Reeves’ Budget gives green light to HS2-Euston tunnel

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Rachel Reeves pledged to speed up private investment in the redevelopment of Euston station as she confirmed the government would pay for the HS2 rail line to run into central London.

There had been uncertainty over whether the link to Birmingham would run only as far as Old Oak Common station in London’s north west suburbs, after the previous Conservative halved the project last year amid spiralling costs.

Two giant tunnel boring machines are in place at Old Oak Common waiting to begin digging towards central London, and industry executives had warned passengers would be put off using a line which did not terminate in central London.

“We are committing the funding required to begin tunnelling work to London Euston station,” Reeves said in the Budget on Wednesday. “This will catalyse private investment into the local area, delivering jobs and growth,” the chancellor added.

Reeves’ comments are the clearest indications yet that Labour will look to the private sector to help pay to develop the area around a rebuilt Euston station.

The previous government had said Euston represented a redevelopment opportunity akin to the privately financed revamp of Battersea Power Station.

But infrastructure experts said any investment would always have been contingent on the government paying for the tunnels into Euston.

“The chancellor’s commitment to public investment in new infrastructure is to be welcomed. However, it will be impossible to get the scale of investment needed to get Britain building again without private financing,” said John Hutton, the former cabinet minister who now chairs the Association of Infrastructure Investors in Public Private Partnerships.

Overall, the Budget committed the government to invest over £35bn in economic infrastructure in 2025-26.

“It is critical that this money is now spent wisely and supports infrastructure projects that will drive growth, decarbonise the economy and improve its resilience,” said Sir John Armitt, chair of the National Infrastructure Commission.

The government also committed to a number of other major rail projects already under way or slated, including the upgrade of the Transpennine route between Manchester and York and the east-west link between Oxford and Cambridge.

It promised to make progress on a major east-west rail link across the north of England, which has been mooted for nearly a decade, but did not reference any timescales or spending.

The Labour mayors of Liverpool and Greater Manchester are hoping for at least £17bn to construct an initial stretch of the link between their cities, a figure committed to by the last government. However ministers said only that further details would be set out “in due course”.

Although metro mayors had been nervous that their local transport settlements would be at risk in the Budget, in the event they received £1.3bn, a £200mn uplift.

Transport for London received £485mn for investment in projects such as the new Piccadilly line underground trains, but did not secure the long-term funding agreement that London mayor Sadiq Khan had been calling for.

The government cancelled five “unfunded and unaffordable” road schemes, including the A1 Morpeth to Ellingham and work on the M27. 

Reeves confirmed funding for other industrial projects, including £975mn for the aerospace sector, over £2bn to support electric vehicle manufacturing and up to £520mn for a new Life Sciences Innovative Manufacturing Fund.

The Treasury also announced a further £2.7bn for the development of the planned Sizewell C nuclear power plant. 

The government and nuclear developer EDF are in the process of trying to raise funds from external investors to build the project in Suffolk, England. But the final investment decision is running later than planned — the last Conservative government had hoped to sign it off by July this year.