High Speed 2 (Economic Affairs Committee Report)

Baroness Neville-Rolfe Excerpts

Thursday 23rd January 2020 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, it is a pleasure to be sandwiched between two eloquent old friends—the noble Lords, Lord Kerr of Kinlochard and Lord Adonis—and not to be discussing Brexit. Instead, today we are discussing the most important decision on public infrastructure currently faced by this country.

It is widely accepted that if the full HS2 scheme is undertaken, the total cost will probably exceed £100 billion. Even today, that is an awful lot of money. It compares with £32.7 billion when HS2 was first given the green light, according to Martin Williams of “Channel 4 News”; I am grateful to the Library for digging that out.

On the benefits side, supporters of the scheme say that HS2 will revitalise the national rail network, providing extra capacity, with beneficial effects going well beyond the places served. This will be especially favourable for some northern English towns and cities that have fallen behind in recent decades.

Initially, the project received cross-party support but a significant body of opinion has always had doubts. The Economic Affairs Committee report before us is in this vein, raising a number of doubts and putting forward several pertinent questions, as we heard persuasively from my noble friend Lord Forsyth.

More recently, the dissenting view of the noble Lord, Lord Berkeley, as a member of the Oakervee committee, has raised further doubts. We will hear from him but he seems to believe that the scheme’s benefits may be less than its costs. As is clear from public surveys, there is also a general perception that the scheme is much too expensive. Worse, leaks of Oakervee’s draft report suggest that the committee also has reservations. There has already been significant expenditure on the project and the rate of expenditure is due to increase sharply from this point on, so we need to decide now whether to proceed, to modify or to cancel it.

What should the Government’s approach be? I am with others; I suggest that they should concentrate on the economics and be realistic about the prospects and likely costs. Political considerations will always be present in such decisions involving public finance, but it would be wrong to proceed in the face of evidence that the economics do not stack up. I fear that it is beginning to look like that, at least for the full scheme.

As a major project, HS2 is in particular danger of giving rise to that feeling of pride and hubris that seems to bedevil such undertakings. Consider train speeds: as the committee pointed out, it is peculiar to envisage speeds for HS2 faster than those yet achieved anywhere in the world when the UK is considerably smaller than other countries with comparable systems. If the scheme is to proceed in full, we need to see much more rigorous cost-benefit calculations than have hitherto been supplied. As the Benches opposite have often asked, with my support, where is a proper impact assessment?

Can we also look at the dynamics—the development and transformation that will follow the line, a point well made by the ICE? I saw for myself their “whole-life benefit” coming to life, with new housing and business parks, when I made a Conservative Party visit to Birmingham. If we could speed up the northern parts, that would obviously bring even more benefits.

As a businesswoman, however, I am also concerned about the management of this and other public infra- structure projects. I was a huge supporter of Crossrail, which has a substantial net benefit. The tunnels and stations have been a great success, but the signalling system was separated out. It has proved a disaster and delayed the whole project. With ticket income postponed, this has taken a scythe to the net benefit and, indeed, had knock-on effects for other parts of our now amazingly crowded Tube lines.

We must learn from this and from experience abroad. With the Library’s help, I found a 2016 PwC report that confirms my impression from my time as Energy Minister. First—thanks, I suspect, to the dead hand of Treasury rules—risk falls almost entirely to the contractors, who have to charge more than they would if risk were shared. The state should take the first slug of risk, as I argued we should do for the new nuclear power stations. The cost there falls by about a third.

Secondly, a project of such national importance needs to be run as a single entity with few large contractors and a preference for the best in the UK—the approach taken in France. Our construction industry is much more fragmented, with a layering of costs in the supply chain adding administration and margin to the cost and introducing scope for aggressive practices. When I became a director of a building company in the 1990s, I was horrified to discover that we made profit in this most competitive of industries by getting money in before we spent it and agreeing enthusiastically to variations because the margin was much better on them. I am sure things have improved, but I would like the Minister to comment on whether this will be an integrated project or split into pieces in a dubious quest for competition. If we want to help small companies, promote green features—many of us were there last night to listen to the brilliant Sir David Attenborough—and foster apprenticeships and regional supply chains, all of which I strongly support, it may be better to make them part of one central contract run by a project manager within a single entity and with clear responsibility.

Given all this, it is perhaps no surprise that, again according Channel 4, HS2 will be six times more expensive than France’s very expensive LGV Méditerranée, which opened in 2001 and cost £16.9 million per kilometre—albeit that there were fewer expensive stations to build.

My final point is to invite a debate on what we might do with the money if HS2 is abandoned or reduced. First, we could make compensatory improvements. A researcher at the Adam Smith Institute has suggested: multi-level junctions at Ledburn, near Leighton Buzzard, and at Hanslope, reducing the need for trains to slow down; in-cab signalling for the Pendolino tilting trains, which could then go faster; and improvements to the Chiltern and Northampton lines. There is also scope for investing in longer trains, longer stations, sensors to avoid collisions and, of course, wi-fi so that people can work on the train.

Secondly, we could make improvements on more northern lines—a huge area of potential, as we have heard, with lots to do and to be achieved.

Thirdly and finally, transport money would be freed up for other causes. Forgive me for sounding like the noble Lord, Lord West, but we must get on with the Stonehenge tunnel, at an estimated capital cost of a mere £1.7 billion excluding VAT, according to Highways England. However, I hear rumours that it is to be cancelled yet again. I hope that the Minister can reassure me.