Andrew Smith is a Conservative Councillor in Westminster. He was born and brought up in Yorkshire and is a Westminster-based public affairs consultant. Follow Andrew on Twitter here.
The former Transport Secretary and Chancellor Alistair Darling’s intervention into the debate on HS2 is yet another high profile former supporter coming out in opposition, following in the footsteps of his Labour colleagues Lord Mandelson, who has also called for the scheme to be abandoned and Ed Balls who has made sceptical noises about costs.
As Tim Montgomerie has pointed out, the opposition to HS2 is becoming a very broad coalition bringing together these recent Labour converts with leading Conservatives such as Boris Johnson, a range of MPs whose constituencies the line will pass through and an increasingly energetic UKIP campaign against the link.
The latest spate of opposition to the scheme has followed recent increases in the estimated cost of the project. Especially suggestions that the latest £43 billion price tag that the Government have put on the scheme will be dwarfed by final costs of be £70 or even £80 billion.
Given the growing economic and political opposition to the scheme people are perhaps right to ask, wouldn’t the rational thing be for the Chancellor to pull the plug on the scheme, as many believe he was planning to do last summer?
The answer to this question depends on your views about the accuracy of the latest claims about rising costs and the role of infrastructure in delivering future economic growth.
Conservatives are of course right to maintain our natural scepticism of involvement in grand projects and the risk that the costs of public sector schemes can run out of control. Even accepting these risks,however, the recent suggestions about the exploding costs of the project do seem to be divorced from realty.
The IEA’s estimate of £80 billion seems to be based on questionable assumptions about significant future route changes, which could not be covered in the £14 billion of contingencies already part of the current DfT total cost estimate of £43 billion, and claims that that any investment delivered near new station locations from regeneration to new transport links should be seen solely as cost associated with the scheme.
The claim that Treasury officials believe costs might rise to £73 billion seem to be based on a statistical sleight of hand by adding VAT and inflation over the construction period on to the costs. This is against Treasury guidance on how projects should be costed, but seems to have delivered what Treasury officials presumably wanted to happen and raised further questions about the viability of the scheme.
Scepticism from Treasury officials should be welcome. They are doing what we recruit some of the brightest and the best civil servants to the Treasury to do which coming up with clever ways to avoid spending money.
Whilst caution from Treasury mandarins might have its place, as the Chancellor has been reported as saying, if it was up to Treasury officials not one piece of major infrastructure investment in the past 30 years would have been constructed. The sole investment in Britain’s transport system in this period would probably have been a few local roundabouts and the odd by-pass.
The Treasury wanted to kill off the investment in the M25, the Jubilee Line extension, HS1 and Crossrail. All these schemes raised fears of out of control costs and white elephants. I am sure that if the clock could be turned back few people would want to see these successful schemes – and the development and growth they delivered – disappear .
The cost estimate of the cost benefit ratio of HS2 to Birmingham at 1:7 is much stronger than the pre-construction estimates of the Jubilee Line extension and the cost benefit ratio for the second phase of HS2 linking Leeds and Manchester is expected to be much stronger than the first phase.
Cost-benefit estimates are of course useful, but in the words of the Treasury Minister Lord Deighton, estimates 13 years before even the first phase is operational can be just ‘a sighting shot’ at calculating demand and associated growth and the wider transformative effects from a major investment like this.
It might be that these estimates might end up to be optimistic rather than conservative, it might be that the UK economy doesn’t grow significantly over the coming decades, associated demand for travel stops increasing and the current capacity we have on the West and East Coast mainlines turns out to be adequate. It might be that costs of the scheme do run out of control and the wilder estimates of the final bill turn out to be accurate. It might be that better north-south connections don’t help the delivery of new jobs and new investment in Birmingham, Manchester, Sheffield and Leeds
All these scenarios might come to pass, but I for one believe that this is a dismal view of the UK's future. The successful delivery of the 2012 Olympics, the current construction of Crossrail which is on target and on budget and the success of other major infrastructure schemes should show us that the UK can successfully deliver major infrastructure and that infrastructure can transform economic growth.
We therefore need to look beyond the doubts of the HS2 naysayers and have confidence in our country’s future and the role that infrastructure like HS2 could play in getting us where we want to go as a nation.