Budget 2016: George Osborne set to give go-ahead to major new rail routes

The chancellor will announce plans for the contruction of Crossrail 2 and the HS3 link between Manchester and Leeds

George Osborne visits a train maintenance plant in Crewe on the election campaign trail in 2015 (Getty)

Plans to build major rail routes across London and in the north of England will be announced in Wednesday's Budget in a programme of improvements to the country’s transport network.

George Osborne will give the go-ahead to the construction of Crossrail 2, running from north to south across the capital, as well as the HS3 rail link between Manchester and Leeds.

The Chancellor has already signalled that the Budget is likely to signal fresh public spending cuts as economic growth is lower than forecast and has played down the chances of reductions to tax rates. Police and council budgets could bear the brunt of new cuts totalling £4bn by 2020 to fill the hole in the nation’s finances.

But Mr Osborne will sweeten the pill by accelerating his timetable for investment in transport, housing and other infrastructure projects, with the two new rail routes the centrepiece of his plans.

The £27bn Crossrail 2 scheme will be given the green light by the Chancellor, who will tell MPs the Government regards it as the top priority transport scheme for London. The route, which could be in operation by 2033, would connect suburban railway networks to the north and south of the city through a tunnel under central London.

He will set aside £80m to develop the plans, and ask Transport for London to allocate the same amount, with the aim of getting legislation to build the route in place by 2020.

Budget checklist: What to look out for

Multinational tax avoidance: The Chancellor is likely to crack down on tax avoidance by multinationals in the wake of the Google tax row. Plans to cut tax relief for debt interest payments are likely to form one pillar of a so-called business tax roadmap, which will clamp down on profit-shifting by multinationals. 

Sin taxes: Brewers and publicans are hoping for the fourth 1p cut in a row on beer duty from George Osborne, who recently invited his own local, Tatton Brewery, to the Commons. But sin taxes always rise and most drink duties are expected to rise in line with inflation again.  Smokers may be hit even harder than usual as the Treasury tries to repair the hole caused by smuggled tobacco and cigarettes. 

Fuel duty: Expected to rise for the first time since 2011, as the Chancellor takes advantage of low fuel prices, with a litre below £1 in many areas. 

Bradford & Bingley: An accelerated sale of £17bn of former Bradford & Bingley mortgages held by UK Asset Resolution could well be one of the big headlines in the Budget.

Mr Osborne will promise to push ahead with proposals for the HS3 east-west rail link across the Pennines, where trains travelling at 140mph will cut at least 20 minutes from Leeds to Manchester journey times. The Government will spend £60m to draw up detailed plans for the route, which could be completed by 2033.

Work on improving rail connections between other large Northern cities, including the feasibility of a trans-Pennine tunnel linking Sheffield and Manchester, will be set out by Mr Osborne.

In addition he will promise investment in motorways in the North-west and across the Pennines, completing £300m investment in his so-called Northern Powerhouse initiative.

The projects have been backed by the new National Infrastructure Commission, set up last year by Mr Osborne and chaired by the former Labour Cabinet minister, Andrew Adonis.

In addition, Mr Osborne will confirm plans to spend £1.2bn on building “starter homes” on brownfield sites, part of the government’s drive to construct 200,000 affordable homes by 2020.

The Chancellor said: “With the difficulties we see in the global economy, we have got to make Britain fit for the future. Now is the time us to make the bold decisions and the big investments that will help us to lead the world in infrastructure and create jobs, pushing up living standards.”