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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