Matthew Lynn

Three better ways to spend £200bn than HS2

Three better ways to spend £200bn than HS2
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It will be big, shiny and it will make a difference. Even with its astronomical and rising cost and its wobbly economics, it is possible to see the gut appeal of HS2, especially to a big spending government such as this one which can borrow freely at virtually zero cost. After all, it needs to do something to close the gap between the regions. It also needs to improve the country’s transport infrastructure and this project is, at least, almost ready to start.

The trouble is, there are far better ways of spending what is likely to be £200 billion by the time the final bill is due. After all, high-speed trains are a 40-year old technology. There is nothing especially modern about them anymore. And even in far less densely populated countries such as France they struggle to earn a decent return on the money they cost. We could be doing something far bolder with that kind of cash. Such as? Here are three we could start with.

First, how about regional tax cuts? Sure, we need to find a way to level up wealth and opportunity between the regions. The Prime Minister understandably wants to find a way of rewarding all the people who voted Conservative for the first time in their life last December. But fast trains to London won’t help that much (indeed they might simply encourage people to get out). If Scotland and Northern Ireland have their own tax systems, why not roll that out across the country with regional tax rates? If we scrapped corporation tax for the North-East and Wales for a decade, for example, businesses would flock there and we wouldn’t be worrying about regional imbalances any more.

Next, how about car scrappage allowance? We know we want to move to electric vehicles. Indeed, the Government is already planning to ban the sale of petrol and diesel vehicles by 2035. How about a £10,000 allowance for every fossil fuel car traded in for electric version?

Sure, that would cost a heck of a lot of money. If everyone took it up, it would come to £380bn. But that is relatively unlikely, so if you assume a 50 per cent take-up, it would cost less than HS2 once the inevitable cost-overruns are taken into account. Even better, you could insist the car was British-made, which would keep those Nissan lines in Sunderland on 24-hours shifts even if they face tariffs from the EU.

Finally, why not build tidal barrages to generate electricity? There have been proposals for a tidal barrage on the Severn estuary knocking around for years. It would be expensive, with an estimated cost that could be as high as £34bn. But a barrage on that scale could generate five per cent of the UK's electricity and it would do so in a way that was completely sustainable. Build five barrages and the UK would be well on the way to renewable energy, as well as turning itself into a world leader in a technology that may well play a key role in combating climate change and generating sustainable energy.

In truth, we could all come up with our own list very easily. The important point is surely this. If the government wants to spend £200 billion on something, there are far better projects than HS2.

It is not just the cost in cash we should be worrying about. It is the cost in terms of not doing all the other things that amount of money could pay for. High-speed rail is unimaginative and old-fashioned and we could be doing something far more exciting.

Written byMatthew Lynn

Matthew Lynn is a financial columnist and author of ‘Bust: Greece, The Euro and The Sovereign Debt Crisis’ and ‘The Long Depression: The Slump of 2008 to 2031’

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