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HS2 to compete with broadband rollout for government funding

High speed 2 hs2 1

High Speed 2 (HS2) will compete for funding against other types of infrastructure projects such as the rollout of fibre broadband, under the terms of a new review being carried out by the government,.

Speaking at a Lords Economic Affairs Committee hearing, chief secretary to the treasury Liz Truss confirmed the zero-based capital review was taking place and that funding for all projects requiring capital funding were being assessed. 

The new review means projects are assessed from a “zero base” and all expenses must be justified for each new period regardless of previous budgets.

As part of the review, more emphasis will be placed on the productivity benefits and deliverability, to a set budget and timescale, of each project rather than simply carrying out an economic assessment.

“We’re looking at the economics of those projects, in particular how much future economic growth they are likely to generate and how much they are likely to improve productivity in particular, especially in areas which have low productivity,” Truss said. 

“One of the issues in previous spending reviews and previous capital reviews is that promises [that have] been made haven’t been kept, so we will have a delivery expert alongside a panel of economists looking at whether these projects are really deliverable for the budget and timeframe that has been set out.”

Truss said she had an “open mind” towards HS2 and that it would be assessed as part of the review.

To make the process fair, Truss said she would chair a roundtable on the investment appraisal technique to allow comparisons to be made between projects on an equal footing.

“What we want for the zero-based capital review is to make sure that departments are making comparable economic assessments,” she said. “I want to make sure that we are assessing fibre broadband basis as road and rail on the same basis as an energy project and that it is made more transparent to the outside.”

The review is due to be published alongside the spending review which Truss said would, in all likelihood, be delayed until after the summer recess to allow for the Conservative leadership contest to take place.

Truss added that she saw it to be “sensible” for the infrastructure strategy document to be published at the same time, however the exact time for its publication would be for the new prime minister to decide.

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Readers' comments (1)

  • The viability of HS2 has again raised its head and those affected locally (to me) expected a substantive announcement in May, only to be disappointed. If the leadership of the Conservative party goes the way it is expected to go then the whole project could be subject to total cancellation. Over two years ago I suggested a much cheaper option (if capacity is the main objective) - that of developing a dedicated freight-only network which could be built at a fraction of the cost and which could form the basis of a new green strategy for the movement of goods across the UK.

    However, if the current concentration is on value-for-money then I suspect that aspects of the project will, very quickly, unravel. The three main options are:

    continue as planned
    total cancellation
    proceed with a truncated project based on revised benefit/cost analysis

    Of these the third would provide a possible compromise, avoiding the embarrassment of total cancellation.

    Firstly, the design speed has been the subject of much discussion and there is no doubt that a reduction from 250mph to 200mph would not greatly affect journey times. Secondly there are savings to be made if the length of the trains is amended from the current 400 meters to a more sensible 200 meters. The 400m figure is an EU requirement and partially based on the distance between the escape routes in Channel Tunnel. Since we are leaving the EU and the route is no longer connected to the Continent, this requirement is redundant. Can we develop a new 200/200 hybrid train which will enable connections between London, Birmingham, Manchester, Liverpool, Holyhead and Glasgow?

    Thirdly, only the London to Crewe spine provides a positive benefit/cost justification. The expensive spur running into central Birmingham, along with the new Curzon Street Station, can never be justified as a stand-alone project and could, therefore be removed from Phase 1 in order to save costs without affecting the main project. In any case, most of those willing to pay the premium ticket cost that the new route will need to charge will, by preference, use the Birmingham Interchange Station. Proposals are already in hand to connect Birmingham International to the City Centre by tram and it would cost relatively little to extend the tram line to the Interchange Station.

    The fate of Phase 2 would then be in the hands of future politicians and would be unaffected by anything above.

    Peter Styles []

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