High Speed Rail (West Midlands–Crewe) Bill

Baroness Kramer Excerpts

2nd reading (Hansard): House of Lords
Monday 9th September 2019 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I am a strong supporter of HS2. I was before I had the privilege of becoming a Minister in the last 18 months of the coalition Government, when I became the Minister responsible for phase 2. Hours and days were spent on the ground seeing not only extraordinary challenges but huge opportunities to regenerate economies that had fallen behind and essentially to change the future direction for many people, particularly in the north. However, I do not want to use this speech to talk in a general way about HS2; I want to focus on a number of issues that genuinely concern me.

Others have said this, but I shall pick it up in a slightly different way. This is clearly an opportunity for the Department for Transport, as well as other parts of government, to look again at how large, complex projects are costed. Recognising that the estimates cost of phase 1 had risen from £27 billion to somewhere between £36 billion and £38 billion did not happen overnight. Those who would have seen and recognised that they needed to make those changes never did so in the public arena—there was no transparency.

Frankly, I find this completely ridiculous. We should never look at a cost estimate in the early stages of a large and complex project and treat it as anything more than tentative. There should be an ongoing process of constantly updating. Having to say that the number is higher should not be treated as betrayal or failure; it is merely recognising and understanding the detail. I say to many here that this really needs a change in attitude at the Treasury and, frankly, much braver politicians in order to recognise that this will frequently be the pattern in projects of this kind.

I want to put on the record my gratitude to the whistleblowers who alerted many on the outside to the cost issues with HS2. I ask the Minister: will HS2 and the Government step in to amend some of the retaliation and harm that those whistleblowers have suffered? It was terrible and inappropriate, and it really needs to be remedied. We need that kind of honesty and integrity in this project.

I also want to look at cost-benefit analysis. My noble friend Lord Bradshaw referred to it in the more technical terms of the WebTAG. Allan Cook highlighted in his stocktaking report the inadequacies of the Government’s cost-benefit tools in providing any kind of sensible answer for projects on the scale of HS2, particularly with its broad impact on regeneration.

I feel this harshly. I had such fights inside the department during my period as a Minister. I have a banking background: I understand net present values and how you look at calculating returns. It was absolutely clear that the methodology was very inappropriate. The Government’s method completely fails to recognise more than very limited aspects of regeneration and economic benefit. This leads to poor decision-making on projects because, in particular, it does not recognise the uplift in land values. That would give us a much better mechanism for making decisions about these projects, as well as providing us with mechanisms to find ways to fund parts of these projects. Where there is land value uplift, we ought to be taking some of that in to pay for the project in the first place.

The current methodology is particularly hopeless for a phased project. Under its methodology, it captures all the costs of all the various phases and only includes a small part of the revenues and benefits that come from the later phases, because of the time guillotine inherent in the process. That has to be completely changed. I really think that it will take some outside pressure to get that kind of sense. It is perfectly within the department’s scope to look at all of that again.

I have a question for the Minister. I am really concerned about what on earth we will do with passengers now that the opening date of phase 1 is estimated not to be 2026 but somewhere between 2028 and 2031. I went into a lot of those passenger forecast numbers closely when I was in the Government. Even then, I was terrified that we could not cope with the forecast growth in passengers on routes between London and the Midlands with a 2026 opening. I do not know how we will cope without HS2 open until 2028 or even 2031.

I know that the industry is trying to use things such as changes in the way it manages fares to redistribute passengers through the day. Frankly, it will only make changes at the edges. In a couple of speeches, I joked about strapping passengers to the roofs of trains. It is no longer looking like a joke. We really are looking at tremendous overcrowding and over-demand. I have no idea what is being put in place now that we know that the opening of HS2 phase 1 will be delayed. This really ought to be a very urgent project.

As I said, I wanted to bring up one or two issues. Perhaps the Minister could help me with one last issue. HS2 is a project that demands sophisticated rail. I know that the whole industry has been reliant on British steel as the source of that rail. We know that the future of British Steel is in question. I hope she can explain to the House how we should respond or how she would see this set of issues. If somebody came to me and asked what major risks could further delay the project and put up costs in a way that we had not anticipated, that one would be somewhere near the top of my list.

--- Later in debate ---

[Baroness Vere of Norbiton]

I suspect that I may already have that list, but I would be delighted to receive it again.

My noble friend Lord Framlingham made what I think noble Lords will agree was an expected contribution, mentioning costs and value for money; indeed, that is what the Oakervee review will consider. He spoke about whistleblowers, as of course did the noble Baroness, Lady Kramer. We are clear that any whistleblowers are covered in the UK by the whistleblowing legislation, and absolutely nothing should stop them coming forward. The Oakervee review will of course look at all available evidence when assessing the scheme.

[Baroness Kramer]

Would the Minister be willing to meet on one occasion to take up that issue of whistleblowers?

[Baroness Vere of Norbiton]

I would be delighted to meet the noble Baroness when diaries allow.

My noble friend Lord Framlingham mentioned fraud. I would like to be clear that neither the Serious Fraud Office nor the police has contacted HS2 regarding any investigation, nor made any request for information in that regard.

The noble Lord, Lord Greaves, asked whether HS2 was competent. The Oakervee review will of course look at how we have arrived at the place we have, and at whether HS2 as it stands is able to deliver the project. We would not want to prejudge that outcome, but we have been working closely with the new chairman to ensure that HS2 has the right skills at this important stage to take the project forward.

The noble Baroness, Lady Randerson, mentioned salaries, expressing surprise at the number of people who are paid quite high salaries within HS2. I do not know that I agree with her on this one. These are very technical positions, which need quite a lot of skill and experience, and I have not yet been able to see any benchmarks which would mean that they are not reasonable salaries to pay to these highly skilled technicians and engineers.

The noble Lord, Lord Tunnicliffe, raised the important issue of connectivity. I said in my opening remarks that HS2 will be able to connect the major cities of the UK, but also described how the hub-and-spoke system then goes out to more than 100 cities and towns, which will be able to benefit. It is probably slightly early days now to think about those towns, because we need to get closer to the date of completion and services. However, I agree with him that whoever is in government at that time—I very much hope that it will be the Conservatives—will work with local authorities to make sure that we have an integrated transport system so that the buses connect with the trains, and all those things happen that we all would like to see.

The issue of Old Oak Common was raised a couple of times. We published a response to the Economic Affairs Committee report in July 2019, which mentioned stopping at Old Oak Common. There are few benefits, because stopping there means that you cannot transfer on to other transport systems, but the Oakervee review will of course look at that issue.