McLOUGHLIN PATRICK 2Patrick McLoughlin is the Secretary of State for Transport and MP for Derbyshire Dales.

Yesterday saw the Second Reading of the HS2 Preparation
Bill in parliament. It was a significant milestone for the project, with Parliament voting on it for the first time. It also enabled me to explain to
the house why I believe this is the right project for Britain and how we are
managing the costs of the project, as well as reassuring MPs that I am
committed to compensation that is fair and design that minimises the
environmental impact.

HS2 is a vital part of the infrastructure overhaul that
this Government is delivering so that our country can compete in the global
race. It will be the first line to be built north of London in 120 years and
the simple fact is that, without it, the key rail and road routes connecting
London, the Midlands and the North will soon be overwhelmed. Rail travel has
doubled in a decade and even on moderate forecasts, the West Coast Mainline
will be full by the mid 2020s. Therefore, this is not a choice between
upgrading the existing railway and building a new railway. It is a choice
between a new high speed line and a new conventional railway. The significant
additional benefits make high speed the right answer.

As well as addressing the issue of capacity, HS2 offers
huge opportunities to create jobs and boost our economy. Our conservative
estimates are that the project will create 100,000 jobs. The Core Cities group
goes further, predicting that it will underpin four times that number, with 70
per cent of them outside London. It is expected to provide around £50 billion
pounds worth of economic benefits for the economy, with some estimates
suggesting it will add more than £4 billion before it is even open. Our towns
and cities, particularly across the North and Midlands, cannot afford to lose
out on these opportunities.

Whilst we can’t afford not to do it, it is vital that we
control the costs and deliver maximum value to the taxpayer. That is why I am
writing to HS2 Ltd setting them a target price for delivering phase 1 of £17
billion. This accounts for important recent design changes to the scheme such
as the decision to build a tunnel from Old Oak Common to Hortholt.

As a responsible Government, we must be prudent. This
means allowing the right level of contingency and for that reason the Government
has set an overall indicative amount for the project of £21.4 billion for phase
one and £21.2 billion phase two, a total of £42.6 billion in 2011 prices which
includes £14.4 billion of contingency. Clearly that is a large contingency and
we expect the final costs to be lower but that is the right way to plan and
manage the project.

There will of course also be requirements for new rolling
stock on key intercity routes linking London and the North over the next twenty
years – we’ll need that with or without HS2. We are therefore budgeting £7.5
billion for HS2 rolling stock. To put this into perspective, the current
Intercity Express programme to replace trains on the East Coast and Great
Western lines which is creating jobs in the North East will cost £4.9 billion.

I do not take these figures lightly, but the fact is that infrastructure is an investment in economic growth. That is why we are
investing £14.5 billion to build Crossrail, just as £11 billion has been
invested in new infrastructure at Heathrow since 2003. It is also important to
understand these costs in context: over the period of construction, the cost of
HS2 will be less than 0.15 per cent of GDP. This is an investment that this
country can sustain and one that it needs.

As well as controlling costs, I am absolutely determined
that we design HS2 carefully, consult properly and compensate fairly. All major
infrastructure projects have a degree of controversy. Yet while I can't deny
that a project of this scale will have an effect and there will be those with
understandable concerns, I do believe the positive experience of our first high
speed line in Kent shows that the consequences can be managed. Indeed, on the
detailed route for phase one, we can already point to effective mitigation,
with 5.8 of the 12.4 miles of the phase one route that crosses the Chilterns in
tunnels and 3.5 miles of it in deep cutting.

As well as effective mitigation, it is my duty to deliver
a compensation package that is fair. That is why we decided to introduce the
exceptional hardship scheme and why, very soon, we will start a new
consultation on the full compensation scheme for the first stage. This will
include consideration of a range of options including a property bond, on which
many MPs have made representations.

Yesterday’s vote demonstrated once again that there is
cross-party support for the project and it underlined the strong belief in
parliament in the benefits it will deliver. There will no doubt be challenges
on the way. The fact is that the easiest thing for the government to do would
be not to build it. But that would also be the wrong thing to do. HS2 is a once
in a generation project that can be an engine of growth for the whole country.