Transport Funding: Wales and HS2

Debate between Jonathan Edwards and Jamie Wallis

Tuesday 26th October 2021 Westminster Hall

[Dr Jamie Wallis (Bridgend) (Con)]

It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate the hon. Member for Swansea West (Geraint Davies) on securing this debate. He and I serve on the Welsh Affairs Committee and he alluded to its recent report on rail investment in Wales, which had a section on HS2. He will remember, from the fierce debates that we had during those private meetings, that he and I disagree very much on the essence of HS2 and its benefits to the people and the economy of Wales, but I admire his passion and I believe that we as Welsh MPs should fight for as much money for Wales as possible. There is absolutely nothing wrong with that.

I firmly believe that HS2 presents an opportunity for us to build back better not just for England, but for the United Kingdom as a whole. I welcome the hon. Member’s comments that investment in the main spine down the United Kingdom benefits the whole United Kingdom. My hon. Friend the Member for Montgomeryshire (Craig Williams) highlighted how his constituents and those in north Wales will benefit with respect to the east-west nature of their day-to-day travel, with journey times to London from Birmingham, their closest main hub, being significantly reduced. This investment will therefore benefit them.

To turn to areas such as my Bridgend constituency, in the past 20-odd months of being an MP, I have seen a huge number of small and medium-sized enterprises that are heavily involved in Government infrastructure projects, whether that is Hinkley Point C or HS2. I actually surveyed all of the businesses on one of our industrial estates. There were only a few dozen and not all of them replied, but over half of them were currently either servicing or considering tendering for a UK Government infrastructure project, most notably Hinkley Point C and HS2. There are currently 2,000 businesses involved in the development of HS2, with 9,000 people working on the line, and many of those businesses are based in south Wales. The whole of the United Kingdom gets to bid and tender for this work. That money and investment provides job security and opportunities for people across the whole of the UK.

The Select Committee report was slightly unfair and contains some inaccuracies. It suggested that the Welsh Government had not received a single penny from the Department for Transport spending on HS2. I would like to highlight that between 2015 and 2019 the Welsh Government received about £755 million in Barnett consequentials. I appreciate that the hon. Member for Swansea West is referring to future Barnett consequentials, but it is not the case that the Welsh Government have received nothing. They have received Barnett consequentials to date.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

I do not think anybody is discounting the fact that increasing Department for Transport expenditure leads to overall consequentials for Wales. The question is on the impact of the HS2 element. Having mentioned the £755 million for Wales, what are the figures for Scotland and Northern Ireland, considering that they get 100% Barnett consequentials? That is the issue at hand.

[Dr Wallis]

I thank the hon. Member for his intervention. I represent a constituency in south Wales. Much has been made of the benefit to mid and north Wales, and I am trying to highlight some of the benefits to south Wales. If there is a benefit to people and businesses in Wales, with investment in infrastructure in the United Kingdom benefiting the UK and Welsh economy, surely we have to accept that to ask for 100% Barnett consequentials on the project is simply not right. We have to accept that Wales will get a benefit, so asking for a 100% comparison is simply not right.

Many of my constituents are very concerned about environmental factors, and achieving net zero is important.

--- Later in debate ---

[Jonathan Edwards]

I listened to the hon. Gentleman’s speech advocating the benefits of HS2 with great interest, but he needs to reflect on the full business case for HS2 produced by HS2 Ltd in 2020. According to Professor Mark Barry’s submission to the Welsh Affairs Committee, there is no passenger benefit to Wales at all from HS2.

Returning to my point, the political process in Westminster following the Silk commission was a hatchet job of the worst kind, in which representatives of the two main Unionist parties drew red lines through the commission’s recommendations. Regrettably, the report was torpedoed below the water line. One recommendation taken out of the report was the devolution of rail powers, which meant that the Wales Act 2014, which followed that process, retained the status quo on that vital issue. The financial implications of that decision are sobering in the context of a domineering project like HS2, due to its impact on Welsh Barnett allocations. It has been catastrophic for Welsh funding.

While Scotland and Northern Ireland get a 100% allocation from HS2, Wales gets a 0% rating because the British Government deemed it an England and Wales project. However, the last time I looked at a map—I made this point in a question to the Prime Minister some time ago—all the HS2 destinations are in England. It says everything about how the British state works that a decision of this nature, with such far-reaching consequences, can be made without challenge. In this post-Brexit world, due to the inequity of the financial settlements across the UK, I have advocated the creation of a body apart from the Treasury to allow the various Governments of the UK to challenge financial decisions. At the moment, Westminster is judge and jury; in this case, that is very much to the loss of Wales. As a result, I have voted against HS2 at every opportunity.

The reality is that as spending on HS2 increases, Welsh Barnett allocations plummet. Now that construction has begun on phase 1, the financial impact has become clear. According to the Wales Governance Centre’s analysis, the statement of funding policy accompanying the last comprehensive spending review indicated that Wales would receive 36.6% of its population share of transport funding, while Scotland and Northern Ireland’s shares remain above 90% due to their full entitlements from HS2, compounding the historical underfunding of the Welsh railways. In 2013, the British Government’s own analysis indicated that HS2 would injure the south Wales economy by more than £200 million per annum; given that that analysis was done eight or nine years ago, I suspect the injury to the Welsh economy will be far more severe than what was revealed at the time.

Underfunding has always been a major issue for Wales. In the way the Department for Transport allocates funding, as our railways become less efficient the case for investment is undermined; meanwhile, investment is ploughed into London and the south-east, leading to a conveyor belt of investment which makes the case for further investment. Indeed, when the Prime Minister was Mayor of London, he argued in the Evening Standard that transport spending in London would need to increase by £1 trillion—if I remember correctly—once HS2 was completed, due to the extra passengers arriving from the north of England. Put simply, the current system does not work for Wales, and we need urgent and rapid change.

The hon. Member for Swansea West made an important point about productivity. Even from the Treasury’s perspective, one of the major issues within the British state is the geographical imbalance in productivity. Transport infrastructure investment is a key economic driver, so if all investment is utilised in and allocated to the most high-performing areas, productivity gaps are worsened. The simplest way to address productivity gaps is to invest in the poorer performing parts of the state, as the German Government realised following reunification—and there was a wall between East and West Germany for half a century. Alas, in the UK, all the money is spent in one small corner. Pre-Budget soundings suggest that an extra £7 billion or so will be allocated for expenditure outside London and the south-east, but the key question is how much of that is new money. It may be less than £2 billion. We wait to hear what the Chancellor has to say tomorrow.

To emphasise the point I made to the hon. Member for Montgomeryshire (Craig Williams), in a submission to the Welsh Affairs Committee’s recent inquiry into this issue, transport expert Professor Mark Barry stated that the full business case for HS2 produced in 2020 proved that HS2 had no transport user benefit for Wales. How the British Government can maintain that this is an England and Wales project is beyond rational understanding, so fairness is at the heart of this debate. Welsh taxes are being used to fund an England-only project that will also have a negative impact on our economy, with no recompense via the Barnett formula. Some might say it was ever thus, but to use the phrase of the moment, this is not levelling up; this is levelling down.

If Wales received fairness in real investment, we could be looking at exciting projects such as a comprehensive metro system for the west based on the one in Swansea—a project that I very much support—a north-south line along the western seaboard, opening up the western half of our economy for further economic development; enhancements across the north Wales and Heart of Wales lines; and electrification of the main line to Swansea.

[Dr Wallis]

The hon. Gentleman talks about these fantastic projects, but given the Welsh Government’s signalling their reluctance to make significant investment in infrastructure with their recent decision not to build the M4 relief road, are they not just further fantasy?

[Jonathan Edwards]

That is a very interesting intervention. I am not defending the Welsh Government’s policy in its totality, but they want to move away from road and towards public transport. If we will not be using road, we have to invest in rail. This is the fundamental question facing us as Welsh representatives: given that the UK Government have shown clearly that they have no intention of investing in Welsh rail transport infrastructure, what are we going to do about it? The only way to address that is to take responsibility for ourselves.