Presented by Jonathan Ford and Neil Collins.
With Tony Berkeley and Tom Forth.
Produced and edited by Nick Hilton for Podot.
Additional producing by Ewan Cameron.
Sponsored by Briefcase.News
Hello and welcome to a long time in finance with Jonathan Ford and Neil Collins, in partnership with briefcase dot news, the service that brings intelligent curation and analysis to your media monitoring.
The Chancellor, Jeremy Hunt, says Britain faces eye-watering decisions on borrowing and expenditure and nothing is off the table. One project is firmly under the microscope, according to Michael Gove, the new Leveling Up Minister, is the massive project called HS2, which is to build a high-speed railway line between London and Manchester by 2040.
Announced in 2012, this has proved highly contentious, with costs rising from 56 billion at the start to more than 100 million or 125 million pounds per mile of track versus average European costs of around 20 million. Construction only started in 2020 – with about 15 billion spent to date. Infrastructure spending is often the first casualty of any government spending squeeze. It’s easier to cut than current spending. Gordon Brown’s government squeezed it after the 2008 financial crisis. And George Osborne then cut it even further with consequences for growth we’re still living with. And go back further to the 1970s, and you find a host of scrapped infrastructure projects from the third London Airport, the Channel Tunnel, and urban transport schemes such as the Manchester underground. Britain has a terrible stop-start record of infrastructure investment.
So we thought we’d look at the debate about the HS2 project and how it fits into the wider story of Britain and infrastructure spending. What’s the argument for cutting it? What should we be doing instead? And are there really shovel-ready projects that would make more sense to which we might direct the 30,000-odd workers and supply chain businesses that are working on HS2? And lastly, we’ll ask why it is that infrastructure such as HS2 cost so much more in Britain than elsewhere. So we’re delighted to be joined by Tony Barclay, an engineer, railway expert, and author of a pessimistic 2019 report on HS2. And also Tom Forth a software engineer, or digital entrepreneur I should say, and industrial strategy expert based in Leeds. Welcome. Let’s really start with HS2, I think and I suppose we should just lay our cards on the table. Is there any real case for it? And if not, why is it the wrong project? Maybe I can start with you, Tony.
Tony Barclay 02:44
The basic problem with HS two is that it’s the wrong project. This is assuming we’re not worried about money. We’re not worried about the government being able to fund it. But it is actually the wrong trade project for dealing with the massive problems we have with railways in this country generally and the fact that people want to move around in a more low carbon means. My view has been for a long time that we should be improving the railways in the north and the Midlands, particularly east-west so people can move around there. And in simple terms, we could create a network of lines in those areas which are as good as a commuter service around London.
Jonathan Ford 03:27
So okay, so commuter projects will be better. It’s the wrong scheme altogether. Tom, what’s your view?
Tom Forth 03:34
So here in Leeds, we’ve already had HS two canceled, of course, so HS2 will no longer come from Birmingham, via Nottingham and then Sheffield to Leeds. Amusingly that was by far the highest value part of the line. Because the current train from Leeds to Birmingham is extremely slow, there is no electricity on the railway, and the tracks are congested because it has to fight for space with people in Sheffield, Leicester and Nottingham trying to go to London and people in Birmingham trying to go to London.
The problem that I have is whilst I completely agree that it’s a pretty average at best and probably poor value scheme overall. I have absolutely no hope in the UK political system building anything else. Leeds has tried to build some form of mass transit system for 40 years. It has failed to do so – it is today the largest city in the whole of western Europe without a mass transit system – there is no tram, no metro, and not much electric trains around Leeds to get people where they need to go.
And I see absolutely no hope of any money saved by further cancelling HS2 being spent on anything better for us here. So it’s in my view, the engineering and the business case for HS2 isn’t particularly impressive. The reason why I probably do support it is because if the infrastructure doesn’t go to London, it will not be funded in this country. The UK government is in London. The UK’s experts are in London. The UK’s media and lobbying groups are in London. And unless they get a big slice of the pie, they will just cut the money. So I think that it’s HS2 or bust, to quote a recent phrase. But if we cancel HS2, would I love to have six wonderful tram lines connecting West Yorkshire, making Leeds Bradford and Wakefield a super city that could compete with its rivals in Europe? I’d love that. I would estimate the chances of that happening are precisely zero, it just won’t happen.
Neil Collins 05:47
How much do you think that would cost compared to the cost of HS2?
Tom Forth 05:52
Oh, it’s trivial. It’s a trivial number: 2 billion pounds would get you a pretty good tram system in Leeds, that would have at least two to three times the return on investment of HS2. Interestingly, we’d have at least double the return on investment for something like Thameslink, which we spent a huge amount of money in London on. So for me, HS2 gets the politics, right, it gives enough to London that they might fund it, and then delivers something at least, since the alternative is zero, to places in the north and the Midlands.
Tony Barclay 06:23
Tom, you’re absolutely right. And it’s very depressing what you say, because many people are now saying that the answer is for Liverpool, Manchester, Leeds, also to Sheffield and York, should have their own higher speed direct line as a first start, which would need the funding from HS2. But that’s what everybody wants. And then you add on all the different lines, including your tram lines on top of that, and I think it would probably cost less than HS2 is forecast to cost at the moment.
Tom Forth 06:57
It’s worth saying that not only do we know it would cost a lot less, but Transport For The North worked up all of those plans, they called it Northern Powerhouse Rail. And that was cancelled. It doesn’t seem to be one or the other, it seems to be HS2 or nothing.
Jonathan Ford 07:11
So Tom mentioned this whole question of economic modelling and how these projects are scored. I mean, Tony, you actually authored a report of that nature, can you just explain to us how you go about assessing the economic case?
Tony Barclay 07:27
On HS2 you’re looking at the cost/benefits, and you’ve got two figures. One is the cost of the project. And the other is the benefits. But of course, the people who do this for HS2 look at very high benefits, because they believe that they can put up with the rail fares to go to London because it’s a very important route. And then they also add on the development potential of building lots of office blocks around the stations, and things like that. Similar comments were made about Birmingham. But when it gets further north, of course, the benefits are seen to be less because the train fares are lower. And the train fares are lower in the regions because people can’t afford them because they get paid less. It’s a vicious circle. Of course, everybody wants better lines around London because they can afford the higher train fares. But actually, the first thing that should happen is that there should be a complete rebalancing of the railway structure between the regions. And London, I believe London per head of population… London and the South, per head of population, get three times the amount of income per year from the government versus the region’s – three times!
Neil Collins 08:45
And I must say I’m fascinated to hear that and slightly puzzled because I would have thought that, you know, there are an awful lot of people living in what we might vaguely call the north, all of whom have votes. And I would have thought that there was a great attraction for politicians to say, we’re going to, I think the expression I’m looking for, is level up! And we’re going to do it by transport infrastructure spending, I would have thought that was quite an attractive method. Rather than get bogged down in trying to do something slightly better at enormous expense in London.
Tony Barclay 09:26
There are a lot of votes in the north. If you’re talking about people who use a train, it’s people in cities. The problem for the political power of the North, is that all of the North cities vote without fail for Labour. Now I’m not fussed either the way that they vote, but when you’re not a swing, see, you don’t have much power within UK politics. So you know, there’s no point the Conservatives being very nice to Manchester Central or Leeds Central or a central seat in Liverpool. Because there’s no chance ever, in my lifetime I don’t believe, the conservatives will ever win that seat, they could give everyone under 1000 pounds. I don’t think they would…
Neil Collins 10:07
You don’t want to waste it on them do you, in that case?
Tom Forth 10:11
I think that the power is in the swing seats and the swing seats are in towns. And what do people do in these towns and suburban and rural areas? They drive!
Tony Barclay 10:20
I remember speaking to Andrew Adonis, who was then Secretary of State for Transport the star for this project and said, Andrew, why don’t you start the lines in the north where it’s really necessary? And if it has to come to London, do that last? And he said, and this confirms what Thomas said that the cost-benefit of doing it in the north wasn’t so good as starting in London. So there we are. That says it all.
Neil Collins 10:49
Could I come back a bit? Tony, you have just written to the Prime Minister, whoever he is this week – You’ve just written to our new prime minister, who is looking for economies explaining why it’s not too late now, to scrap HS2 and two, you’ve highlighted the amount of money that can be saved. Could you just tell us what you put in the letter?
Tony Barclay 11:20
I had, I had a quick meeting with him when he was still Chancellor some time ago. And he was obviously concerned about the cost of HS2, which seems to have gone up and up, and in people’s estimates over the last few months. And given the fact that government is now talking about having to save many billions of money to balance the books. My suggestion was, it should actually be scrubbed completely. And the money partly spent on other lines and partly used for other things, because we haven’t actually got to the end of the cost increases yet. I mean, we don’t have a station at Euston that’s actually designed yet. First of all, the project is haemorrhaging money at the rate of 200 million a week. That’s quite a lot of money, 200 million a week.
Neil Collins 12:09
200 million a week!
Jonathan Ford 12:12
Tom, what do you think? I mean, obviously, you’re sceptical that anyone will actually do it. Tony’s proposal, bring down the hammer on HS2 for more east-west Rail. If that were politically feasible, is that how you would choose to redeploy the money? Or would you find other ways of spending it?
Tom Forth 12:32
If that were politically feasible? That’s absolutely the right thing to do. And we know that it’s absolutely the right thing to do, because that’s what all of the countries that have better infrastructure and are more prosperous than us do. What they generally tend to do is they focus on transport within their cities and within their city regions. So when high-speed rail was built in France, it arrived in cities which had already built metros and tram lines, because they had been allowed to raise taxes locally and build that infrastructure. If we allow the cities in England to invest the similar amount of money to what we are spending on HS2 on their priorities. I can promise you right now that not a single one of them would build HS2. In West Yorkshire we spent eight years begging the government to let us have a devolution deal, we begged. Finally, after seven or eight years we’ve got a devolution deal. In that devolution deal, there was a power for the West Yorkshire Borrowing Authority to raise an infrastructure levy would be like how Crossrail was funded partly in London. A few months after we signed the deal, the UK Government turned around and said, we’ve changed our mind.
So the idea that even though we’re not allowed to raise our own money here, that we would be given 20 billion pounds to spend on something that we wanted locally, as far as I’m concerned, it’s pie in the sky. It is not going to happen.
Jonathan Ford 14:01
But Tony, we’re coming back to this same question about value for money and how you score these projects. You yourself say that they are structurally unfair towards places outside the southeast, basically, because the assumption is that the value, the economic value, the fares, for example, you can levy on lines are higher in the southeast. Doesn’t this need reform to make it a more equitable system? Because we can’t just carry on building everything in the southeast and not doing anything anywhere else? Because the model says ‘yes’, only to those sorts of projects.
Tony Barclay 14:35
Yes, but I mean, Tom is absolutely right. When it comes back to the Green Book, which is a treasury bible of how you do these things – they’ve recently revised it. If the politicians really wanted this to happen and the government wanted this to happen, they would instruct ministers and the Treasury to look at it again and come up with ways of getting a better value for money. You can’t magic, everything. But on the other hand, given the fact that HS2’s benefit to cost is point five to one and the Treasury would like you to have over two.
Jonathan Ford 15:13
But your point five to one is you have to spend a pound of money on your line, gets you naught point five pounds of economic benefit. So you’re effectively immediately losing your, half your invested capital, is what you’re saying?
Tony Barclay 15:27
Yes, the only solution to the problem in the north like what Tom has outlined.. well, let’s double the train fares! And let’s assume there’ll be three times more passengers and this were actually likely to happen. I mean, it’s because the economy is in a bad way. People can’t afford to go by train half the time! So they’re using their cars, which is again, damn stupid. It does need a leadership from the north – northern politicians being allowed to do it by central government and start all over again from scratch. And accept that it’s not going to happen all in one day.
Neil Collins 16:03
Tom? No, the absolutely nill possibility of being given 20 billion pounds per city for your five cities. How much do you think as a bus tracker, it would cost to produce a local bus system in those cities, comparable to the one that we have in London>
Tom Forth 16:26
Fixing the buses is probably the thing where we have made the most progress in the last five years. So it’s a welcome opportunity for us to all be very positive. In 2017, there was a bus services act, it allows the regulation of buses again. So it allows the cities outside of London to have buses of a similar style to what exists in London. That is one fare, one smartcard, an integrated ticketing system – that was illegal outside of London until 2018. It is now legal, and that was passed by Theresa May’s government. And that opens the possibility for cities and Greater Manchester is moving at full speed ahead to make that happen, and in 2024, Greater Manchester will roll out its franchise bus system. That’s going to cost on the order of low hundreds of millions per year probably to run – to start off with – because that would require investment in things like bus lanes.
But over time, I wouldn’t actually expect that to cost much more to run than the current bus system. So you’re looking at really quite small sums of money. You actually can see in places, medium-sized cities, this works pretty well. You’ll have people screaming at the podcast if they live in somewhere like York, or Reading or Brighton, when I call their places, small cities. But these are quite small cities, and they can have quite good public transport systems with buses. The problem happens when you have what is a proper big city such as Greater Manchester or West Yorkshire, it really doesn’t matter how good your bus lanes are. If you want to get the 11 miles from the west of Bradford to the east of Leeds, it’s not going to work on a bus. And that’s why you want something like a tram system or a metro system.
Jonathan Ford 18:17
One of the things which, you know, we’ve touched on several times when we’ve talked about the economic case for investments and so forth is, is this disparity, for example, in railway investments and how much it costs to build in the UK versus how much it costs to build elsewhere in Europe. And it really is a multiple, which of course makes it incredibly difficult to stand these projects up and get them greenlit because they have the, you know, requisite positive additive value. Why is it that it is so expensive? Is it because we are not efficient in doing these things, and therefore, we are kind of making it more difficult?
Tony Barclay 18:57
I think there are two main differences and one is the process and the cost of getting permission to do anything. Railways in the UK, is a hybrid bill through Parliament, which is a massive cost. I mean, we’re talking about hundreds of millions of pounds, a large extent on lawyers and consultants fees, because that’s the way it’s always been done. Whereas if you want to build a new motorway in the UK, you do it in a different way, which is a hell of a lot cheaper and quicker even though the government is effectively doing both of them.
It is a question of who takes the risk on the capital cost and what risks the contractors are being prepared to take and you may have read comments in the press about some of the contractors on HS2 are getting very worried about their exposure because in theory, they have a design and construct contract for something which hasn’t been designed properly. It depends what type of contract you end up with- but my gut feeling is that we should go for something much smaller when you’re building railways.
And it ties in with it being very unwise to not only to make such a very big project as one project, but it’s something the French never do. They build a bit of TGV line and they leave it and they build a bit more. And also the fact that we’re building something which is going to be a world beater in terms of speed, but that also means, you know, very levelled straight tracks, good (inaudible) and all the other things which need developing.
Neil Collins 20:37
They haven’t even started on the signalling yet, which I think was the thing that bankrupted Eurotunnel.
Tony Barclay 20:43
Well, yes, I as you know, I worked for Euro tunnel for 15 years, and it didn’t quite bankrupt Euro tunnel, but certainly the cost overruns on the signalling and telecommunications were the highest, whereas the Civil Engineering was not far off on budget.
Tom Forth 21:00
Just on this question of why does everything cost so much in the UK. There are actually quite a lot of infrastructure projects that are delivered not just on time, but early and under budget. So Greater Manchester has delivered most of its recent term extensions, ahead of schedule and below budget. One of the keys of the success of that, if you ask the people who did it was that they didn’t have to talk to anybody in London, they just got on and did it. They didn’t talk to the UK government.
In order to try and gain approval from these quite sparsely populated parts of the South East of England, we have spent a huge amount of money that we really didn’t need to spend. So I think we’ve done some politically, not very clever things. And that has ended up with us having a very, very expensive railway. But still, I come back to it, there is no visible alternative to this, we can do nothing and we stay poor, we can build HS2 when it costs too much, or we can cancel HS2 we’ll build nothing. There is no way in which we build something else in my view.
Neil Collins 22:08
My proposal would be to say, look, look at the vast amount of money we can save by putting HS2 into administration. And we will guarantee to spend, let’s say half of that saved money on doing what Tom was suggesting, and splitting it between the five major cities that require better transport links, and allowing them to decide how they play it. And it seems to me that that would be a way to square the circle, because it would mean that you’d have a very substantial cut in the cost to the exchequer, and you’d end up with something which was actually worth having.
Tony Barclay 22:49
I’m 100% behind you. In fact, I suggested something like it a few months ago you’re absolutely right.
Tom Forth 22:55
And sadly, I’m aware that the British Constitution does not allow Parliament to bind its successes. The next parliament will cancel it. We’re talking about Northern Powerhouse Rail this was announced, it was promised, it was re-promised, it was promised again by Boris Johnson. And it was canceled.
Jonathan Ford 23:13
Promised by Boris Johnson that’s..umm…
Neil Collins 23:17
Words that resonate down the ages!
Jonathan Ford 23:22
That was a long time in finance with Jonathan Ford and Neil Collins, editing and production by Nick Hilton. And our sponsorship partner is briefcase dot news. Join us again next week.
