Scrapping HS2 northern leg would be ‘disaster’, says ex-Tory Treasury minister

Lord O’Neill says UK framework for making investment decisions on infrastructure is ‘dreadful’

The prospect of Rishi Sunak cancelling HS2’s northern phase after 13 years of work shows the UK’s approach to investing in infrastructure is “a disaster”, a former Tory Treasury minister has said.

Jim O’Neill, who also served as commercial secretary to the Treasury under David Cameron and Theresa May, blasted the government’s “superficial obsession” with cutting investment to balance budgets.

The latest calculations worked up by the Department for Transport show the original vision for phase 2b into Manchester would provide an economic boost of £800m a year into the 2050s.

But The Independent revealed this week that Mr Sunak and chancellor Jeremy Hunt have held discussions on whether to cut the northern parts of the high-speed rail line – as the pair look for headroom for pre-election giveaways.

They are understood to be keeping the option of scrapping the northern phase open at the chancellor’s upcoming mini-Budget.

Jim O’Neill was scathing about the government’s approach (PA)

More Northern mayors on Friday also joined the chorus of criticism, saying canning the project would represent a betrayal “voters won’t forget”.

Lord O’Neill, a well-known economist as well as former Tory minister told The Independent: “It is very very disappointing, and the country’s long-term investment decision-making is a disaster.”

He added: “The debate and framework for these long-term investment decisions in the UK is dreadful.”

“We need a system where our superficial obsession with short-term arbitrary fiscal rules is not constraining long-term supply boosting and debt-reducing investment decisions.

“A future government must create greater scope for both the Infrastructure Commission and OBR to influence long-term investment choices.”

The ex-Treasury minister said that while he was “not the greatest HS2 fan”, if it were cancelled the government should at least build Northern Powerhouse Rail in full.

That proposed east-west line across the North of England was already cut back by ministers. But the project relies on part of the HS2’s northern phase to get trains in and out of Manchester.

Lord O’Neill was previously the chair of Goldman Sachs asset management and was given a seat in the House of Lords in 2015 as a Tory peer.

HS2 has come under consideration as the prime minister and chancellor look for cost savings (Jacob King/PA)

He served as economic secretary to the Treasury, a ministerial post, until September 2016. Upon leaving government he also resigned the Tory whip and became an independent crossbencher.

As head of economic research at Goldman Sachs in 2001 he published a paper in which he coined the term “Brics” – Brazil, Russia, India, China – to refer to the group of fast-growing developing economies. The term has since entered widespread usage.

MPs, business and transport leaders reacted with fury after The Independent revealed the second stage of HS2 to Manchester could be scrapped over cost concerns. An earlier plan for a spur to Leeds has also been put on ice.

Liverpool City region mayor Steve Rotheram and West Yorkshire mayor Tracy Brabin have joined Greater Manchester major Andy Burnham in condemnation – accusing the government “holding the north down”.

The Labour mayor Mr Rotheram told The Independent: “Far from levelling up, this government’s actions continue to hold the North down. Voters won’t forget – and they’ll be handing Rishi Sunak and his party a one-way ticket to opposition at the general election.”

“The whole point of HS2 is to improve connectivity between North and South and free up capacity on our railways,” added Mr Rotheram – who said he had “long warned” that the government would not deliver on the project.

He added: “Against all odds, their ‘high speed’ line might give us slower journeys than the creaking Victorian infrastructure we have to endure at present. At the rate the Tories are going, HS2 won’t get out of North London – never mind to the north of England.”

No 10 repeatedly refused to confirm the link would be finished in full, after The Independent revealed Mr Sunak and Mr Hunt reviewed £30bn potential “savings” that could be made by scrapping parts of it at a meeting on No 10 on Tuesday.

Ms Brabin, the Labour mayor of West Yorkshire, said: “Almost two years after the eastern leg of the project was scrapped, it seems the government is determined to deliver the fatal blow for HS2 in the north.”

She added: “We are crying out for our fair share of transport investment to help us build a better-connected region — but once again the North is just an afterthought for this government. It’s our passengers and businesses who will pay the price.”

Last year, crossbench Lord O’Neill led a review of investment policy for Labour. Writing in The Independent in August, the economist said both parties should abandon “petty and arbitrary fiscal rules” holding back growth and that the government needed better formal advice on what infrastructure to invest in.

He suggested that the Office for Budget Responsibility (OBR) should be given powers to work out which public investments would have a “multiplier effect” and actually reduce the budget deficit in the long term by improving productivity and growth.

These spending commitments could then be given the green light without constant reference to the “arbitrary” fiscal rules, he suggested.

The prime minister’s official spokesperson told reporters in Westminster that “spades are already in the ground on our HS2 programme and we’re focused on delivering it” but would not promise the line would go to Manchester.

“I can’t comment on speculation around a leaked document. It is obviously standard process for departments to discuss the phasing of major projects like HS2 … but the work is already underway,” he said.