HS2 is one of the most controversial and costly rail projects of the modern era. There are strong views for and against – and Boris Johnson could decide its future as early as this week. Here, we look at the economic arguments against HS2

The economic case against HS2 is straightforward: its critics say there must be better ways to spend £100bn on rail infrastructure.

That £100bn figure is a rounded number, but precision on costs has never been a hallmark of HS2. When approval was granted in 2010, the budget was put at £30bn. That quickly become £43bn. Then, in 2015, it was £56bn, with ministers describing the figure as HS2’s “only” budget as recently as last summer, as if trying to will savings into existence.

The arrival of a hard deadline for a decision on whether to proceed has injected greater realism into the calculations. Allan Cook ordered a “chairman’s stocktake” when he arrived at HS2 in December 2018 and last September came up with £72bn-£78bn in 2015 prices, or £81bn-£88bn in 2019 prices.

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Even that sum, though, has not been the last word. The official Oakervee report is thought to warn that £106bn is possible if problems aren’t fixed. The National Audit Office noted last month that phase 2 of the project – the routes from Birmingham to Manchester and Leeds – is still at an early stage of development, so “we do not think that it is possible, as yet, to estimate with certainty what the final cost could be”.

Every escalation in costs has dented the economic case for HS2 – £106bn equates to an astonishing £307m per mile to build 345 miles of high-speed track.

Government studies used to say the full Y-shaped line would generate benefits of £2.30-£2.50 for every pound spent. The methodology was disputed, since one key assumption was that savings in journey times would make business travellers more productive, a questionable idea in the age of laptops and 5G – or 6G or 7G by the time HS2’s trains are seen on tracks.

The Oakervee report, still unpublished, may put the benefits at only £1.50 for every £1 spent. Lord Berkeley, the dissenting member of the Oakervee panel, reckons 60p is more like it. One reason, he argued, is that running 18 trains per hour, as assumed in original projections of HS2’s revenues, is impossible. No other high-speed network in the world achieves that; 14 trains per hour may be the practical maximum.

The key question now is: if you were given a fixed £100bn, or even HS2’s own estimate of £85bn-ish, to improve the UK’s rail network, would you throw the lot at HS2, a track that will primarily only connect major cities? What about frustrated commuters who only want to travel between Blackpool and Manchester?

Lord Berkeley has concluded that “the greatest need and demand for improved rail services is within the regions … since services to and from London are of better quality”. HS2, he argued, only helps in this regard at the northern end, where tracks are within the proposed Northern Powerhouse Rail area. HS2’s aim of providing better north-south links “is just as likely to attract more jobs from the regions to London than the other way round”, he said.

That last idea is hotly disputed by the mayors of Greater Manchester and Liverpool, among others, but there is the obvious danger that HS2 – the biggest infrastructure project in Europe – ends up crowding out other spending on rail.

Northern Powerhouse Rail would connect Liverpool, Manchester, Leeds, Sheffield, Hull and Newcastle and few doubt that it would work best in combination with HS2. But the contrast between political backing for the two projects is stark. HS2 Ltd has spent £7bn already, but Northern Powerhouse Rail is still described by its own backers as an “emerging vision” and a “blueprint”.

It is why the pro-HS2 lobby’s cry that their project is the only “shovel-ready” proposal is so powerful. But it also why many fear that the northern section of HS2, if it is built, will end up being squeezed for savings to pay for over-runs in the south.

Many of the underlying problems with HS2’s expense – an over-specified design, an obsession with faster speeds than the French TGV network – are not new. They were identified as long ago as 2015 in a blistering report by the House of Lords economic affairs committee that found “it is impossible to agree with the government that HS2 is the only solution to increase capacity on the rail network”.

Facebook Twitter Pinterest HS2 Curzon Street archaeological investigations, Birmingham. Composite: metrogogo

Extra capacity could be provided by “incremental improvements to the existing network, a new conventional railway line, or a new high-speed line (of which HS2 is only one option)”. It urged the government to rethink and stop giving serious consideration only to HS2. Investment in rail infrastructure in the north should be the priority.

By 2019, when the Lords returned to the subject, peers concluded that “little progress” had been made in answering their questions and warned ominously: “The north is being short-changed by the government’s present plans, especially as construction on HS2 is starting in the south. Any overcrowding relief from HS2 will mainly benefit London commuters.”

Or one could go further back to 2013, when Lord Mandelson, one of Labour’s backers of the scheme in 2010, said he’d changed his mind and now feared HS2 “has the potential to end up a mistake, damaging in particular to those people that it was intended to help”.

Labour’s original estimates of HS2’s costs were “almost entirely speculative”, he told the FT.

On one thing both sides can agree: the past decade has been an exercise in how not to procure a railway.