Economic Case for HS2 (Economic Affairs Committee Report)

Lord Rowe-Beddoe Excerpts

Wednesday 16th September 2015 Lords Chamber

[Lord Rowe-Beddoe (CB)]

My Lords, I also had the pleasure of serving on this committee under the able chairmanship of the noble Lord, Lord Hollick. This inquiry started before the Summer Recess last year. Our report and recommendations were published in March and the Government’s response was received in July. I remind noble Lords of this timeline, for, despite a general election, it seems somewhat unsatisfactory to deal with a subject costing multiple billions of pounds in such a way. I misquote deliberately the bard of Stratford-upon-Avon: it moveth with all undue haste. My concern is that the Government’s response, which has been alluded to by some noble Lords, is very much, “Here is your answer; what is your question?”.

Remember what the press release accompanying our report said. The headline was:

“The Government has yet to make a convincing case for a £50 billion investment in HS2”.

Have they made a convincing case in their response, or have they adjusted the facts to support the political commitment? To progress such a project, forensic examination must take place and be given priority in identifying areas of substantial cost reductions, which I assume that Sir David Higgins and his team are undertaking. We are all only too familiar with that well-known phrase “cost overruns”. It covers so much in everything that we seem to do. An article written by Daniel Albalate and Germà Bel, two professors at the University of Barcelona, who were also two of our witnesses, analysed high-speed rail in five countries. In that article they gave us a meaningful warning. The fixed costs of high-speed rail investment are huge. Cost overruns are notoriously high.

In the context of cost, I also bring to your Lordships’ attention some evidence given to us in March this year by a former Permanent Secretary, Sir Tim Lankester, who found it surprising that the department’s accounting officer had,

“so far not insisted on a formal direction from his minister before authorising … expenditure on the project, as he is required to do under Treasury rules if the value for money test fails to be met”.

Will the Minister inform the House of the current situation in that regard?

Despite much expert advice from many quarters supporting our argument for a more convincing case to be made, the juggernaut moves on. In a letter written to the Prime Minister at the end of May this year, which has been mentioned by the noble Lord, Lord Hollick, and by the noble Baroness, Lady Mallalieu, 34 prominent UK experts—to correct the noble Baroness—including senior engineers, transport planners and economists, under the lead of Professor James Kroll of University College London, called for a pause. It has been suggested that that could happen at the time of the hybrid Bill. It would be a pause to look again at the role of HS2.

The issues are confusing. Do we want to get to Birmingham quicker? Do we want to have a northern powerhouse and a connection at the top end, which seems to me the obvious choice? As the noble Lord, Lord Prescott, said, we could start on that now. Or is it a question of extra rail network capacity, as has recently been mentioned? Then there are the environmental and economic justifications. However, there certainly does not appear to have been a pause. If there is, it is a very silent one.

As regards the Government’s response to our report, the noble Lord, Lord Hollick, wrote to the Secretary of State on 21 July and drew to the latter’s attention 10 clear unanswered questions. The answers from the department and the Secretary of State arrived at the beginning of September. The department’s answers to the 10 questions were contained in one paragraph, which states, “considering that the Government’s position on these matters is well established”. Basically, that is how those 10 questions were answered. It smacks again of the adage: “Here is your answer. What is your question?”.

Among those 10 questions was a request to estimate the overall reduction of cost to HS2 of terminating the line at Old Oak Common. I am sure that other noble Lords will talk about that as I note the time, but it must be done. We asked about the necessary station redesign, how much it would cost and what would be the effect on the cost-benefit analysis. We also asked whether the Government could reduce the cost through design change to accommodate a lower maximum speed. Why do we have to travel as fast as this thing is supposed to travel when high-speed trains travel at a lower speed everywhere else in Europe? Such a change would clearly save money.

In conclusion, we need greatly improved transport infrastructure. I believe that we can satisfy the northern powerhouse objectives but we must look at lesser speeds and longer trains. Pricing for passengers is also very important. Rail freight has not as yet been mentioned. It is the poor relation of the whole exercise.