Treasury Suspends $12.6 Billion in Spending Projects, Axes Other Programs

U.K. Chief Secretary to the Treasury Danny Alexander suspended 12 projects costing 8.5 billion pounds ($12.6 billion) announced by the previous government and cut completely other programs totaling 2 billion pounds.

Most of the money affects one contract, to supply search- and-rescue helicopters to the defense ministry and the Department for Transport. The 7 billion-pound project, which will now be reviewed, is with the Soteria group made up of CHC Helicopter Corp., Thales SA, Royal Bank of Scotland Group Plc, and Sikorsky, a subsidiary of United Technologies Corp. Deliveries under the planned 25-year deal were scheduled to start in 2012.

“These decisions will significantly relieve burdens on departmental budgets that will be significantly under pressure,” Alexander told lawmakers in Parliament in London today. He said the contracts canceled “do not represent good value for money.”

The announcement comes five days before Chancellor of the Exchequer George Osborne is scheduled to make an emergency budget speech in Parliament setting out measures to reduce Britain’s record budget deficit.

Pre-Election Commitments

Alexander said that out of 34 billion pounds in spending commitments made by Gordon Brown’s Labour government between Jan. 1 and the May 6 election, “we’ve had to cancel 2 billion pounds and put 9 billion into the spending review.”

Prime Minister David Cameron accused Brown of using his final months in office to target spending at electoral districts Labour looked as if it might lose.

“We’re going to have to take difficult decisions, and we’re going to have to start with decisions the previous government made as it was getting close to the election,” Cameron told a news conference today after talks with European leaders in Brussels.

In May the Treasury said that the rate at which ministers overruled their aides to push ahead with spending projects had risen almost tenfold in Labour’s final year in office.

Alexander told Parliament that Labour ministers had relied on potential underspending in their budgets to fund some projects when “there was no reason to suppose there would be underspends.” He cancelled 1 billion pounds of such projects.

“Billions are underspent each year,” Labour Treasury spokesman Liam Byrne said in reply.

Sheffield Forgemasters

Labour lawmakers expressed outrage that an 80 million-pound loan for Sheffield Forgemasters Ltd. to make components for nuclear power plants had been canceled. The money was announced in March by then Business Secretary Peter Mandelson. Brown visited the plant in Sheffield in the final hours before the election.

“The Sheffield Forgemasters proposal was never just about aid to one company,” said Labour business spokesman Pat McFadden. “It was about the U.K. having an ambition to be a success in the growing world supply chain in civil nuclear power. It would have given Britain the ability to make key components for the nuclear and other industries that currently have to be sourced from outside Europe.”

Alexander said the government would help the company find private investment.

The chief secretary accused Labour of irresponsible expenditure, repeatedly quoting the letter Byrne left for his successor, which read simply: “There’s no money left.”

A YouGov Plc poll this week found that 48 percent of respondents blamed Brown’s administration for current spending cuts, with 17 percent blaming Cameron’s coalition government of Conservatives and Liberal Democrats. YouGov questioned 1,435 British adults for The Sun newspaper on June 13-14. No margin of error was given.

To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net.

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