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During the summer the balance of opinion seemed to shift firmly to the ‘No’ camp, with influential figures such as Alistair Darling, Peter Mandelson and Lord Ashcroft publicly announcing their scepticism that investing £50 billion in creating a new high-speed line between London and Birmingham, and then on to Manchester and Leeds, is worth the money. A recent YouGov poll found that 55 per cent of those asked said they were against HS2 (compared to 46 per cent in July, with support down 5 points and now standing at 29 per cent).
Now the Government is mounting a fightback. In the past week, David Cameron, Nick Clegg and George Osborne have all gone on record about their support for HS2 as part of the UK’s strategy to ‘stay in the global race’. Yesterday’s report by KPMG attempted to shift the grounds of debate further by moving on from what the Department for Transport admits was an originally flawed cost-benefit analysis based on the importance of ‘speed’ (it didn’t take into account that people work on trains) and focusing more on capacity and the benefits to local and regional economies.
The report argues that:
The report is a significant step away from over-reliance on ‘speed’ as an outdated justification for the line. Yet, as Robert Peston amongst others has argued, there are still flaws in the analysis.
One such flaw is that the report assumes that “transport accessibility is the only supply side constraint to business location” – that businesses wish to move, and that the biggest barriers to businesses moving to other cities is poor transport. Yet this ignores a wide range of other factors including availability of land and appropriate premises, as well as access to skilled labour. We recently highlighted these as some of the key risk factors for SMEs in UK cities in Small Business Outlook 2013
Another particularly striking flaw is that the KPMG approach does not compare HS2 with other options. For example, the Eddington report argued in 2006 that incremental improvements to transport across the UK would deliver clearer benefits than one or two ‘grand projects’.
So what does this all mean?
First, the evidence remains clear that if you want demonstrable economic benefits for limited money and in relatively short order, the most effective way to do this is to invest in improving transport within and between cities. It’s also important to note that, without these incremental improvements, it’s unlikely that many of the cities on the HS2 route will be able to benefit as much – if you can’t help many of the people who live around Birmingham to access the HS2 station, it will be harder for residents and local businesses to maximise the opportunities the new line offers.
Second, questions should be raised about whether it will ever be possible to have a clear idea of the project benefits. According to the latest analysis and the current time line the project will take 18 years to complete and the benefits would be enjoyed for 30 years after that if not more. However much we want to come up with a convincing evaluation of the project, the reality is we can’t predict that far into the future.
Third, what the international evidence suggests is that decisions to undertake a High Speed rail project are always as much a political as an economic one. Political commitment was the most significant driver of high speed rail expansion in Japan, China, France and Spain. The recent push by the British Government do defend the widely criticised scheme suggests that the current situation is not dissimilar from overseas examples.
Much of the debate about the potential benefit of HS2 comes down to whether you buy the argument that it will help to deliver a long term shift in the economic geography of the UK. Evidence on how High Speed rail can shift balance between cities is inconclusive, although some suggest that this isn’t a zero sum game, and both larger and smaller cities connected to the network can benefit.
So what does the Centre think? Ultimately, HS2 is about delivering on a long-term political vision to change the UK economy through improving transport links. Historically, the UK has largely failed to plan adequately for our long term infrastructure needs. Instead, we regularly get caught up and distracted by short term debates – particularly at times where public spending is constrained – rather than thinking about when and where investments are needed to ensure that the economy can grow sustainably in the future.
Whatever the exact quantum of benefits it can bring, HS2 has the potential to be an important, strategic investment for the future of the UK economy. But any investment like this should not be made at the expense of, or instead of, the smaller, incremental transport improvements that are likely to benefit our cities in the short and medium term. Not only will they help support economic growth now, but they will also be vital in helping the places HS2 connects to make the most of the new links provided.
We’ll be talking more about this issue when we publish a detailed briefing next week.
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