Government shelves Labour projects worth £10.5bn

The government has cancelled or frozen £10.5bn worth of projects announced in the dying days of the Labour government. An £80m investment to build parts for nuclear power stations in Sheffield and the flagship Labour policy of free swimming for children and pensioners will be scrapped while work on new libraries, hospitals, job schemes for young people will be suspended. The government said it was forced into difficult cuts by the "irresponsible planning" of its predecessors, but Labour accused the coalition of being ideologically driven to reduce the size of government and its involvement in stimulating the economy. Danny Alexander, the chief secretary to the treasury, announced that £2bn worth of projects would be scrapped following a review of spending. They include the £80m loan to Sheffield Forgemasters , the £450m North Tees and Hartlepool hospital and the government's £25m contribution to a new Stonehenge visitor centre. A further £8.5bn of projects are suspended including the libraries modernisation programme, the Sheffield retail quarter, a Department of Health funded wellbeing centre for Leeds and a new magistrates court for Birmingham. The bulk of the potential savings comes from nearly £7bn worth of defence ministry contracts for new search and rescue helicopters. Alexander revealed that he had identified a £1bn black hole made up of Labour pledges that either depended on unspecified underspending in other areas of government or on drawing on government reserves. "We have found another spending black hole in the previous government's plans – projects had been approved with no money in place to pay for them. I am determined to deal with this problem head-on and ensure we never see this kind of irresponsible financial planning in government again," Alexander said. A review of the school rebuilding programme, which has effectively been frozen, will be revealed within days but Alexander described it as "heavily over-committed" and warned of tough decisions ahead. Liam Byrne, the shadow chief secretary to the Treasury, said the projects amounted to 0.05% of government spending, "nailing the myth" that Labour had operated a "scorched earth" policy in the run-up to the election. "Both the country and the Liberal Democrat party beyond will be aghast this afternoon at your attack on jobs, your attack on construction workers, your attack on the industries of the future and the cancellation of a hospital," he told Alexander. "Let me ask you: what could be more front line than this? In five minutes this afternoon you have reversed three years of Liberal Democratic policy of which you were the principal author. What a moment of abject humiliation." In total 217 projects worth £34bn were resubmitted for reapproval. The £80m loan to Sheffield Forgemasters was agreed by the then business secretary Lord Mandelson. Today the deputy prime minister, Nick Clegg, whose constituency is in Sheffield, said: "Sheffield Forgemasters is a great British company and as a Sheffield MP I regret that the government cannot afford to support its expansion. "The truth is that this loan was promised by the outgoing Labour government as a calculated ploy to win support in Sheffield just ahead of the election, when they knew all along that there simply wasn't the money to keep to that pledge in the first place." Union leaders have warned that withdrawing the loan would lead to thousands of job losses and jeopardise preparations to build a new generation of nuclear power stations. The Unite leader Derek Simpson, who is from Sheffield, said the decision was a "colossal error of judgment", adding: "The company is unique, there is not another company in the world that has its skills and expertise." Alexander announced an urgent review of spending commitments for 2010-2011, but the review will exclude those for military operations and the financial package agreed with the Northern Ireland executive to support the devolution of policing and justice powers. Projects cut Department for Culture Media and Sport Stonehenge visitor centre, £25m Local authority business growth initiative (LABGI), £50m (previously announced) Regional Development Agencies: Outokumpu site redevelopment, Sheffield, £13m Department for Communities and Local Government Local authority leader boards, £16m Department for Business Innovation and Skills Sheffield Forgemasters International Limited, £80m Department for Work and Pensions Roll-out of the Future Jobs Fund, £290m (previously announced as part of £6bn cuts) Six-month offer recruitment subsidies, £30m (previously announced) Extension of Young Person's Guarantee to 2011-201, £450m Two-year Jobseeker's Guarantee, £515m Department of Health Active Challenge Routes, Walk England, £2m County Sports Partnerships, £6m North Tees and Hartlepool hospital, £450m Total: £1.9bn (£370m previously announced) Projects suspended Department for Culture Media and Sport Libraries modernisation programme, £12m Department for Communities and Local Government Sheffield retail quarter, £12m Kent Thameside strategic transport programme, £23m Department for Business Innovation and Skills University enterprise capital fund, £25m Newton scholarships, £25m Department of Health Health research support initiative, £73m Leeds Holt Park Wellbeing Centre, £50m Ministry of Justice Birmingham magistrates court, £94m (2010-2011 element previously announced) Ministry of Defence Equipment for design phase of Trident replacement programme, £66m Search and rescue helicopters, £4.7bn Department for Transport Search and rescue helicopters joint procurement with MoD, £2.3bn A14, £1.1bn Total £8.5bn