We’re in debt – so let’s cancel HS2 and save £55 billion
Few people would regret the demise of a project that is already outdated and won’t justify its (inevitably rising) costs
How much does HS2 cost? So far, we have spent £2.3 billion on the new railway line – as much, to put it in context, as the Government raises every year through the landfill tax and the climate change levy combined. But we haven’t yet laid an inch of track.
Where has the money gone?
On fees, mainly. This is, after all, a government scheme, and government schemes have a tendency to attract consultants, advisers and rent-seekers. Grands projets invariably become more expensive as they go on. In 2010, the government said that HS2 would cost £32.7 billion. Now, it admits to £55.7 billion. But a report last week commissioned by the Department for Transport puts the cost of the whole track, as far as Leeds and Manchester, at £104 billion – an eye-watering £400 million for each mile.
HS2 was conceived when Britain’s finances were relatively healthy. But the credit crunch is not the only change in our circumstances since then. By coincidence, at the very moment that these new costings were emerging, Elon Musk was tweeting that he had verbal approval to proceed with his proposed Hyperloop, a kind of vacuum tunnel through which frictionless trains will zoom between Washington and New York in an incredible 29 minutes.
Hyperloop may or may not turn out to be viable. Driverless cars almost certainly will: some of them are already in commercial use in the United States. So why is the Government still firehosing money at the rather Seventies idea of high-speed trains?
The short answer is that firehosing money is what governments do. In the private sector, businesses know when to cut their losses. If something becomes too expensive, they stop doing it. In the public sector, though, the first response to rising costs is usually to increase the budget.
Government schemes become more expensive with time because contractors know that officials are paying with other people’s money. It was revealed last week, for example, that the cost to consumers of the Hinkley Point power station will be £50 billion, rather than the £6 billion estimated in 2013.
For what it’s worth, I’m with Theresa May on Hinkley Point. I wouldn’t have commissioned it in the first place but, once we had agreed terms with foreign investors, we had little option but to go ahead. Still, it’s worth asking how many non-government projects could sustain an 800 per cent increase in projected costs.
Consider the Eurofighter, the most grotesquely over-budget scheme in the history of the RAF. Designed to dogfight Soviet MiGs over the skies of West Germany, the Eurofighter was redundant long before it came into production. After the Cold War, Britain needed aircraft with long loiter time, buddy-refuelling, the capacity to operate from rough local bases and a low-technology requirement for spare parts. The Eurofighter was pretty much the opposite of all these things. Yet every time a defence minister had the option to abort, he found it politically expedient to carry on, throwing good money after bad.
How can I know that HS2 won’t justify its cost? The clue is in who is paying for it. If the project were viable, private companies would see an opportunity to invest and there would be no need for taxpayer involvement.
Lots of people oppose HS2 on aesthetic or environmental grounds. Those who live along its route understandably don’t want the disruption under any circumstances. I sympathise, but that isn’t my position. If there were a way to build the railway without widening our deficit, I’d be happy to go ahead. My objection is simply that we are borrowing tens of billions of pounds to pay for something that will never recoup its costs.
I don’t want to be a bore about this, but our deficit has not gone away. Last month, Britain borrowed an extraordinary £6.9 billion. In the time you have been reading this article, our national debt has increased by some £350,000. We need to find ways to screw the taps shut, not to spin them further open.
It is never easy to cut spending. Government programmes are often initiated for the sake of nothing more than good headlines, but quickly become almost impossible to discontinue. Look at the reaction when the Conservatives tried to cut the winter fuel allowance for wealthy pensioners and to end the pensions triple-lock. The first of these schemes (it has nothing to do with fuel, by the way, being an unconditional lump-sum payment) was brought in by Gordon Brown, the second by David Cameron. Yet within a couple of years these perks were being treated as elemental rights, part of our immemorial constitution.
HS2, by contrast, has not yet taken form. Yes, lots of consultants and contractors are getting sixfigure salaries out of it, but there would be little electoral downside to its cancellation. The trouble is that trains pick up momentum, politically as well as literally. Going back and reopening a decision of this magnitude is always more hassle than carrying on.
Still, in this case, we have little option. The Government has committed to higher spending on healthcare, defence and overseas aid, and it is already clear that it can’t get significant welfare cuts through this Parliament. By a process of elimination, HS2 is the one thing it can still realistically scrap.
Ministers like to justify infrastructure schemes by talking about our children. In this case, though, it’s our children who will bear the cost: we are gaily writing IOUs to the next generation to pay for the technology of the last. As our national poet put it: “Prevent it, resist it, let it not be so, lest child, child’s children, cry against you woe!”