Treasury aims to ditch roads cash for tax cuts

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The Independent Online

Leaked documents from the Ministry of Transport last night showed that the Treasury is seeking to slash the road programme by pounds 200m, putting at risk major projects to make room for tax cuts in the Budget.

Transport ministers are warning the Chancellor that the Government could lose popularity by opting for tax cuts before the road plans, including bypasses which many Tory constituencies are demanding.

One of the key schemes at risk, it emerged last night, is the Newbury by-pass, which was given the go-ahead by Brian Mawhinney before he was moved in the Cabinet reshuffle from Secretary of State for Transport to Conservative Party chairman.

"There is going to be blood on the floor if this goes ahead. We are going to take a big hit on the capital programme. But we are not the only ones. Defence and health are also facing cuts in capital spending," said one ministerial source.

The documents, said to have been found blowing around in a London street, comprised a lengthy memorandum from a senior civil servant warning it would be difficult and unpopular if the cuts went ahead. Spending on new roads could be halted next year, said the memo, and maintenance could be postponed. A senior official at the Highways Agency told transport department officials the cuts would mean "the viability of an efficient network becomes increasingly untenable".

He added it would be unpopular with a wide range of interest groups including MPs. It would mean the demise of a large part of the engineering consultancy industry. Sir George Young, the Secretary of State for Transport, is going through the procedure of trying to resist the Treasury knife going too deep, but he has agreed with Cabinet colleagues to restrain spending.

The Chancellor warned the Cabinet at its last meeting before the summer recess that ministers hopes of cutting taxes would "turn to dust" unless they agreed to reduce their spending bids in the summer review headed by William Waldegrave, the Chief Secretary to the Treasury.

He made it clear that capital programmes, including roads, would be one of the key areas for savings. The current roads budget comprises pounds 5bn over three years. Transport spending has already been cut by pounds 1.1bn this year and is due to be cut by a further pounds 860m for the year 1976/7. That means that the total cuts next year could amount to another pounds 1bn.

Mr Clarke said no capital schemes should be approved unless ministers first considered the option of funding them through private investment. None of the by-pass schemes have attracted such finance.

Slashing road building will be hailed as a victory for the green lobby, which has opposed many road schemes, including the Newbury route. But many Tory supporters have been keenly awaiting the by-passes to take heavy traffic from their towns.

Whitehall sources said ministers had been forced to consider a range of cuts up to 10 per cent in the road programme. One source said: "It is pretty clear the Treasury is determined to cut capital programmes. That means postponing or scrapping building schemes for transport and defence and maybe hospitals. They have to be cut to balance the cost of social security and education. It means we are looking at Draconian savings to transport. That has to be the roads programme because you cannot cut the railways, or London Transport - that is mostly revenue spending, and you can't cut that. Some very popular schemes are going to be cut. Ken Clarke is going to have to decide whether it's better to cut taxes or cut a scheme like the Newbury bypass, which could be our only chance to save the seat of Newbury next time."