Mark Leftly: Keeping HS2 on the rails might mean taking a fresh look at what it costs
Mark Leftly is political correspondent at The Independent on Sunday and associate business editor across the Independent titles. He writes a weekly column, Parliamentary Business, published on a Wednesday, that covers politics and the City. He is a multi-award winning reporter and was named Press Gazette's business magazine journalist of the year prior to joining The Independent on Sunday.
Thursday 14 March 2013
Outlook The weekend's Independent on Sunday revealed that High Speed Two (HS2) is already threatening to bust its eye-watering £33bn budget.
That's right, 13 years before passengers first hop on the super-fast trains that will cut the journey time from London-to-Birmingham to just 49 minutes, there are already serious concerns over finances.
HS2's chief executive, Alison Munro, admitted that rising construction costs were becoming an issue, while there are "teething problems" with the IT. What's more, few industry insiders believe that the £253m already spent, most notably on consultant fees, is justified.
A committee to slash costs has been set up. Plans for a wildly impressive revamp of Euston station will be scaled back, and the local MP, Frank Dobson, is seething that jobs and housing will be lost as a result.
Department for Transport and HS2 officials get angry at reports like these. They wonder why the critics don't recognise what a superb job they're doing. Why are the press against us?
For the little that it's worth, my view is that HS2 will be fantastic for the economy. It will create tens of thousands of jobs, make more money than it costs, and be a relief to consumers frustrated by wearisome journey times.
Businesses and research parks will surely spring up around many of the revamped stations, while major cities in the North will be better linked, boosting regional economies. In a country so financially dominated by its capital, a better economic balance by geography is welcome.
When Mr Justice Ouseley rules on a judicial review brought by campaigners and residents along the proposed route tomorrow, I hope he upholds only the most bulletproof arguments that they weren't properly consulted. Otherwise, great swaths of HS2 could be returned to the drawing board, perhaps delaying the project by years, inevitably causing another escalation in costs.
I don't think HS2 will cause the noise pollution some campaigners claim, while the more hysterical argument that terrorists will hop on an HS2 train to bomb the Midlands countryside raises a smile rather than any concern.
And, yes, the HS2 team should be applauded for recognising that costs have got out of hand relatively early in the project's life.
However, all that doesn't mean HS2 escapes being held up to scrutiny. Every penny which is overspent diminishes the economic advantages of the Coalition's grand vision; every part of the project which has to be scaled back makes the impact of the project that little bit less.
Those who are concerned over the environmental hit might well be right that those fears trump the economic arguments. Ancient woodland will be destroyed (or, more laughably, "moved") and vast areas of rural England and Scotland will surely be dug up, which in the eyes of some, will blight some stunning landscape.
Understandably, the countryside lobby uses the problems to pour further scorn on plans that could prove such an upheaval. Plus, it is surely fair enough for people who have seen their benefits cut to question why now is the time to pour billions into a railway.
What is also important is to try to work out just what is going wrong with HS2's budget. The UK has long had an issue with inflationary pressures on the construction industry, but much of this was surely factored in by HS2's savvier engineers.
The best guess is that a budget, timetable and what should be a part of HS2 – the station revamps, the routes, and the trains – were all decided separately. Yet the three are symbiotic: if you want the first phase built by 2026, the budget will be higher than if the timing's flexible and it's OK for the trains to start running a few years later.
In other words, the three ambitions aren't in equilibrium, and at least one of them has got to give. By setting up a cost-review group, HS2 is signalling that the project's content will be altered: the budget, which is really an estimate at this stage, cannot be seen to go up.
This is similar to what happened when the final budget for the London 2012 Olympics was set. The Olympic Delivery Partner noted that the organisers couldn't get everything they wanted for £9.3bn, the timetable had a fixed-end date and it was politically inconceivable for the budget to change yet again.
So, tweaks were made that the public simply wouldn't notice, like raw materials. Then, there were the bigger changes, such as making permanent venues temporary, which didn't seem to matter in the end.
The good news is London 2012 was a success. HS2 officials are surely hoping they can do as well out of similar financial adversity.
However, the Olympic organisers did change their initial budget from 2005, as there reaches a point where so much is stripped out that the project cannot achieve its central purpose. A complete review of the baseline cost of HS2 cannot be ruled out.
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