Yet another report slams HS2 fiasco
HS2 has - yet again - been criticised for being too expensive. The latest in a long line of bodies to criticise the dubious flagship transport policy is the Public Accounts Committee who are ‘sceptical’ about the project’s capacity to deliver value for money.
We originally criticised the project when it was expected to cost £30 billion. But as is customary with major government infrastructure projects, the budget is on the rise. It’s not clear how high it will go, but the IEA have said the final cost could be as much as £80 billion. I don’t think the government can quite comprehend the enormity of this number written as such, so here it is in a way they might (and I stress might) understand: £80,000,000,000.00.
That is equivalent to £1,250 for every single UK citizen, or £1,632,653,061 for each of the (49) minutes that HS2 will save between London and Birmingham
The PAC suggested that the £50 billion allocated to HS2 included allowances for budget inflation and overspend.
The business case for HS2 has fallen apart like a cheap suit. The Institute of Directors have said it’s neither the Infrastructure project the UK needs, nor the one it wants.
Even though gilt yields yields are presently extremely low, monetary policy is certain to tighten in the near future with Quantitative Easing unwinding and interest rates increasing. John Redwood has pointed out that the government’s idea of an investment as something which brings “economic benefits” (even highly questionable ones) is misleading.
“Let us suppose the government can over the next few years of buying this railway borrow all £50bn for an average of just 5 per cent. That means the railway will need to generate £2.5bn of extra revenue over the costs of running the trains, just to pay the interest. That is before taxpayers get a penny of profit or return, and before we receive a penny to start paying off the colossal debt. To put this into context, the total revenues of the entire existing railway in England, Scotland and Wales derived from fares are just £7.7bn at the moment.”
This is clearly optimistic in the extreme.
It’s not that spending on infrastructure projects is a bad thing. In fact Nick Clegg has admitted cutting capital spending was a mistake.
There is nothing wrong with a significant outlay on our creaking infrastructure over the next few decades, but the opportunity costs of putting so many eggs in such a questionable basket is enormous. It’s not too late to change tack and whoever forms the next government should axe this project and spend the money on smaller, better targeted infrastructure projects.
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