Let’s build an economy fit for the future

In his comments on HS2 forecasts, Peter Shiels (KWN, last week) prays in aid of the views of economists such as Henry Overman and Richard Wellings. But, of course, there are many other economists who take a much different view, such as Bridget Rosewell of Volterra who reckons that the wider economic impacts of HS1 in London and Kent have already contributed £10 billion to the economy, and that the KPMG forecast of the completed HS2 network adding another £15 billion a year to the economy is under-estimated by at least 25 per cent.

Peter Shiels’ letter was published on the same day I attended an event where the guest speaker was John Major’s former Chancellor of the Exchequer Norman (now Lord) Lamont — who said that during his whole time at the Treasury not a single economic forecast proved correct.

Certainly, there are grave doubts about relying on benefit-cost ratios (BCRs) to decide the rights and wrongs of long-term infrastructure schemes such as HS2 — not least because under present rules any growth is assumed to cease just three years after a project is completed. Yet HS2 could be in use for a century or more, just like the West Coast Main Line, which HS2 is intended to relieve, that passed its 175th anniversary last September.

Perhaps a more realistic view is that of another Lord, Peter Snape, speaking in the recent debate before the HS2 paving Bill gained Royal Assent last week. He said: “If it were left to the Treasury we would not have built the M25, the Jubilee Line, the Docklands Light Railway and various other schemes that most people would agree are essential.

“I will go further: if everything had been left to the Treasury, when I make my way back to Birmingham this week, I would do so on the 10 o’clock stagecoach from Tyburn. There would be no other way of going from London to Birmingham as no schemes, including the London & Birmingham Railway, would ever have passed the preposterous cost-benefit analysis so beloved of Her Majesty’s Treasury.”

And yet another Lord, Michael Heseltine, Margaret Thatcher’s former Deputy Prime Minister, said some estimates of the costs and benefits of HS2 were “mumbo jumbo” calculated by “men with slide rules.” Many estimates of HS2’s value for money were nonsense, he said, because they left out the possibility of consequential growth.

Instead of listening to the siren calls of economists like Dr Richard Wellings of the right-wing Institute of Economic Affairs — who forecast HS2 could cost £80 billion by including the price of building another Crossrail in London and a new line to Liverpool that is not even planned — perhaps we should note the largely-unreported good news . . . that HS2 Ltd has actually reduced the expected cost of building the first stage from London to Lichfield, where it reconnects with the West Coast Main Line, and the branch line into Birmingham.

At the close of the recent House of Lords debate Transport Minister Baroness Kramer said HS2 Ltd “now estimates that, without any contingency, it could bring in phase 1 at £15.6 billion.”

However, she added, the Transport Secretary had decided to include “a little contingency” — 10 per cent — so the target budget for the first stage, extending over some 150 miles and including more than half the route in tunnels or deep cuttings, is now £17.16 billion. This could be reduced further after Sir David Higgins takes charge of the project next year and, as Lord Heseltine proposed, there is the opportunity to offset perhaps £5 billion of the cost of stage 1 by negotiating a 30-year concession with a private sector infrastructure manager, as has happened with HS1.

And we should not overlook that the remainder of the cost can be more than offset by revenue from passengers, and by the wider economic benefits to the whole economy.

Instead of nonsensical talk about trying to upgrade the existing 175-year-old railway infrastructure, would it not be better to follow Baroness Kramer’s advice? “Let us protect the Victorian spirit that built our railroads,” she said, “but let us look for an infrastructure that is not Victorian but modern and 21st-century so that we can build the economy of the future.”

It is our children’s and their children’s future we should be concerned about.

Alan Marshall, Inchbrook Road, Kenilworth