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High-speed fail

By clinging on to costly HS2, the Tories are allowing Labour to look like the prudent party

2 November 2013

9:00 AM

2 November 2013

9:00 AM

A year ago the electoral strategies of the two main parties seemed set. The Conservatives would stand as the party of prudence, claiming to have saved Britain from a Greek-style meltdown through austerity measures which, though painful at the time, had eventually borne fruit in the shape of a private sector-led recovery. Labour, meanwhile, would stand as the party for public investment, promising to repair what it saw as the damage wrought by cuts.

Since then, things have got better for the Tories than they could have imagined. Not only did a threatened triple-dip recession fail to materialise, but revisions to economic data concluded that Britain did not even suffer a double dip. While debt is running well ahead and growth is still lower than the forecasts he made in 2010, George Osborne can no longer be accused of causing a recession and can now invite the public to wonder how much larger the deficit would have been had Gordon Brown been allowed to continue trying to spend the country out of debt.

Yet a rather large fly has just landed in the Conservatives’ electoral ointment. The government’s determination to commit itself to HS2 no matter what the cost has allowed Labour to steal the mantle of prudence, while the Conservatives seem to have a wide-eyed faith in extravagant public-sector spending.

Labour appears to be wavering in its support for HS2. This week the party reiterated its commitment to the project. At the same time, however, it backtracked by adding strong caveats about the costs.


Ed Balls’s sudden scepticism is, of course, highly opportunistic. It was Gordon Brown’s government which first backed the scheme. Balls is treating the £42 billion to be saved from scrapping HS2 as if it were a windfall; by his logic we could all make ourselves rich overnight by planning to spend £1 million we don’t have, then deciding not to and counting the forgone expenditure as if it were money in the bank.

But perceptions count for a lot in politics. And what comes across at the moment is that Ed Balls and other senior Labour figures are being careful with public money, while the government says all the things about -investment and jobs that Gordon Brown used to say when frittering away our money left, right and centre. Transport Secretary Patrick McLoughlin’s accusation that, by questioning the cost of HS2, Labour is ‘playing politics with our prosperity’ is the kind of platitude that shadow cabinet ministers -produce every time the government proposes to trim a budget. It hasn’t worked for them, as the public know full well the extent of the budgetary crisis and are generally fed up with politicians asserting that they can spend our money better than we can. So why does Mr McLoughlin think he will impress the country by trying to claim we face ruin unless one of the state’s pet projects goes ahead?

The government has supported the case for HS2 with ever more preposterous estimates of the benefits of the project. But even the imaginations of HS2’s consultants have struggled to keep ahead of a £10 billion rise in estimate budget in the summer. This week, the official benefit-to-cost ratio of the project fell to 2.3:1 as the government was forced to admit that its previous estimates used the erroneous assumption that businessmen do not and cannot work on trains.

Even so, the benefit-to-cost ratio comes across as belonging to the wider realms of fantasy. The attempt to calculate the value of productive time lost on a rail journey down to the nearest penny — which it puts at £31.96 — does not boost confidence in the exercise. Pseudoscientific precision merely clouds reasoned judgment on the project. It doesn’t take too much to see that while cities directly on the route will benefit, secondary towns and cities off it will risk losing out on investment and may suffer; that is why support for HS2 among councils and businessmen in the Midlands and North is patchy, to say the least. Neither does it take too much to wonder how many other, less glamorous, transport projects that have been cancelled, postponed or never conceived as a result of the need to contain public spending would have far higher benefit-cost ratios.

Two years ago a study by the RAC Foundation and consultants Arup identified 96 new road schemes abandoned or postponed by the government, most of them with benefit-cost ratios in excess of that calculated for HS2, and several of them with a benefit-cost ratio over 10:1. If failing to support HS2 is ‘playing politics with our prosperity’ then the government is surely even more guilty of doing so over its failure to support road investment.

With almost every other form of public spending, the coalition has applied a common-sense approach: however desirable something might be, the priority lies in balancing the books and eliminating a deficit which is increasing public debt to the tune of a third of a billion pounds every day. Yet with HS2 that principle seems to be suspended. Ministers are behaving like a CEO who turns around his company with aggressive cost-cutting, only to stall when it comes to a vanity project of which he is particularly fond.

The political trouble for the Conservatives is that of all government projects, HS2 is currently just about the most high-profile. If the party is seen to be extravagant on that, it will find itself in danger of losing its reputation for prudence on everything else.


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