The government will prioritise and increase investment in major projects at this month’s Budget, Chancellor Rachel Reeves has said.
In addition, she announced a nearly £22bn investment in two major new carbon capture schemes over 25 years.
She criticised plans she inherited from the previous government to cut investment as a share of the economy, saying she would not repeat “those mistakes”.
But the Conservatives said it was thanks to them that funding had already been announced for the carbon capture projects.
After weeks of hints about the chancellor changing her self-imposed borrowing rules to allow significantly more investment in major projects, Ms Reeves has given her strongest indication yet of a significant increase to levels of state investment.
The green schemes are two new carbon capture and storage projects on Merseyside and Teesside.
The government said they will create and support thousands of jobs, draw in private investment and help the UK meet its climate goals.
Funding of up to £21.7bn over 25 years will subsidise three projects once they start capturing carbon from hydrogen, gas, and energy from waste.
Oil and gas giants BP and Equinor will be among the firms providing private sector funding for the projects, she said, adding that other countries “would love to get this sort of investment”.
But Greenpeace UK’s policy director Doug Parr said more than £21bn “is a lot of money to spend on something that is going to extend the life of planet-heating oil and gas production”.
The chancellor said contracts such as this were never signed by the previous government because it did not prioritise capital investment – which is money spent on items such as buildings, equipment, and IT.
She directly criticised the fact that the UK’s capital budget is due to fall from 2.5% of the size of the economy to 1.6%.
However, Conservative shadow energy secretary Claire Coutinho said “it’s thanks to the Conservatives that funding was already announced for these projects in the spring of 2023”.
She added that the announcement “will not make up for the mass deindustrialisation pathway that Ed Miliband’s costly net zero and energy policies are leading us to, with the devastating impact of his zealotry on jobs already seen in steel-making, refineries and in the North Sea”.
But Ms Reeves said the previous government “were cutting back on investment at exactly the time we needed to be increasing investment in our economy”.
“I’m not going to make those mistakes,” she said.
Her words are the clearest confirmation of a shift in approach to spending on major projects at the Budget and Spending Review, connected with attempts to attract significant private investment at the upcoming International Investment Summit.
That summit will be a “massive opportunity for us to show what Britain has to offer to some of the biggest investors”, she said, including private equity, venture capitalists, and sovereign wealth funds.
She also denied suggestions that the government’s budget rhetoric had spread gloom among consumers and businesses, saying there would be a “drum beat” of major investments in the coming days.
