Delivering value for money on HS2

12.04.23

In February 2020, the then Prime Minister Boris Johnson committed to building Northern Powerhouse Rail across the Pennines and both legs of HS2. His government had, he said, “the guts to take a decision – no matter how difficult…that will deliver prosperity to every part of the country.”

There have been a series of changes to the route since then. The biggest blow came in November 2021, when the government axed critical sections of the Eastern Leg of HS2 as well as almost all of the promised Northern Powerhouse Rail new track in Yorkshire.

These cuts will – ironically – deliver less good value for money in the long-run.

As Tom Forth of Open Innovations has argued, all of the government’s own modelling has demonstrated that the now-scrapped section between Birmingham and Leeds delivered the highest benefit-cost ratio (BCR). The London-Birmingham leg will be the first to be built, despite being the worst value for money.

NPP Chief Executive Henri Murison writes…

The changes which have been to large-scale infrastructure projects such as HS2 and Northern Powerhouse Rail in recent years aren’t just a headache for transport planners, it’s hugely expensive – particularly when it comes to redesigning stations.

It’s also worryingly symptomatic of the UK’s wider problem with ambitious infrastructure investment as a whole, especially for projects outside London and the South East.

In recent decades, the UK has fallen into a bad habit: detractors demand sections be chopped off to save money, those changes require new designs which, in turn, drive up the cost of the surviving bits of route.

The uncertainty deters investment and development. Worst of all, it makes those remaining sections far less economically transformative. When we whittle down major infrastructure projects, we end up with a pale imitation of the original vision which does not deliver the productivity transformation we were promised and, ironically, is less good value for money. 

The original benefit-cost ratios for HS2 heavily relied on traditional transport economic modelling, which has a narrow focus on journey time savings. What they didn’t ever do was analyse the effect of delivering a real, properly connected Northern Powerhouse.

Our research commissioned ahead of the Oakervee Review took into account the multiplier benefits of boosting rail services across the North and building HS2 in full alongside investing in skills, education and extensive devolution. We found it could unlock a £1trillion jackpot and create almost a million more jobs within the coming three decades.  

After all, this was never about shaving a few minutes off the time to London. The main case for HS2 and is and always has been about capacity.

The lack of capacity on our rail network is a blight on our economy. HS2 unlocks capacity for the whole country, not just the cities along its route, which is vital for delivering efficient, reliable passenger and freight services.

The next time you’re stuck behind a queue of articulated lorries on the motorway, remember that the freight could be transported far more quickly, not to mention in a far more eco-friendly way, if we put it onto rail instead.

So, while these projects do cost a lot, that money doesn’t go up in a puff of smoke. It goes into building a transport network that’s fit for the 21^st century, bringing us closer to net zero and boosting productivity – meaning that projects like HS2 end up paying for themselves many times over.

As George Osborne told the Andrew Neil Show: “You do need the big infrastructure projects. All the arguments that were made against HS2 were made against the M25, the Channel Tunnel, the original motorway system.”

And let’s not forget that those big numbers are spread out across decades. In the year to April 2022, the government spent £5.4 billion on HS2. We spent nearly ten times as much (£53.5bn) in interest payments on national debt.

There are also sensible ways we can find savings. For example, we can lease rather than buy the new trains, enabling us to address inflation in industrywide construction costs whilst keeping up the pace of completing Phase 1 between London and Birmingham.

Lastly, I promise that we will keep fighting tooth and nail to make sure that this region doesn’t miss out.

Bringing high-speed services to Sheffield and Leeds would create 50,000 jobs, support 8,000 new homes and deliver a £54 billion boost to the local economy – but we’re still yet to see the long-awaited Leeds review on how to make that happen.

The good news is that Rail Minister Huw Merriman, a trusted and credible voice on this issue, has said he plans to meet leaders in Bradford and Leeds in the coming weeks to discuss options.

The question remains, is the UK – the birthplace of modern railways – capable of finishing what we started?

While we dither, France, Germany, Spain, Italy and many more of our competitors are investing billions in their own networks.

I hope we don’t get left behind.