HS2’s justification has gone off rails

Train project will deliver 90p in economic benefit for every £1 of taxpayers’ money, say civil servants

HS2 will cost taxpayers more than the benefit it will deliver, the Government has admitted for the first time.

An analysis by civil servants has found that the rail project will deliver just 90p in economic benefit for every £1 it costs, raising fresh questions about its existence ahead of this week’s Autumn Statement.

The report, unearthed in a new paper by Policy Exchange, a centre-Right think tank, comes after ministers said the first leg of the route was likely to overshoot its “target cost” and was burning through cash reserves.

Conservative MPs have raised questions about the project, which was originally intended to cost £38billion but is now expected to exceed £100billion by the time it is complete.

The report also said that 43 per cent of the economic benefits of HS2 would be felt by those living in London and the South East, despite ministers’ claims it would be a major part of the Government’s “levelling up” project.

A Department for Transport (DfT) spokesman said the report was “incorrect” because the figures also say HS2 will provide a 10 per cent return on investment when “wider economic impacts” are factored in. But Policy Exchange said those had been exaggerated and were likely to be outweighed by underestimated construction costs and anticipated delays.

A cost-benefit analysis by DfT in 2012 estimated that the London-Midlands section would produce a return of 40 per cent in economic benefit, while the original design of a “Y-network” from Birmingham to Leeds and Manchester would produce a return of between 80 per cent and 150 per cent.

That estimate has now been downgraded amid concerns about the spiralling cost of the project and its claimed benefits.

Andrew Gilligan, the paper’s author, is a former Downing Street special adviser who worked on the project while Boris Johnson was prime minister. He said HS2 was “Britain’s greatest infrastructure mistake in half a century” and that cancelling it would help Jeremy Hunt fill an estimated £50billion black hole in the public finances, avoiding austerity measures planned in this week’s statement.

“Rising costs and falling public spending means that if HS2 continues as planned, it will eat much of the rest of the public transport budget, causing terrible harm to the services that most people actually use, need and want, and which could do far more for economic growth, reducing CO2 and cutting road congestion,” he said.

He said claims that the project would create 500,000 jobs and a £1trillion economic boost to the North were “absurdly exaggerated” and that the prospect of it being delivered on budget were “essentially nil”. Tory MPs last night seized on the report as further evidence that HS2 should be scrapped altogether. Sir Bill Cash, the MP for Stone in Staffordshire, said: “This is proof from the Government itself that this is an economic disaster.

“Given the pressures on the Government’s finances, it would be absolutely the right thing to do, to stop it at Birmingham before it spirals further out of control.

“Instead of frittering away money on projects which are not really fruitful, it would be responsible to ’fess up and admit that this is a vanity project.”

The DfT said: “This report’s headline is incorrect – the assessment in summer found HS2 would deliver positive value for the taxpayer. HS2 will bring transformational benefits and is currently supporting 29,000 jobs.”