11 Sep 2013

HS2 high-speed rail ‘will boost UK economy by £15bn a year’

Despite growing concerns over the spiralling cost of the HS2 high-speed rail line, the government says it will provide a £15bn a year boost to the UK economy.

Transport Secretary Patrick McLoughlin said a new analysis shows that the proposed link between London and cities in the Midlands and northern England will drive growth.

He also claimed the network’s main benefit will be the increased capacity on offer, rather than the speed of services along the route, and insisted that the project will be completed within its £42.6bn budget.

Read more: HS2 cost 'will double to £80bn'

The KPMG report, commissioned by the government, estimates the Birmingham area’s economy will be boosted by between 2.1 per cent and 4.2 per cent, there will be a 0.8 per cent to 1.7 per cent benefit to Manchester, 1.6 per cent for Leeds and 0.5 per cent for Greater London.

Mr McLoughlin said: “It addresses that vital question – will HS2 create jobs and growth in the north and Midlands, where they are needed most? The answer is absolutely clear. Yes.

“High Speed Two will make Liverpool stronger. Manchester stronger. Leeds stronger. Britain stronger. A £15bn annual boost to the economy.

“With the north and Midlands gaining at least double the benefit of the south.”

Mr McLoughlin also said that without the new line, the UK’s transport network will become “clogged”.

He said: “The reason we need HS2 isn’t for its speed, though speed is obviously a benefit. HS2 will allow you to get from Birmingham to Leeds in 57 minutes and from Manchester to London in 68.

“The benefits of faster journeys are easy to explain. But speed is not the main reason for building the new railway.

“The main reason we need HS2 is as a heart bypass for the clogged arteries of our transport system.”

Addressing the cost of the scheme, Mr McLoughlin stated that the £42.6bn budget includes a £14.4bn reserve with work being done by project managers at Oxford University’s Said Business School to examine the scope for reducing the contingency fund.

‘Fragile numbers’

Some MPs, however, issued a scathing report on the scheme on Monday, which said the apparent benefits were dwindling as the costs spiralled.

Ministers’ case for the massive project was based on “fragile numbers, out-of-date data and assumptions which do not reflect real life” with no evidence that it would aid regional economies rather than sucking even more activity into London, said the public accounts committee report.

Shadow transport secretary Maria Eagle said Mr Cameron had failed to take a lead on HS2 and accused him of “dither and delay” over the scheme.

Read more: HS2 routes extended to Manchester and Leeds

She said:”Far too many people have to stand on their way to and from work, often in cramped conditions, despite paying thousands of pounds for their season ticket. The only credible way to free up space for more commuter services is if we shift the growth in long distance journeys on to a new high speed line.

“David Cameron has disastrously failed to provide the leadership necessary to build support and make progress on actually delivering the vital new north-south rail line.

“As a result of three years of dither and delay, there is no prospect of securing parliamentary approval for the first phase of the scheme before the next election. The government must now redouble their efforts to make the new north-south rail line a reality and ensure it remains on budget and on track.”

Read more: HS2 - What's in it for you?

But campaign group the TaxPayers’ Alliance said the new method of analysis applied to HS2 should also be used to examine alternative proposals.

Matthew Sinclair, chief executive of the alliance, said: “The government has squandered taxpayers’ money on a cynical attempt to win over the many, many people who think this white elephant is the wrong way to spend tens of billions of pounds of their money.”

“The report is based on the dodgy assumptions in the government’s own business case and the additional services they have promised, despite their budget actually relying on cuts to existing services.

“This is not a serious attempt to assess the merits of HS2, just another expensive propaganda exercise. The government must scrap HS2 and look again at less grandiose, but better value, projects that can deliver the capacity needed on Britain’s rail network.”