High Speed 2 (Economic Affairs Committee Report)

Lord Kerslake Excerpts

Thursday 23rd January 2020 Lords Chamber

[Lord Kerslake (CB)]

My Lords, I declare at the outset that I am a firm supporter of HS2 and—like the noble Lord, Lord Adonis—believe strongly that the Government should overcome their current wobble and get on with delivering it. Before coming to the Economic Affairs Committee report, however, I will set HS2 in the wider context of economic rebalancing and say a few words about the UK2070 Commission, which I chair. We are an independent commission looking at the deep-rooted spatial inequalities in this country. We are consciously long game, going back 50 years and forward 50 years—hence the title—but we have, of course, made recommendations for the here and now.

The conclusions of our first report make for pretty sobering reading. First, in a comparison of the UK with 30 OECD countries across a broad range of 28 indicators, the UK comes 28th in interregional inequalities. These are Eurovision Song Contest levels of performance. Secondly, despite the efforts of successive Governments to tackle this gap, it has grown wider. Thirdly, unless we take decisive action, the gap will continue to grow, with London and the wider south-east taking over half the future jobs growth. We all know that the consequences of this will be missed economic opportunity, widening divisions and growing pressures in London and the south-east. In short, nobody wins.

Our report finds that the actions of successive Governments have been fragmented, too short-term and significantly outweighed in spending by the investment that has gone into London and the south-east. We have had a regional policy in this country; it has just worked in the opposite way from how we all thought it did. Rebalancing the UK economy is not mission impossible, but it requires a radical change of direction.

Our second report set out seven priorities—not one. One was to invest in a connectivity revolution. The transport and digital networks in this country reinforce the patterns of inequality and low productive output. To address this, we need a revolution in connectivity that builds a network between cities, within city regions and beyond cities to the disconnected towns. The key point here is not about individual transport schemes but about creating a new connected network. We need HS2, Northern Powerhouse Rail, Midlands Connect and, of course, much better buses. Only then can we realise the full benefits and address the disparities.

Since publication of our report, we have had the general election and the new Government’s commitment to levelling up, which I welcome. However, if the Government genuinely want to deliver on the ends, and avoid the mistakes of the past, they will have to summon up the courage to deliver on the means. Only large-scale, long-term and comprehensive action will make a real difference. The pea-shooter policies that have characterised the past will not hack it.

This is the wider context in which HS2 needs to be considered. The Economic Affairs Committee asks some important questions. Of course, projects must be properly managed, the costs managed and value for money secured. You have to review and consider the project as you go along. I await with interest the NAO’s report, and we should learn from the experience of the project so far—not least on predicting costs—but this should not be a barrier to making progress and getting on with the scheme.

As the Government’s own response to the Select Committee report says, HS2 is integral to

“the Government’s plans to build a stronger, more balanced economy … will form the backbone of the nation’s future rail network; is required to deliver the … Northern Powerhouse Rail … will bring significant benefits to the North of England”,

with 70% of the jobs outside London and the south-east; and—this is the crucial point—is

“a once in a generation opportunity to transform rail connectivity in Great Britain, designed to last for 120 years.”

I could not have put it better myself. Given this clear view from the Government, why do we have the current doubts? Of course there is the repricing, which we always knew would happen. It is one of the inexorable laws of life: costs of projects go up. If noble Lords want me to give examples of ones that have gone up even more, I would be happy to do so, but it might be rather embarrassing. The key point, as the noble Lord, Lord Adonis, said, is that we need information on the cost, disruption and duration of upgrading the existing network to deliver the same capacity release. I would be very keen for Ministers to respond on that.

Just as the costs of projects are often underestimated, however, so too are the benefits. It is worth recalling that the Jubilee line had a cost-benefit ratio not of 1:1, but 0.95:1. It is now one of London’s top three busiest lines. These things change.

I think the real reasons for the delay go deeper than the cost increase. The Government’s woeful handling of the independent Oakervee report is instructive. The committee completed its work to timetable by the end of October but, as we all know, it has still not been published. Instead, we have had a series of leaks and a dissenting minority report from the noble Lord, Lord Berkeley. It is unusual to get the dissenting report before we get the report itself.

Andrew Sentance, a senior and respected economist, who was also a panel member, spoke to the Yorkshire Post this week. He accused the Government of being “duplicitous” by suggesting that the report was in draft when it has clearly been finalised. He said that the panel

“had two-and-a-half months to do the report and the Government has sat on it for three months”.

He also said that the press reports of the review had been “spun by No. 10”—gosh—as being “very unfavourable” when the “general view” of the review panel was that it “wanted HS2 to happen”. These are very strong words and very concerning.

The suggestion is that the Government might be thinking again about this and that someone powerful is taking a view about whether the project should proceed. My advice is: do not make that serious error. The noble Lord, Lord Adonis, spoke powerfully about the strength of feeling behind the project. The Government’s decision on HS2 will send a clear signal as to whether they are serious about levelling up or whether this is just an empty political slogan. They need to get Oakervee published, end the uncertainty and, to coin a phrase, get HS2 done.