HS2: Anatomy of a farce

The axe falls on Phase 2 of HS2 in the very place it was supposed to connect to

Farewell then, HS2 Phase 2.

Rishi Sunak’s public execution of its intended Birmingham to Manchester leg follows weeks of behind the scenes briefing, obfuscation with the media and public lobbying against it from figures ranging from George Osborne to Manchester United. The fatal blow was delivered early in the Prime Minister’s speech to his party ‘faithful’ at Conference:

“HS2 is the ultimate example of the old consensus. The result is a project whose costs have more than doubled, which has been repeatedly delayed and it is not scheduled to reach here in Manchester for almost two decades... and for which the economic case has massively weakened with the changes to business travel post Covid.

I say, to those who backed the project in the first place, the facts have changed. And the right thing to do when the facts change, is to have the courage to change direction. So I am ending this long running saga. I am cancelling the rest of the HS2 project. And in its place we will reinvest every single penny, £36 billion, in hundreds of new transport projects in the North and the Midlands, and across the country. This means £36 billion of investment in the projects that will make a real difference across our country.

As a result of the decision we are taking today, every region outside of London will receive the same or more government investment than they would have done under HS2, with quicker results.”

Regardless of how the Prime Minister frames the decision or what will come next, this is extremely bad news for the UK. This report explains again why this will have a deleterious effect on our economy.

We also test the veracity of some of today’s claims on the alternative schemes that will be funded in ‘HS2’s place’, whilst also considering the lessons of this debacle on the future running of Government and on transport investment.

You won’t be seeing one of these whizz past Crewe at ‘high speed’

Why Phase 2’s cancellation is a terrible decision and its potential knock-on effect

We’re fans of recycling at Bellona Advisors and so the root of our assertion that this is an economically terrible decision is the same one we made in our first ever report - on the cancellation of Phase 2b in Autumn 2021!

Back to basics: HS2’s major trump card is increasing rail capacity, badly needed to support modal shift to support decarbonisation - not improving journey times. It was supposed to create additional opportunities for increasing freight and commuter traffic on three of Britain’s critical mainlines. One of these is the West Coast Main Line, which is considered to be the busiest mixed-use railway in Europe given it runs at full capacity and has no possibility to serve new more passenger and freight trains. HS2’s construction and operation was supposed to unblock this line, the Midland mainline and the East Coast mainline.

Cancelling Phase 2 in full:

• Reduces additional capacity for regional and commuter trains that make far more stops than the high-speed ones, directly denting efforts to support passenger modal shift away from the car. The next time you see cancelled services around Staffordshire, think on……

• Hampers efforts to increase the number of freight trains on the national network to improve the efficiency of goods distribution. It’s worth keeping in mind that one utilised freight train is the equivalent of removing up to 76 lorries from Britain’s roads, thereby speeding up deliveries and improving air quality.

• Dramatically reduces the predicted overall impact of the original scheme. HS2 Ltd originally estimated that carbon emissions from HS2 would be seven times less than passenger cars and 17 times less than domestic air travel. Travelling 500 miles on HS2 was predicted to use the same amount of carbon as 70 miles in a car and just 29 miles by plane. Most crucially of all, the capacity ‘released’ by HS2 was projected to carry 2.5 million lorries worth of cargo each year while producing 76% less carbon emissions than by road. These benefits will have been somewhat amortised…..

The signal that this sorry saga sends out internationally is also disastrous. Since the project was originally signed off in 2012, it has been subject to endless Government interference: large-scale redesigns and adjustments, dither, significant political delays (particularly from 2019) and eventually cancellation(s) of Phase 2 legs in both 2021 and 2023. This endless flip-flopping was a crucial factor in its ballooning cost, something which the current Government have not publicly admitted; they have been direct contributors to its downfall.

All of this points to a Country that has frankly forgotten how to build primary infrastructure to time and budget. We wholeheartedly agree with the view of Darren Caplan, chief executive of the Railway Industry Association, who opined:

"It's defeatist and sends a terrible signal to potential overseas investors that the UK simply cannot deliver large national transport infrastructure schemes."

And yet dear readers, it could have been even worse. Rejoice, for at least the line’s remaining single leg will actually terminate in Central London at Euston (the original plan) rather than out in the sticks at Old Oak Common. (We shan’t point out, as others have, that this was a wildly fanciful idea in the first place). We can thank the Chancellor of the Exchequer for that intervention, as the FT points out here.

The tram connection to Manchester Airport: completed nine years before it was announced

The alternative the Government has announced

The Prime Minister now says that the Government “ will reinvest every single penny" saved from HS2, which he says is £36 billion, in hundreds of new transport projects in the North and the Midlands, and across the country:

"Every region outside of London will receive the same or more government investment than they would have done under HS2, with quicker results."

Note ‘transport’ and not just ‘rail’….

This will be through a new programme called ‘Network North’, announced through a rather ragged and rushed policy document, including a series of signposted potential investments by region from Page 23 onwards. Its introduction appears sure-footed:

“We will invest £19.8 billion to redraw the transport map across our northern towns, cities, and countryside. This includes £3 billion for a plan to connect the great Northern cities: not just Liverpool, Manchester, Leeds and Newcastle, but Sheffield, Hull and Bradford, where we will invest £2 billion to increase capacity, halve journey times and build a brand new station. In addition to that £19.8 billion, we will invest a further £12 billion to better connect Manchester to Liverpool. This would allow the delivery of Northern Powerhouse Rail as previously planned, including high-speed lines. But we will work with local leaders to agree whether they wish to suggest other uses of this money to achieve the objectives with that £12 billion.”

For us however, it throws up a number of key questions.

The money mirage

The first is the issue of finances. That £36billion ‘saved’ is not really a saving, given that future expenditure was the subject of future borrowing against the line itself much later this decade. How will future borrowing be structured exactly? When will these apparent funds be made available? It makes us suspect that the £12 billion ‘additional regional objectives’ pot gives quite a lot of wriggle room to push spending commitments out….

Besides (whispers a quiet Northern voice), didn’t the Government already commit to a load of specific rail spending within a much bigger plan two years ago?

What about the Integrated Rail Plan?

Yes indeed, they did - though two years is a long time in politics. Following the abandonment of HS2 Phase 2b, it published its Integrated Rail Plan in Autumn 2021 - which we reviewed at the time here. Even though it apparently signalled a £96bn framework of investment across the UK, we viewed it as unambitious given its row-back of high speed routes.

What is the status of this plan now? How does the £36bn mentioned today reconcile with the £96bn? Are the list of ‘potential/showcased projects’ at the back of Network North in step with those in the IRP?

Our initial headline assessment suggests a curious mash-up: projects announced that have already been completed (Manchester Airport tram anyone?); some projects which directly conflict with today’s announcement (see here); and no indication as to who is responsible for what.

Grant Shapps launching the Integrated Rail Plan in the Commons in November 2021

Who delivers and how?

That final point really does matter the most: METHOD. There’s nothing in the new plan on the method for delivery, nor was anything on Governance or responsibility emphasised within the Prime Minister’s speech - quite incredible given the Government’s outspoken criticism of the rising costs and management of HS2, one of its own programmes!

People soon notice when this isn’t clear. He’s a typically lucid assessment from Jen Williams of the FT:

“On great rail cancellations, a reminder that the expansion of Piccadilly, intended to alleviate the chronic northern rail bottleneck in the centre of Manchester, was promised a decade ago, then put on ice, messed about with and actually only officially cancelled a few months ago.”

Without this being clear at the outset, we fear plus ca change as they say in Marseille - a repetition of the ‘announce, part-design, change our mind, cut’ culture that has typified a number of British infrastructure projects in recent years. My friend David Baker at Baker Rose summed it up rather well on linkedin yesterday:

“The underlying problems with procurement and indeed governance are systemic, crippling and utterly wasteful of human capital, a scarce enough resource in the UK anyway. HS2 may be the Titanic of our day, but the icebergs of obvuscating governance structures, built to protect against 20:20 hindsight auditing and pernicious click bait journalism that follows, has put planning and development, from housing through to major infrastructure projects across the board, in a complete and utter mess in the UK. Until this is sorted, we are going nowhere… simply allocating the funds not spent on HS2 elsewhere will be just as wasteful. We have to deal with the icebergs.”

Ministers in recent weeks, including the Chancellor, have wondered aloud as to why it apparently costs 9 times as much to build a high speed rail line in Britain versus France. Despite this, one of the critical tenets of successful delivery - clearly delineated responsibility to appropriate bodies, matched with a determination to not get unnecessarily involved - doesn’t get a mention. It is utterly baffling.

The Government has listened and acted to our satisfaction on one issue however

We want to conclude this rather downbeat assessment however with some good news for previously affected parties of HS2. We’d previously lambasted the Government for retaining safeguarding status for land no longer needed for HS2, opining the following back in November 2021:

“Huge amounts of good quality, developable land is currently blighted by the route, including consented land earmarked in the East Midlands and Yorkshire for primarily Manufacturing and Logistics development. Following the COVID-19 pandemic, this land is highly sought after with a resulting squeeze in supply.

The Government’s decision to retain safeguarding status is a classic case of having your cake and eating it. It prevents any of this land being brought forward for commercial development unimpeded, acting as a further brake on regional growth and undermining any arguments of further levelling up, whilst not providing a hint of a long-stop date for the completion of the options work. It leaves affected land developers utterly in the dark as to what happens next.“

Today’s ‘Network North’ announcement actually tackled this directly, “removing the uncertainty that has surrounded thousands of people along the route.” It specified:

“Phase 2a safeguarding will be formally lifted in weeks and Phase 2b safeguarding will be amended by summer next year, to allow for any safeguarding needed for Northern Powerhouse Rail. The land acquisition programme on Phase 2a will be halted immediately and HS2 will not be accepting new applications under the existing schemes from property owners in the areas where safeguarding is going to be lifted. Any property that is no longer required for HS2 will be sold and a programme is being developed to do this. By next summer changes to the property schemes will be implemented.”

About time. Plenty else needs to be learned from the HS2 safeguarding experience however, which my good friend Jon Stott from Ardent eruditely covers here.

What’s next then?

The end of the Network North document sets out just two paragraphs on how it will be progressed - the first of which sounds like a party political broadcast. The second attempts to answer the exam question but in very woolly terms:

“We will now proceed with the steps necessary to take these decisions forward. That will include reflecting on the existing package of legislation before Parliament, on which we will set out next steps to the House in the usual way. It will include the necessary consultative steps and business case development, in line with our relevant legal and fiscal duties. And we will listen to local government and transport bodies about what this means for them, including further guidance and indicative allocations for local authorities and city regions. This will allow us to confirm an achievable, affordable plan to deliver this programme over the coming years and beyond, in addition to the £12 billion of capital investment that the Department for Transport is already undertaking each year to deliver transport priorities outside of the HS2 programme.”

Unpacking this, it sounds like civil servants (including the Treasury!) need to get their heads around what’s been announced this week, prior to negotiating nationally with the likes of Network Rail and regionally with combined authorities over the next few weeks to sift what could or should be funded.

We suspect a number of those projects referred to today will never get developed. Those bodies that could receive funding should of course try and make the most of the funding available for those programmes they have calculated brings the highest public benefit, but we’re sceptical that without a firm commitment from Government to alter its methods in funding, planning and delivering these projects a number will go the same way as HS2: unloved, dislocated, maligned and ultimately not delivered as intended.