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Economic Case for HS2 (Economic Affairs Committee Report) — Motion to Take Note

Part of the debate – in the House of Lords at 3:55 pm on 16th September 2015.

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Photo of Baroness Blackstone Baroness Blackstone Labour 3:55 pm, 16th September 2015

My Lords, as a member of the Select Committee that produced the report on the economics of High Speed 2, I stress that we were unanimous on the need for infrastructure investment in the UK. It is vital to the success of our economy, and if we neglect it we will not attain the economic growth that we need to build prosperity. We also agreed with the Government’s aim to rebalance the UK economy by creating a northern powerhouse with high growth and increased productivity in the north of England. However, after taking evidence from many expert witnesses, we were unconvinced that this costly project was the right infrastructure investment to which to attach such high priority. We were unconvinced, too, that it was the best way to achieve the Government’s goal of a northern powerhouse.

The Government claim in their response to the Select Committee report that the case for HS2 is clear and robust. Regrettably, it is neither. Of course there is a case for it, but much more clarity is needed about its value, about alternatives using existing lines, about the opportunity costs of the investment, about the robustness of the Government’s claims about capacity, about long-term projected demand for rail travel on this line and about its value with respect to connectivity to the north of England.

These questions are particularly pertinent in the context of austerity policies in which the Government are cutting public expenditure in many areas. Nearly all government departments are struggling to produce illustrative cuts of 40% and 25% for the spending review. Apparently, there will be little money for capital development. In such circumstances, many will ask whether allocating £50 billion for this project is justified. Moreover, as has just been suggested, it will be an underestimate when the extra work needed to mitigate environmental effects and the extra compensation that is likely to be demanded are taken into account.

Another reason for questioning it is that a high proportion of the beneficiaries will be the business people who travel on this line, who will not, according to the Government’s current plans, be charged higher fares, in spite of the time they will save on these ultra-fast trains. Can the Minister say why the Government are not assuming any upward adjustment of fares to reduce the high cost to the taxpayer? Not raising fares will increase the regressive nature of this investment. Why on earth is the Department for Transport treating Network Rail capital spending on an as-incurred basis rather than as an asset on which a return is required from fare revenues and access charges?

The second question of context about which I raise concerns is the Government’s projections of demand. I readily concur that the demand for rail travel has gone up greatly over the last 20 years. It does, however, seem dangerous to assume that demand from business travellers will go on rising exponentially. High-speed broadband, video conferencing and further technological developments seem likely to reduce the need for inter-city rail travel by business men and women. Will the Minister tell the House why there has not been more explicit consideration of these factors, which are likely to affect demand?

On capacity on the west coast main line, is it not odd to attach so much importance to capacity problems, when, as my noble friend Lord Hollick mentioned, long-distance trains for Euston are only 43% full on average and even at peak times are between only 50% and 60% full? Indeed, there is more spare capacity on this line than on any other main line out of London, with the exception of HS1.

As to alternative solutions, the Government concede that extending all trains to their maximum length makes an important contribution, but this solution has by no means been fully implemented. Would not a further substantial reduction in the number of first class carriages also help, as my noble friend Lord Hollick suggested? Railway experts also suggest that technological improvements to signalling can increase the number of trains using existing tracks. Why have the Government made no reference to this in their response to the committee?

Is there not a danger that many other parts of the railway system where investment is needed will be neglected while HS2 is given priority? We have already seen recent cancellations in starts for electrification schemes elsewhere. The mere fact that HS2 is planned to travel at a maximum speed of 400 kilometres per hour suggests that it has become something of a vanity project. This ultra-high speed, considerably higher than that of high-speed trains in other countries, adds a great deal to the cost and uses resources that might be applied to improving other lines. Will the Minister comment on this, too?

On connectivity in the north and the stimulation of economic growth, the Government have failed to respond to the committee’s evidence that capital cities appear to be bigger beneficiaries of high-speed links than provincial cities connected to the capital via these lines. Nor have the Government given adequate consideration to comparing the relative contribution of £50 billion of other forms of investment in the north of England, such as further education and skills training or investment grants for SMEs to give but two examples. The committee also suggested that improving conventional rail links in the north, and starting the investment in high-speed trains across the north of England, might make a greater contribution to its economic reinvigoration. The Government’s claim that HS3 can be built later is not a satisfactory response.

To conclude, I ask the Government to do further work on the many issues raised by the committee before the enabling legislation for HS2 goes through Parliament. To do otherwise, in the words of one of the experts who gave us evidence, is simply taking a punt.