Labour is considering dropping support for the High Speed 2 railway before the 2015 general election, City A.M. understands.
Ed Balls used his speech to the Labour conference in Brighton to question whether HS2 – which would link London to the midlands and the north – was the best way of spending £50bn on transport infrastructure.
Afterwards, sources close to the shadow chancellor told City A.M. that it is not "set in stone" that building the line will be in the party's next election manifesto. They also said questions needed to be asked about the best way of investing such a large sum in transport – although there is currently no internal party process under way to answer this question.
They added that all of Labour's spending commitments would be reviewed in the run-up to the election and – and said the party could even review alternatives to HS2 while in government if it won the 2015 general election.
The latter comment recognises the assumption that construction of the line is unlikely to begin in the next 18 months.
If Labour were to formally oppose HS2 then it would be a major blow to the project, which would struggle without cross-party backing.
Balls had earlier told the conference: "David Cameron and George Osborne have made clear they will go full steam ahead with this project – no matter how much the costs spiral up and up. They seem willing to put their own pride and vanity above best value for money for the taxpayer.
"Labour will not take this irresponsible approach. So let me be clear, in tough times – when there is less money around and a big deficit to get down – there will be no blank cheque from me as a Labour Chancellor for this project or for any project."
"Because the question is - not just whether a new High Speed line is a good idea or a bad idea, but whether it is the best way to spend £50bn for the future of our country."
Balls had previously only threatened to cancel the project if costs kept rising. This is the first time he has questioned the basis of the decision to spend £50bn on the railway.
Lord Adonis, the former Labour transport secretary who first backed the project while in government, recently said it would be an "act of national self-mutilation" to cancel the new north-south rail link. Supporters say it is desperately needed to avoid a capacity crunch for both freight and passenger services on the the existing network.