Is the financial logic behind HS2 collapsing?

There are growing signs this inter-city vanity project could be scrapped

9 February 2019 9:00 AM

Illustration by Morten Morland

No one is in any doubt about the problem facing Britain’s railways. Over the past decade, rail fares have risen twice as fast as salaries. Yet across the national network, overcrowding is at record levels, cancellations are spiralling and passenger dissatisfaction is at a ten-year high. Yet ministers are about to start pouring £4.5 billion a year, every year for a decade, into building a single new railway route: HS2. To put this into perspective, the amount annually maintaining and upgrading the rest of the rail network is £6 billion. It’s a trap that we can, even now, avoid.

Much has changed since the scheme was launched in 2010. Official cost estimates have almost doubled — from £33 billion to £56 billion. And even this might be modest: independent industry experts put the eventual bill above £100 billion. If true, then Britain will have achieved a world record — the most expensive railway ever built.

The controversy has so far focused on the shabby treatment of those with homes on the HS2 route, subject to compulsory purchase. The fat taxpayer-funded salaries of HS2 executives have also caused -concern. But with demolition work underway in London and Birmingham, and construction soon starting in earnest, the rationale of the project itself is being questioned at the heart of government. The UK’s new super-train could soon be called to a halt.

It has already survived some near-death experiences. Had Andrea Leadsom been -elected Tory leader after the Brexit referendum, she would have pulled the plug on the whole scheme — a policy seen, by fellow senior Tories, as one of her most attractive political positions. She and David Lidington, -Theresa May’s de facto deputy, have been openly questioning the case for HS2. Both represent constituencies on the London to Birmingham section, where there is much anger about disruption, and the precious little that is being promised in return. But ministers with seats nowhere near the HS2 route are starting to join them. Spending on the project is about to crank up — and the Tories need votes now, to see off the threat from Jeremy Corbyn. So why not divert money away from a high-speed inter-city vanity project (one that won’t materialise for years) and put it instead towards quick turn-around improvements in local rail routes into major cities used by millions of commuters each day?

The case for HS2 is changing all the time. At first it was about speed. But that argument was collapsed by the growth of internet connectivity, facilitating work on trains. The case then shifted to capacity — but the London to -Birmingham route is already relatively well served, with trains only 43 per cent full on average, and around 70 per cent at peak. More recently, HS2 has been sold as a way of ending the UK’s chronic north-south divide. But why build a multi-billion-pound, marginally quicker service connecting London to Birmingham, and then Manchester and Leeds, when these cities are already connected to the capital?


Meanwhile, arguments for better ideas are gaining ground. Why not build transformative new east-west lines linking northern cities directly, creating an alternative UK growth centre beyond the south east? That would really help promote regional prosperity in post-Brexit Britain. HS2, on the contrary, and for all the ‘boosting the north’ lip service, is ultimately built around an ever more London-centric vision of the UK’s economic future. It is as if the best possible thing that can be done for the north is to let those living there come to London a bit faster.

Over the past ten years, government spending per head on transport across the north of England has been little more than a third of that in London. And it shows. The five worst performing train companies last year all served the north — and the UK’s two most consistently overcrowded trains were both routes into Manchester. On one rail network in the north last year, there were more than 32,000 cancellations, and only half its trains arrived on time.

As chancellor, George Osborne famously promoted ‘Northern Powerhouse Rail’ — built around a vision of better connections into and between northern cities. Frustrated by a lack of progress, and no sign of serious funding, Liverpool’s ‘old-fashioned socialist’ mayor Joe Anderson recently resigned from the board of the Northern Powerhouse Partnership. ‘I’m not Osborne’s greatest fan, but he meant what he said about improving transport across the north,’ Anderson tells me. ‘The current Prime Minister and Chancellor both hate him, though, so they won’t fund the project he started.’

The danger now is that, while absorbing cash that could go into rail upgrades across the north and elsewhere, HS2 may not make it further than the Midlands — making a mockery of the notion that it helps the north-south divide. The London to Birmingham section is due to be completed in 2026 but, beyond that, the route has yet to get parliamentary assent. ‘I can’t see it getting beyond Birmingham,’ says Alistair Darling, who as chancellor launched the first HS2 feasibility study but now has grave doubts. ‘Most people who travel by train are doing a daily commute rather than the long-distance stuff — that’s why money is needed for local routes, particularly into those northern cities so ripe for regeneration.’

Andy Burnham, Greater Manchester mayor, is incensed that cost overruns further south could see HS2 stop short. ‘If the rumours are true, and it ends in Birmingham, that would be criminal,’ he says. ‘HS2 would then be a total waste of money.’ Across Britain, HS2 is increasingly seen as a ridiculously expensive white elephant that delivers few benefits but will happen anyway due to inertia, the lobbying power of engineering conglomerates and property developers, and broader metropolitan bias.

With the costs now about to bite, -ministers are beginning to realise that delivering top–quality fibre-optic connectivity to every house-hold, for instance, would be a far smarter use of public money. An -unglamorous truth is dawning — that the UK needs to solve its national rail issues by investing not in trophy assets but in existing infrastructure, channelling cash into the humdrum local services that get commuters to work. ‘The case for HS2 is and always was nonsense,’ says one cabinet minister. ‘By the time it gets to Birmingham, if it ever does, there will have been so many rows about cost overruns that the second phase won’t happen.’

‘In the next Tory leadership contest,’ a cabinet colleague adds, ‘the winning candidate will need to have “Scrap HS2” in his or her leadership manifesto — as in: call the whole thing off.’

An earlier version of this article stated that Joe Anderson had resigned from the Northern Powerhouse Rail board, rather than the Northern Powerhouse Partnership.