HS2 must be built to make Brexit Britain fit for the future
As the Chancellor pledges to upgrade our creaking infrastructure, a call to arms from City Editor Alex Brummer
THE Chancellor is known to regard investment in new infrastructure as one of the answers to Britain’s lagging productivity.
But he is also aware of the capacity constraints in Britain after the failure of Carillion and the ongoing difficulties of outsourcing and construction group Interserve.
So it was no surprise that Philip Hammond used his Spring Statement to launch a consultation on how better to deliver 21st century infrastructure. The costly private finance initiative, an inheritance from the Blair-Brown years, already has been scrapped. And the reputation of the private sector contractors has been damaged by financial mismanagement and overreach.
Indeed, the problems have reduced faith in some of the country’s most visionary projects.
There is understandable political and public anger over the escalating cost and disruption of the construction of a high- speed rail link (HS2) between London and Birmingham – and eventually on to Manchester.
As is the case with so many infrastructure projects, prudent efforts to keep HS2 within budget seem to have been tossed to the wind.
Obscene salaries for top executives involved, and huge sums of compensation paid to landowners and homeowners whose property is in its path, have undermined public confidence in the project.
Commons leader Andrea Leadsom has warned the business case for the link ‘may no longer exist’. Her comments follow those of Stephen Glaister, the former head of the Office of Rail and Road watchdog, who says the money may have been better spent on other projects.
SOMErailway analysts have gone as far to calculate an eventual outlay of £104bn, more than three times the original budget.
As Everett Dirksen, a 1960s sage of American politics, famously cautioned about the way public spending can quickly get out of control: ‘A billion here and a billion there, and you are soon talking about real money.’
It is no wonder that ministers, who myopically refuse to look beyond the short-term and their own personal future prospects, are desperate to reallocate the money to their own pet projects. Why, then, do I still believe that HS2 must be built?
Above all, I think the work should have begun in the North and progress south – not start in London and work northwards.
It has long been my view that the Government, planners and engineers made a big error by starting work on HS2 in London and the South East. The disparity of wealth between this region and the rest of the country has been a running sore for many years and a major new rail investment afforded a chance to send the message that efforts are being made to narrow that gap. Incomes per head in inner London are five times higher than in the Welsh valleys or Cornwall. Imagine the boost to northern England had HS2 been rolled out from Manchester. If that had happened, it could have linked with HS3, the fast trans-Pennine rail route which is badly needed if the vision of the much-heralded ‘Northern Powerhouse’ is to become a reality. But politicians have not taken this savvy option. In the meantime, the original £33bn budget is believed to have spiralled to more than £60bn. This worrying overspend aside, I am convinced that as the world’s fifth-largest economy, Britain must invest in major infrastructure improvements.
HS2 is at heart a visionary idea in the mould of those brought to life by our Victorian ancestors in that golden age of world- dominant British brains and power.
The UK is able to put money into such imaginative projects because the Treasury has carefully husbanded the nation’s finances since the 2008 crash and has brought Government spending almost into balance.
This has created room for longerterm capital spending which ought to produce tremendous pay- offs in terms of raising the efficiency of the national economy. The origins of HS2 date back more than a decade to a study by one of the City’s most esteemed figures, former chairman of Lloyd’s of London Sir David Rowland, who rescued the insurance market from calamity.
After meticulous parliamentary scrutiny, the project got the goahead in 2014. But there are fears about escalating costs, combined with planning laws that tend to favour people and habitats over public projects.
Take, for example, the story of plans for London’s third airport.
Ted Heath’s Tory government in the early 1970s planned to build it at Maplin Sands by the Thames estuary. The first footings were put down and the scheme launched. But it was cancelled when the Cabinet was told by the Treasury it was ‘unaffordable’.
Anyone who has followed the protracted saga in more recent times of a planned new runway for London at Heathrow or Gatwick (personally, I believe both should have an extra one) will know how hard it is for proposals to get off the ground.
Weak political willpower apart, there has been a lack of creative thinking when it comes to fundraising. The story of London’s super-sewer is a salutary one.
Designed to deal with the sanitary needs of a rapidly growing population, the Thames Tideway Tunnel project has so far cost £1.48bn.
BUTit is being built thanks to the assistance of Government guarantees and a new financing structure which rewards investors by paying dividends before completion. Such clever financing ideas prove that it is possible to achieve HS2 and other less ambitious projects.
Ultra- low interest rates also mean that the cost of borrowing for improving the state of our increasingly dilapidated transport networks has never been cheaper.
Admittedly, the public image of new major infrastructure projects has not been helped by the appalling delays to the delivery of Crossrail, Europe’s largest infrastructure project.
Costing £ 15bn, it will run from Reading and Heathrow through 26 miles of new tunnels under London to Shenfield and Abbey Wood on the eastern side of the capital.
As Britain approaches a future outside the EU, there has never been a more important time in our history to upgrade our national infrastructure, including ports, roads, airports and railways.
Politicians will always find reasons – financial or electoral – to smother ingenious inspirational ideas. But with rigorous scrutiny of contracts, caps on the pay of executives and more creative thinking among Treasury beancounters, Britain can make HS2, and much more, work.
We must have the self-confidence to build a legacy for future generations every bit as impressive as those awe-inspiring creations left us by Isambard Kingdom Brunel and his brilliant 19th century contemporaries.