Ministers are facing cuts to major projects including hospitals, train lines and housing as Sir Keir Starmer tries to find money to fund defence.
Discussions inside Cabinet on how to pay for the Defence Investment Plan (DIP) are still ongoing, despite reports that the blueprint could be published this week.
Senior defence insiders have been calling for the Prime Minister to cut the welfare bill, one of the government’s biggest spending commitments, to fund the DIP, which could cost between £15bn and £18bn.
But The Sunday Times reported that Starmer and the Chancellor, Rachel Reeves, are eyeing up £6bn of cuts from Whitehall capital spending – which does not cover welfare – to help fund the uplift.
David Lammy, the Deputy Prime Minister and Justice Secretary, suggested he would be prepared to see cuts in his department to help fund the DIP.
He said Starmer’s pledge for defence spending to reach 3 per cent of national income is “absolutely sacrosanct under this Government” and that “the money will be found” to set out how new equipment and infrastructure will be procured.
Asked whether he would be happy to give up some of the justice budget to shore up cash for defence, Lammy told the BBC’s Sunday with Laura Kuenssberg: “The first purpose of any government is defence of the nation.”
MPs on the Commons spending watchdog criticised the delays in publishing the DIP, which ministers have said will be released before the Nato summit in Turkey begins on 7 July.
Chairman of the Public Accounts Committee Sir Geoffrey Clifton-Brown said: “Excuses to the effect of ‘taking the time to get the details right’ simply do not cut it.”
Unite general secretary Sharon Graham said: “The failure to deliver the DIP is a threat to British jobs and skills and a threat to national security now and in the future.”
An MoD spokesman said the Government is providing a “generational increase” in defence spending, with an extra £270bn across this Parliament.
“The Defence Investment Plan will fix the outdated, overcommitted and underfunded programme we inherited,” the spokesman said.
“We are working hard to finalise it. As the Defence Secretary told Parliament this week, the Prime Minister is determined to publish it before the Nato summit.”
The Sunday Times reported that net zero and transport would face the deepest cuts to fund defence spending – but every government department would take a hit, meaning billions less for the hospitals, railways and housing upgrades that capital budgets currently fund.
The Government publishes a list of its major infrastructure projects, each rated by independent assessors at the National Infrastructure and Service Transformation Authority – known as Nista – on a traffic light system: green means on track, amber means there are already problems that could threaten delivery, and red means the project is in serious difficulty.
Here are some of the biggest that could be in the firing line.
New Hospital Programme
The NHS is already running a record £16bn maintenance backlog – and that is before any further cuts to its building budget.
The New Hospital Programme was launched in 2020 with a promise to build 40 new hospitals by 2030.
It has since been reset, expanded to 46 schemes, and now carries an estimated total cost of £60bn – with a completion date pushed back to 2046.
Seven of those hospitals are built from RAAC – reinforced autoclaved aerated concrete, a crumbling material at risk of structural collapse.
Independent safety experts said those seven should be replaced by 2030 at the latest. The current plan has them finished by 2032–33, already up to three years past that deadline.
The programme is rated amber by Nista – meaning significant problems already exist – and spent less than half its annual budget last year: £762m of a £1.66bn allocation, a 54 per cent underspend.
The Public Accounts Committee, a cross-party group of MPs that scrutinises government spending, warned in April that the programme has a 39 per cent staff vacancy rate following a recruitment freeze, leaving it short of the expertise needed to deliver on its timetable.
MPs called for the programme to be given “megaproject” status – a formal classification that comes with fixed capital funding, protection from year-to-year budget raids, and more streamlined oversight.
A 1 per cent cut to the health department’s capital budget would amount to £580m – money that currently funds hospital building, equipment upgrades and maintenance.
Northern Powerhouse Rail
Northern Powerhouse Rail is one of two projects on the Nista list that are rated red, the most serious category, meaning independent assessors believe delivery is currently in doubt.
The scheme would deliver faster and more frequent rail services between Liverpool, Manchester, Leeds, Bradford, Sheffield and York, with onward connections to Newcastle and Hull.
It was first announced more than a decade ago, under George Osborne’s chancellorship, and has been repeatedly delayed ever since.
The Government confirmed in January 2026 that it would proceed with the programme, setting a lifetime funding cap of £45bn and backing it with £1.1bn over the current Spending Review period.
That £1.1bn is for planning and design work only. Major construction is not expected to begin until the 2030s, with full completion expected in the 2040s.
The red rating was recorded by Nista in March 2025 – before the January announcement confirmed the programme would go ahead – and reflects how little had been formally agreed on scope and costs at that point. Even so, the programme spent only £80.6m of a £131.6m annual budget in 2024/25, a 39 per cent underspend.
TransPennine Route Upgrade
The TransPennine Route Upgrade is one of the largest active rail schemes in the country – an £11.1bn programme to electrify and upgrade the 76-mile route between Manchester, Huddersfield, Leeds and York.
The work involves electrifying the line, expanding capacity between Huddersfield and Dewsbury from two tracks to four, and upgrading 23 stations along the route. It is due to run until 2041.
Independent assessors have rated it amber – meaning significant problems already exist – and the National Audit Office has previously warned it carries a risk of further delays and cost increases, noting that repeated changes to its scope since 2017 have already resulted in £190m being spent on work that is no longer needed.
Lower Thames Crossing
The Lower Thames Crossing is a planned 23km road – including a 4.2km tunnel under the Thames – linking the A2 and M2 in Kent with the A13 and M25 in Essex.
National Highways describes it as its most ambitious scheme in 35 years, with an estimated cost of around £10bn.
Planning consent was only granted by transport secretary Heidi Alexander in March 2025, after the project was submitted for approval and withdrawn twice – a process that took five years and cost more than £800m in public money before a single brick was laid.
Construction has not yet begun in earnest, and independent assessors have rated it amber – making it particularly vulnerable to capital cuts before work has properly got under way.
Geological Disposal Facility
The Geological Disposal Facility is the UK’s plan to permanently store nuclear waste – and it is the second red-rated project on this list.
The facility would consist of a network of engineered vaults, buried between 200 metres and one kilometre underground, designed to safely contain high-level radioactive waste for thousands of years.
Its estimated cost ranges from £20.3bn to £53.3bn. It is not due to be completed until 2050.
Nista described the project as “unachievable” in its August 2025 annual report – the first time it has received an outright red rating in any published government assessment since records began in 2013.
The Government has since said the project is being “replanned.”
The consequences of delay are significant. The Public Accounts Committee warned in June 2025 that every decade of slippage could require Sellafield – the nuclear site in Cumbria that currently stores the waste – to construct another interim storage building, each costing between £500m and £760m.
Social Housing Decarbonisation Fund
The Social Housing Decarbonisation Fund provides grants to social landlords – councils and housing associations – to install insulation, heat pumps and double glazing in social rented homes.
The aim is to cut energy bills for some of the lowest-income households in the country, many of whom live in older, poorly insulated properties.
The fund has an estimated whole life cost of £2.21bn and runs until 2028. It is rated amber, and underspent its budget by 8 per cent last year.
A capital cut would slow a programme the Government has described as a central plank of its net zero strategy.
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