PM cut HS2’s Leeds link without cost assessment of revised line

Critics of scheme believe new calculation will show for the first time it offers poor value for money

BORIS JOHNSON’S decision to axe a large section of High Speed 2 was taken without a formal assessment of whether the benefits of the remaining line would still outweigh the costs, The Sunday Telegraph can disclose.

This newspaper understands that, by last week, the Department for Transport had still not finished calculating HS2’s updated “benefit-cost ratio”, the metric used to assess whether a taxpayerfunded project offers value for money.

Instead, a spokesman for the department said officials had carried out costbenefit analysis for Mr Johnson’s overall Integrated Rail Plan, which was published earlier this month and incorporated parts of the line.

Lord Macpherson of Earl’s Court, the former permanent secretary at the Treasury, said it was “very odd” and “surpris

ing” that a value-for-money analysis specifically of the revised HS2 scheme was not produced before the Prime Minister signed off on plans to scrap the eastern leg of the Y-shaped line.

He said: “In a sensible world when you’re trying to prioritise investment projects you do want the full analysis broken down by project.

“Investment should be allocated on the basis of economic return and the only way of deriving economic return is doing a cost-benefit analysis.”

The peer, who signed off on the initial funding for the line while in post as the Treasury’s most senior civil servant, warned that carrying out the assessment after the event could give the appearance of “policy-based evidence making” rather than “evidence-based policy making”.

Critics of the scheme believe the new calculation could result in an assessment showing for the first time that the scheme offers “poor” value for money, after the last assessment, last year, concluded it had dropped from “medium” to “low” value for the expected taxpayer spend of up to £100billion.

Last week Prof Andrew McNaughton, HS2’s former technical director, said the West Midlands-Leeds leg had been the “core” of the plan for the line, which is due to stretch from London to Birmingham and the North.

Government departments use benefit-cost ratios (BCRs) to assess the value for money of individual schemes. The BCR measures how much benefit can be expected for each pound spent on a project, with less than £1 categorised as “poor” value for money, between £1 and £1.50 as “low”, and £2 to £4 as “high”.

An assessment published last year, following a review commissioned by Mr Johnson, produced a BCR of 1.2, or 1.5 when taking into account estimated “wider economic impacts” of the line.

Lord Macpherson said: “When the Government chose to go ahead with HS2 there was plenty of cost-benefit analysis. It is surprising that they haven’t done it.”

The Government’s Integrated Rail Plan, published on Nov 18, confirmed that the eastern leg of HS2 to Leeds had been scrapped, along with plans for a line between Manchester and Leeds – a key plank of Northern Powerhouse Rail.

The announcement sparked a mixed response among Tory MPs, with fury expressed by a series of backbenchers. Other Conservatives have been calling for the HS2 scheme to be scrapped altogether, due to soaring costs and what they see as a weak business case.

At the time of the announcement, Sir Edward Leigh, the Conservative MP for Gainsborough and former chairman of the public accounts committee, said: “HS2 was always a white elephant, but as far as the east coast is now concerned it is a white elephant missing a leg. We were promised it would relieve congestion on the east coast main line because it was going to go to Leeds.”

A Department for Transport spokesman said: “It is untrue that benefit-cost ratio analysis was not undertaken. Our £96 billion Integrated Rail Plan was informed by detailed economic and value for money analysis including benefit cost ratios. As individual schemes are taken forward, further cost-benefit analysis will be completed to inform future decisions.

“This is standard with a project at this stage of development and given the study to be carried out on how to take HS2 services to Leeds.”