bn has responsibility for the largest capital spend in government, are also at risk.
One target could be HS2 rail, whose budget had topped £98bn. Treasury mandarins have long been sceptical about the project, which opponents underline will cost taxpayers “£100m a week for the next 20 years”.
Conservative peer Lord Wolfson, the chief executive of Next, warned Truss last month that ministers risked falling into a “gambler’s trap” by ploughing ahead with the scheme.
Protests appear to have so far landed on deaf ears. The Sunday Telegraph has learnt that the Government made no requests from the HS2 board to reduce its budget.
Meanwhile, Hunt told the influential 1922 committee of Conservative backbenchers on Wednesday evening that he was fully committed to the train line, according to Bloomberg. That, however, could soon change.
The £2bn of funding set aside for Active Travel England – a quango led by Olympian Chris Boardman to get people cycling and walking – also looks vulnerable. Boris Johnson’s transport adviser Andrew Gilligan voiced concerns about the future of the body. “I really do hope it survives the arrival of a new government,” he said at the start of October.
Grant Shapps, the former transport secretary who was initially banished to the backbenches following Truss’s appointment before returning last week as Home Secretary, is understood to have appealed to his successor, Anne-Marie Trevelyan, to preserve Active Travel’s budget.
Trevelyan has, however, already signalled Shapps’ plans to create Great British Railways could be scrapped. She announced on Wednesday that the rollout of the new public body, designed to bring the operation of tracks and trains under one organisation, would be delayed as other government reforms were prioritised.
Meanwhile, Treasury officials are said to be calling for a cap on spending on the so-called “investment zones” announced as part of the mini-Budget. These zones were supposed to create low-tax, low-regulation hubs in towns and cities, but officials are concerned they are essentially an open-ended cheque with 40 sites announced, according to the Financial Times.
Banks are also expected to be forced to cough up more in tax. The 8pc bank surcharge on corporation tax is expected to remain in place, even with corporation tax rising to 25pc, giving banks an effective tax rate of 33pc.
After the free-spending era of Johnson and collapse of Trussonomics, it is clear no project is safe.
Chancellor is preparing ‘eye-watering’ cuts to state budgets, write Matthew and Oliver Gill