To move that this House takes note of the Report from the Economic Affairs Committee Rethinking High Speed 2 (6th Report, Session 2017-19, HL Paper 359).
My Lords, I congratulate my noble friend Lord Goldsmith on a superb maiden speech. We very much look forward to his contributions to the House in the future.
I apologise, as I am suffering from a cold; my noble friend Lord Ridley told us yesterday that Darwinian principles meant that his cold would find another host, and I fear that he has been proved correct in that respect.
Five years ago, the Economic Affairs Committee, under the excellent chairmanship of the noble Lord, Lord Hollick, raised serious questions about the cost of HS2, the methods used to appraise the project and other priorities for rail investment in its 2015 report The Economics of High Speed 2. In January 2019, the committee followed up this inquiry and published a new report in May last year. Sadly, we found that the Government were still no nearer to providing satisfactory answers. We therefore concluded that HS2 required a major rethink. Before I explain our conclusions, I thank the committee staff who produced the report: Sam Newhouse, Ben McNamee and Lucy Molloy.
I begin with the question of how urgently we need HS2 in relation to other rail investment priorities. In 2015, the committee suggested that rail infrastructure in the north of England should be the priority. We asked the Government to consider whether investment in northern rail infrastructure should be prioritised over HS2. Beyond a business case for Northern Powerhouse Rail, no such assessment of the relative merits of doing so was ever carried out. Five years on, commuter services in the north of England remain badly overcrowded, unreliable and reliant on ageing Pacer trains built on the cheap using frames from Leyland National buses.
My Lords, I am sorry to intervene on the noble Lord—I will not do it again—but I cannot understand why his committee does not seem to have looked at the West Midlands and the issues there.
If the noble Lord allows me to make my speech, he will perhaps get an answer to that.
The Government’s response to our report stresses that the Northern and TransPennine Express franchises will deliver over 500 brand new vehicles and retire all the existing Pacer trains. Yet, in spite of the Government’s confidence, Pacer trains remain in widespread use today. Allow me to stress that Pacers were initially given a lifespan of 20 years when they were introduced as a stop-gap in the 1980s. Forty years later, many are still with us.
Overcrowding continues to be far more severe on commuter services than long-distance services. We heard evidence that fast long-distance services are among the least crowded trains that serve the cities on the HS2 line. For example, just 4% of passengers stand on the Virgin Trains West Coast to Manchester, whereas there has been a doubling of demand for local services into central Manchester in the last 15 years but only a 50% increase in passenger capacity. HS2 will do very little to help these long-neglected commuters travelling into cities in the north. In fact, the main beneficiaries of overcrowding relief from HS2, when it is finished, will be London commuters who use the west coast main line. Chris Stokes, an independent rail consultant, described HS2 as
“a very expensive way of dealing with the Milton Keynes-Euston commuter peak.”
Simply put, the HS2 project is a poor reflection of the UK’s rail investment needs—I hope that addresses the noble Lord’s question.
There is, fortunately, a programme in place to help these commuters: Northern Powerhouse Rail would create faster and more frequent lines between Liverpool and Manchester, Manchester and Leeds, Sheffield and Manchester, Leeds and Sheffield, and Leeds and Newcastle. It would reduce journey times between northern cities substantially. To give just two examples, the journey time from Liverpool to Manchester would reduce from a maximum of 57 minutes to just 26 minutes; likewise, Newcastle to Leeds would be reduced from 95 to 58 minutes. Such improvements to journey times would increase access to a wider jobs market between northern cities that are currently very poorly connected.
Representatives from northern regions who gave evidence to our inquiry generally agreed that both HS2 and the Northern Powerhouse Rail programme were absolutely crucial to the north. Since the publication of our report, there has been fierce debate—to put it mildly—on whether both programmes are needed. First, the Government, under the previous Prime Minister, stated in their response to our report that HS2 needs to be in place first. In August, the new Government commissioned a review into the viability of HS2, chaired by Doug Oakervee. New details from a leaked version of his report—apparently delivered before Christmas but still unpublished by the Department for Transport—were revealed this week and appeared to indicate only qualified support for the project.
The recently published dissenting report from the noble Lord, Lord Berkeley, argued that HS2 is the “wrong and expensive solution” and that priority should be afforded to Northern Powerhouse Rail and Midlands Connect instead. Stakeholders from the Midlands and the north of England, however, have made clear in their response, once again, that both programmes are needed. We urge the Government to provide clarity on this matter. The noble Lord, Lord Berkeley, made it clear: if the Government have £150 billion, they can do both; if they have only £50 billion, they need to choose.
My Lords, I congratulate the noble Lord, Lord Forsyth, and his colleagues on their excellent report, which sadly shows that many of the questions raised in our 2015 report remain unanswered.
The two reports from the Economic Affairs Committee and an admirable solo contribution from my noble friend Lord Berkeley earlier this month make up an evidently popular box set with common plot lines. First, there is the shared enthusiasm for significant investment in our transport infrastructure but dismay that many alternative, less expensive and less environmentally disruptive solutions to the capacity and network constraints have been inadequately considered or, in some cases, ignored. Secondly, there is clear evidence that the cost of HS2 is spiralling out of control. Thirdly, the benefit-cost analysis, a widely used method of assessing the economic value of the project, is flawed. Fourthly, the oversight of a large-scale infrastructure project is inadequate.
Our enthusiasm for infrastructure spend was based on the assumption that all options would be considered before a final plan was adopted. It is evident that a number of lower-cost options which would have increased network capacity and offered greater connectivity—and in some cases still could—have been sidelined without full public debate.
The failure of the Government and HS2 Ltd to be transparent and communicate details of the cost overruns and project uncertainties in a timely manner has deprived Parliament of the opportunity adequately to scrutinise progress and undermined public trust in HS2. This communications strategy has allowed the project to proceed to the point where the sums invested are now so great that sensible alternatives to reduce costs or reprioritise work have become costly and complex. Some say that was the plan.
A benefit-cost analysis is how the Government assess the economic value of projects. Its usefulness as a decision-making tool depends on the accuracy of cost estimates and the assessment of benefits. It is attractive to policymakers because it can provide an illusory certainty. In the case of HS2 this certainty has unravelled as costs in real terms have doubled and the calculation of benefits is highly questionable.
My Lords, I am very pleased to address the House again after being ill for a long time, but I am sad that we have come to this point. I can say only that I agree with the conclusions of the report before us.
The initial reason for building HS2 has not changed. There is no way that forecast demand for passenger or freight can be met using existing main lines. There has to be more capacity, and talk about incremental enhancements to the west coast main line, the east coast main line and the Midlands main line is nonsense, because the amount of disruption caused would be enormous and last for years.
However, HS2 has been developed as an engineer’s dream project, meeting neither market demands nor cost constraints. It is too fast, as the committee said. I believe that 140 miles per hour would meet market demand, as that is pretty fast. Fast speeds are driven by extravagant emphasis by the department and the Treasury on values of time, which are a very weak way of assessing value. Indeed, the factual economic basis for the whole business is flawed in the extreme. The noble Lord, Lord Adonis, may remember a meeting in his office where I begged him to take up the whole question of Wabtec, which is the method used, and the Treasury Green Book. That was shouted down by officials who I believe had a vested interest in what was for them a good little earner in working out values of time, because it employs a lot of people. We have spoken about the station surveys; they are just one example of slovenly methodology. We need to evaluate the benefits to the community at large, such as the regeneration benefits—solid things which will last for a very long time.
The trains using this route should be what is called in railway terms “classic compatible”. That means that, when a train runs to Birmingham and it eventually goes off HS2 towards Scotland, if it has tilting capacity, it can use it on all the twisting curves around the Lake District. There is little point in saving a lot of money from London to Birmingham and then squandering it because you cannot use tilting capacity as you go further north.
Having heard the noble Lord, Lord Bradshaw, speak, looking forward to hearing the noble Lords, Lord Adonis and Lord Berkeley, rereading the 2015 and 2019 reports from the Economic Affairs Committee, and hearing the noble Lords, Lord Hollick and Lord Forsyth, I am reminded of what a huge amount of expertise and interest in rail transport there is in this House. It used to be said that we were all about hunting and shooting, but it is clear that we are now seriously into shunting and hooting.
I sat on the Economic Affairs Committee under the noble Lord, Lord Hollick, and then the noble Lord, Lord Forsyth, and I have little to add to what they said. The two reports, and in particular the 2019 report, make an extremely powerful case for reappraisal, reprioritising and linking Northern Powerhouse Rail and HS2.
One point that has not yet been made in this debate, which perhaps I can make—I have no particular railway expertise—is about sunk costs fallacies. I am sure that in this debate we will not fall into the two fallacies which are all too evident in the public debate in the press. What worries me is that critics of the project forget that the important cost-benefit analysis now starts with all future costs; sunk costs are sunk. The enthusiasts for the scheme need to remember that the worst reason for proceeding with any investment project is, “With so much spent, we can’t stop now”. That is the road that takes one to two white-elephant carriers in a grossly underfunded, vestigial, tragically small Navy.
It is absurd that it takes 90 minutes to travel the 67 miles from Birmingham to Manchester, and that it takes another hour to go from Manchester to Leeds—about 45 miles. It makes sense only if you are a Scotsman and you are accustomed to dealing with the unreliable snail that spasmodically crawls between Glasgow and Edinburgh. It does not sound too bad in comparison with them. I am not allowed to talk about Glasgow and Edinburgh, which are sadly irrelevant to this HS2 debate, although they were not irrelevant at the start of the project. I am strongly in favour of improving connectivity between the Midlands and the north, and east-west within the north. However, if that is the aim of this exercise, and the Government really mean what they say about levelling up, it is a bit perverse to start by digging a tunnel under Primrose Hill.
My Lords, it is a pleasure to be sandwiched between two eloquent old friends—the noble Lords, Lord Kerr of Kinlochard and Lord Adonis—and not to be discussing Brexit. Instead, today we are discussing the most important decision on public infrastructure currently faced by this country.
It is widely accepted that if the full HS2 scheme is undertaken, the total cost will probably exceed £100 billion. Even today, that is an awful lot of money. It compares with £32.7 billion when HS2 was first given the green light, according to Martin Williams of “Channel 4 News”; I am grateful to the Library for digging that out.
On the benefits side, supporters of the scheme say that HS2 will revitalise the national rail network, providing extra capacity, with beneficial effects going well beyond the places served. This will be especially favourable for some northern English towns and cities that have fallen behind in recent decades.
Initially, the project received cross-party support but a significant body of opinion has always had doubts. The Economic Affairs Committee report before us is in this vein, raising a number of doubts and putting forward several pertinent questions, as we heard persuasively from my noble friend Lord Forsyth.
More recently, the dissenting view of the noble Lord, Lord Berkeley, as a member of the Oakervee committee, has raised further doubts. We will hear from him but he seems to believe that the scheme’s benefits may be less than its costs. As is clear from public surveys, there is also a general perception that the scheme is much too expensive. Worse, leaks of Oakervee’s draft report suggest that the committee also has reservations. There has already been significant expenditure on the project and the rate of expenditure is due to increase sharply from this point on, so we need to decide now whether to proceed, to modify or to cancel it.
My Lords, for reasons I cannot begin to fathom, when I was Secretary of State for Transport, they called me the “thin controller”. Whether or not that was true, I bear some responsibility for this scheme and should therefore participate in the debate.
My noble friend Lord Hollick referred to the National Infrastructure Commission, which I had the privilege of founding and was its first chairman. I agree entirely with him that it should be put on a statutory basis. We need much stronger and more robust long-term infra- structure planning in this country. Having a permanent commission on a statutory basis would be a good step forward. However, when I chaired the National Infrastructure Commission, one of my principal recommendations—I urge it on the House very strongly —was to avoid the curse of stop-start infrastructure planning, which has bedevilled our development of infrastructure over the past 100 years, and which we are in acute danger of doing again with HS2.
I pay great tribute to the work of the Economic Affairs Committee and the noble Lord, Lord Forsyth, but he presented his report as if these issues were being considered for the first time when the committee debated them. They have been considered exhaustively since the scheme was first announced, and I had the privilege of presenting it to this House on 11 March 2010. Not only have they been considered exhaustively but they have been decided by Parliament. Four years ago, on 23 March 2016, the legislation that is now being implemented to build the line from London to the West Midlands was agreed by the House of Commons by 399 votes to 42 votes. That is one of the most emphatic votes in favour of a large project in the history of Parliament. That came after months of consideration by a hybrid Bill committee of the other House looking at all the issues which my noble friend Lord Hollick and the noble Lords, Lord Forsyth and Lord Kerr, have raised.
The issue of whether to terminate at Old Oak Common or go through to Euston was considered exhaustively by the Select Committee—I could go through all the arguments for the House. It is true that a lot of passengers will wish to transfer to the Elizabeth line when it is completed—another project that is over budget and delayed. But it is also the case that there are big resilience factors in having the whole of the rail traffic in this country coming from the north and the Midlands—as my noble friend Lord Hunt said, the Midlands is a crucial part of the scheme—decanting at one station on to just one line. You have only the Elizabeth line if you terminate at Old Oak Common, whereas coming through to Euston, which the noble Lord, Lord Forsyth, does not seem to think is in central London, there are another three lines—I am all in favour of the arch coming back, like the noble Lord, Lord Kerr, but one could debate that too. Once you join up properly with St Pancras, which is part of the scheme, you will also link in with High Speed 1 and a whole array of other services.
20 of 96 shown
In the view of the Economic Affairs Committee, HS2 phase 2b and Northern Powerhouse Rail should be combined into a single programme to allow investment to be prioritised where it is needed most, and funding for the northern powerhouse needs to be ring-fenced and brought forward where possible, otherwise the north of England will continue to be short-changed by the Government’s plans. The Government stated in their response that they would “carefully consider this recommendation”. We hope they do so.
Our report also considered the planned costs of HS2 and examined the method by which the Department for Transport determines whether the project provides value for money. The leaked version of the Oakervee report found that more work is needed to assess the scheme’s impacts on regional growth and that it is “hard” to say what economic benefits will result from building it. Suffice it to say that providing clarity on the costs of HS2 has never been one of the Government’s strengths. The first estimates for the costs of HS2 were published in February 2011 by the department under the then Secretary of State for Transport, Philip Hammond. The estimated cost for the full network was given as £37.5 billion. Then the department, under the following Secretaries of State, Justine Greening and Patrick McLoughlin, put forward two updated economic cases in January 2012 and October 2013. The estimated cost rose first to £40.8 billion and then to £50.1 billion.
Moving forward, the department’s 2015 spending review set the funding envelope for HS2 at £55.7 billion, in 2015 prices. Adjusting for construction price inflation since 2015, this funding envelope increases to £59 billion today. The estimated costs, however, were shown to have increased to £65.2 billion. Yet fear not; in 2017 the department, now under Secretary of State Chris Grayling, published a financial case with all assumed efficiency savings calculated into the model, estimating that the full cost of HS2 would be £52.6 billion. The committee was told that spending to date on the project was £4.3 billion.
Since the publication of our report, there have been even more conflicting estimates of the costing range for the project. In August 2019 HS2 chairman Allan Cook published an official stock-take of the current status of the programme, in which the total funding range for all costs and risk was estimated at between £72.1 billion and £78.4 billion. Yet following this the Secretary of State for Transport, Grant Shapps, clarified these costs to Parliament in a Written Statement on 3 September 2019:
“Adjusting by construction cost inflation, the range set out in Allan Cook’s report is equivalent to £81 to £88 billion in 2019 prices”.—[Official Report, Commons, 3/9/19; col. 7WS.]
Now, according to the leaked Oakervee report, the cost of the project could rise to as much as £106 billion. Adding to the confusion, the noble Lord, Lord Berkeley, suggests in his dissenting report that the total cost will in fact be £115.8 billion.
This confusion absolutely tallies with what the committee heard from Sir Terry Morgan, the former chairman of HS2 Ltd, who told us that “nobody knows yet” what the actual cost of HS2 will be. Most pointedly, the noble Lord, Lord Berkeley, concluded that
“Parliament has been seriously misled”
about the costs of HS2. The committee also had serious reservations about the cost-benefit analysis used in determining whether HS2 provides value for money. The results of the latest cost-benefit analysis for HS2, published in July 2017, show net benefits of £92.2 billion and net costs to the Government of £39.8 billion. Following the familiar theme of confusion that has arisen throughout the project so far, the leaked Oakervee review suggests that the cost-benefit ratio has fallen from £2.30 to £1.50 for every pound spent. The committee did not find the methodology used credible for either the project’s costs or its benefits. The model does not account for the transformative effects on employment and population that new infra- structure can provide, because it assumes that land use in the surrounding area is fixed. The Government’s response to our critique was disappointing. They accepted the limitations relating to the treatment of land-use changes but offered no indication that they would carry out new analysis.
Our second reservation concerns the methodology and evidence used to calculate the value of travel time. These measurements have improved since their first iteration—when they forgot that people can, and quite regularly do, work on trains—but they are still questionable. They used surveys asking business rail travellers hypothetical questions about how much they would be willing to pay for quicker journeys. The committee did not believe that a few hundred interviews carried out on station platforms were a robust evidence base on which to base a calculation of the benefits that a potentially £80 billion new railway will bring.
Finally, our report shows that the estimated benefits of HS2 are highly dependent on forecast numbers of business travellers using long-distance rail. Our central concern on this point is that the evidence used to forecast the number of business travellers using HS2 is based on data that is 15 to 20 years old. Not only do the numbers not correspond to the most recent data from the national travel survey and the national passenger survey, but relying on out-of-date data is neither a robust nor rigorous basis for evidence-based policy-making. We therefore recommended that new analysis of the project is needed. This must take into account the transformative effects of new infrastructure on the benefits of the project. It should revise the assumptions behind the values of travel time, and the demand forecasts should be revised ahead of this new analysis. We recommended that this analysis be published in full alongside the business case by the end of last year. The Government have accepted that the data is out of date and stated that updating it is part of the department’s latest research priorities. We strongly urge its publication as soon as possible.
In 2015 we recommended that the Government should review the cost saving from lowering the maximum speed of the railway and terminating the line at Old Oak Common rather than Euston. Yet again, the Government failed to consider our very reasonable recommendations. Our follow-up examined the two ideas again in detail. HS2 is being built to accommodate trains that run at a maximum of 400 kilometres per hour, with trains initially expected to run at a maximum of 360 kilometres per hour. Trains that can travel at that speed do not exist. When we asked why the railway was being designed to that specification we were told it was in order to make it future-proof. We heard evidence that strongly questioned the design speed, including one piece of evidence that described the maximum speed as “an engineer’s pipe dream” and “close to ludicrous”.
Allow me to stress, on this point, that in phase 1 trains can operate at 360 kilometres per hour on a mere 68-mile stretch between Amersham and Birmingham. Reducing the maximum operating speed to 300 kilometres per hour would add an extra 10 minutes to a journey between London and Manchester, but the cost savings for the whole project could represent up to £1.25 billion once longer-term operational and energy costs are accounted for. Based on this evidence, we see no reason for HS2 to be built to operate at 400 kilometres per hour.
Once again, we are disappointed that the Government have ignored our recommendation to assess the cost saving that could be made by terminating the HS2 line at Old Oak Common rather than Euston. The Government and HS2 Ltd cite a 2011 report from Atkins as the evidence base for rejecting our proposal. Notwithstanding the fact that it was written at the start of the last decade, that report assessed only the reduction in benefits and made no estimate of the possible cost saving. The Government must consider both. We argue that what matters for the termination point is not the single point in central London, but the connections that enable passengers to quickly arrive at their destination. The evidence we saw shows that onward journey times to final destinations using the Elizabeth line from Old Oak Common appear to be comparable to, or better than, continuing from Old Oak Common on HS2 to Euston. Euston is not “central London”.
We have therefore recommended that the redevelopment of Euston station be removed from the scope of phase 1 of HS2 and that Old Oak Common should operate as the London terminus for phases 1 and 2a. Doing so will allow time to determine whether Old Oak Common could operate as the London terminus for the entire HS2 network, and the potential costs or savings that that would involve relative to a terminus at Euston. Our report is an appeal to the Government to conduct a major rethink of the full HS2 project. A new appraisal of the project is urgently required. The Government must act to ensure that the benefits of HS2 are not geographically uneven and do not entrench the uneven economic divide between north and south that already exists.
I was very struck, in our discussions in the committee, by the words of the former Chancellor and Transport Secretary the noble Lord, Lord Darling. He said, “These projects are all the same: they run over budget and in the end the bit at the end gets cancelled.” The bit at the end is the east-west rail structure which is so desperately needed now in the north of England. I beg to move.
As the noble Lord, Lord Forsyth, said, the economic case published by HS2 Ltd in 2015 assumed a capital cost of £55 billion and claimed a benefit-cost ratio for every £1 invested of 1.8, increasing to 2.3 when wider economic benefits such as those associated with bringing people and businesses closer together are included. Last year, the chairman of HS2 revealed that total costs had increased to £78 billion and that the benefit-cost ratio had dropped from 2.3 to 1.3. In a paper published today, the Institute for Government estimates that, based on the Oakervee review cost estimate of £106 billion, the costs of the project risk exceeding the benefits.
The benefits flowing from the proposed project are founded on a long-term estimate of income based on the number of travellers, the fares charged and the wider economic benefits expected to flow from HS2. Approximately 60% of these benefits are based on an assumption of the willingness of business travellers to pay higher fares. As the noble Lord, Lord Forsyth, noted, this is derived from a survey of travellers’ answers to hypothetical questions on station platforms. This data has rightly been described by the committee as unconvincing. One key assumption underpinning the forecast is that there will be 18 trains per hour; experts advise that there can be only 14 trains per hour, which is the number that travel per hour on European high-speed networks. Another key assumption underpinning the forecast of benefits is the number of travellers. This is based on a 20 year-old model which does not even correspond to the number of journeys undertaken for business in the latest national travel survey. More work is needed to make sense of these assumptions.
If the Government are to proceed with HS2 phase 1, they must reduce costs. Making the London terminus Old Oak Common—possibly to be renamed Boris Terminus—and running the trains at the same speed as the rest of Europe will save an estimated £10 billion to £15 billion. These savings can be invested in upgrades to improve capacity, speed and connectivity in the Midlands and the north. This is the surest way to achieve a positive return on this massive investment in this decade. The Government can in the meantime take a fresh look at the lower-cost, higher-return options to improve the transport system set out in my noble friend Lord Berkeley’s report.
With their laudable ambition to invest a further £100 billion in transport infrastructure, the Government need now to put in place measures to avoid the shambolic HS2 process, where project oversight has been absent. The Department for Transport is the sponsoring department, with the optimism bias and defensive mentality that comes with that role. The Treasury appears to have neither the inclination nor the resources to oversee multiyear projects.
The NAO and the Infrastructure and Projects Authority provide valuable rear-facing analysis of projects. When George Osborne first floated the idea of setting up the National Infrastructure Commission, he planned to invest it with statutory powers to oversee infrastructure and other projects from the planning stage to completion. Whitehall departments made it clear that they did not want such a body poking its nose into their affairs, and the statutory status was quietly dropped. Apparently, the National Infrastructure Commission does not even plan to review HS2 or Hinkley Point C, another rather expensive project because they were greenlit before it was established. So much for effective adult supervision. Putting the National Infrastructure Commission on a statutory basis should be a priority if the Government want to deliver their projects on time and at a realistic budget and help to secure parliamentary and public support.
The north and the Midlands desperately need improved services, but those are very much dependent on HS2. I have seen some good work done by Midlands Connect, which shows the impact of HS2 on the journey times between places like Derby, Nottingham, Leicester and Lincoln going into Birmingham, not London, because people mostly do not want to go that far. However, there is huge potential in building up commuting in this very congested area by making use of the services provided by HS2.
I will not go on very long, but this is the most important part of what I have to say, and I would like to meet the Minister to talk about it. The traffic forecasts prepared by the National Infrastructure Commission for the period 2033 to 2043, on which current projections are based, were prepared before the major paradigm shift to net zero in 2050. Because of this, there is a likelihood that the whole basis of official forecasting has changed. It is most unlikely that by 2050 we will have a satisfactory replacement available for the 44-tonne lorry—one that does not use diesel. It would be sensible to connect the country to an electric freight railway. That does not require very much more electrification, but filling in a few gaps would give us the opportunity of connecting every port, inland terminal and quarry to either a city centre or an inland freight terminal. On the demand generated by this—I will not go on about this for long—it would require six extra trains an hour between Felixstowe and Nuneaton, and four trains an hour on the west coast main line. That is the pressure on capacity for freight, let alone the pressure that may arise and is still arising from passenger flows. The sums urgently need doing again.
Like the noble Lord, Lord Forsyth, I strongly support the termination at Old Oak Common. I would like to have the job of running Old Oak Common as the terminus, because in fact the speed at which you turn trains back is a function of the number of staff you have and the ease of access to and from the station. You can turn the trains round very fast, as they do in Japan, by having staff at the ready to pounce on the train instead of leisurely taking half an hour or an hour to do so.
So much can be done with this, and I entirely endorse what the noble Lord, Lord Forsyth, said. However, we need HS2—one which is scaled back, uses less energy, and has lower engineering costs and lower speeds.
I hate the 1968 Euston station and mourn the wonderful Grecian arches of the old station. However, improving London’s architecture does not do much for connectivity in the north. In fact, this project does not do much either for connectivity in London. As the noble Lord, Lord Forsyth, pointed out, we on the committee established that if you wanted to go from, say, Birmingham or Manchester to the West End of London, Westminster, the City of London or Canary Wharf, you would certainly get off at Old Oak Common, and you would reach your destination much faster than if you stayed on the train and went to Euston. I cannot see why this end—the Primrose Hill end—has to be part of phase 1. If we had unlimited sums to spend, yes, we could replace Euston and tunnel under Boris Johnson’s father’s house. That is fine—perfectly okay. However, if it is about connectivity in the north, let us start in the north.
NPR is clearly needed much more urgently than HS2. However, on present plans, NPR does not start spending any serious money for another five years, and it will not be complete for another 20 years. That is a very long time to wait.
It is very important, while the Government have the wind in their sails and while they can take bold and brave decisions, that they should show what they mean by levelling up. We want a proper reappraisal, rephasing and reprioritising. I therefore strongly support what was said by the noble Lords, Lord Hollick and Lord Forsyth.
What should the Government’s approach be? I am with others; I suggest that they should concentrate on the economics and be realistic about the prospects and likely costs. Political considerations will always be present in such decisions involving public finance, but it would be wrong to proceed in the face of evidence that the economics do not stack up. I fear that it is beginning to look like that, at least for the full scheme.
As a major project, HS2 is in particular danger of giving rise to that feeling of pride and hubris that seems to bedevil such undertakings. Consider train speeds: as the committee pointed out, it is peculiar to envisage speeds for HS2 faster than those yet achieved anywhere in the world when the UK is considerably smaller than other countries with comparable systems. If the scheme is to proceed in full, we need to see much more rigorous cost-benefit calculations than have hitherto been supplied. As the Benches opposite have often asked, with my support, where is a proper impact assessment?
Can we also look at the dynamics—the development and transformation that will follow the line, a point well made by the ICE? I saw for myself their “whole-life benefit” coming to life, with new housing and business parks, when I made a Conservative Party visit to Birmingham. If we could speed up the northern parts, that would obviously bring even more benefits.
As a businesswoman, however, I am also concerned about the management of this and other public infra- structure projects. I was a huge supporter of Crossrail, which has a substantial net benefit. The tunnels and stations have been a great success, but the signalling system was separated out. It has proved a disaster and delayed the whole project. With ticket income postponed, this has taken a scythe to the net benefit and, indeed, had knock-on effects for other parts of our now amazingly crowded Tube lines.
We must learn from this and from experience abroad. With the Library’s help, I found a 2016 PwC report that confirms my impression from my time as Energy Minister. First—thanks, I suspect, to the dead hand of Treasury rules—risk falls almost entirely to the contractors, who have to charge more than they would if risk were shared. The state should take the first slug of risk, as I argued we should do for the new nuclear power stations. The cost there falls by about a third.
Secondly, a project of such national importance needs to be run as a single entity with few large contractors and a preference for the best in the UK—the approach taken in France. Our construction industry is much more fragmented, with a layering of costs in the supply chain adding administration and margin to the cost and introducing scope for aggressive practices. When I became a director of a building company in the 1990s, I was horrified to discover that we made profit in this most competitive of industries by getting money in before we spent it and agreeing enthusiastically to variations because the margin was much better on them. I am sure things have improved, but I would like the Minister to comment on whether this will be an integrated project or split into pieces in a dubious quest for competition. If we want to help small companies, promote green features—many of us were there last night to listen to the brilliant Sir David Attenborough—and foster apprenticeships and regional supply chains, all of which I strongly support, it may be better to make them part of one central contract run by a project manager within a single entity and with clear responsibility.
Given all this, it is perhaps no surprise that, again according Channel 4, HS2 will be six times more expensive than France’s very expensive LGV Méditerranée, which opened in 2001 and cost £16.9 million per kilometre—albeit that there were fewer expensive stations to build.
My final point is to invite a debate on what we might do with the money if HS2 is abandoned or reduced. First, we could make compensatory improvements. A researcher at the Adam Smith Institute has suggested: multi-level junctions at Ledburn, near Leighton Buzzard, and at Hanslope, reducing the need for trains to slow down; in-cab signalling for the Pendolino tilting trains, which could then go faster; and improvements to the Chiltern and Northampton lines. There is also scope for investing in longer trains, longer stations, sensors to avoid collisions and, of course, wi-fi so that people can work on the train.
Secondly, we could make improvements on more northern lines—a huge area of potential, as we have heard, with lots to do and to be achieved.
Thirdly and finally, transport money would be freed up for other causes. Forgive me for sounding like the noble Lord, Lord West, but we must get on with the Stonehenge tunnel, at an estimated capital cost of a mere £1.7 billion excluding VAT, according to Highways England. However, I hear rumours that it is to be cancelled yet again. I hope that the Minister can reassure me.
The issues of commuter and freight services have been raised. They were considered exhaustively by the HS2 company that advised me in 2010 and by the hybrid Bill committee before that vote of 399 to 42 in the House of Commons. A key issue raised by the noble Lord, Lord Forsyth, in respect of commuter and freight services is the freeing up of capacity by HS2, by taking all the long-distance trains off the west coast main line; a lot of them off the Midland main line, because the service is to Sheffield; and a lot of them off the east coast main line, which goes up to York and Newcastle. They would all go on to the HS2 line, thus freeing up huge capacity to run additional commuter and freight services into the West Midlands, Leeds, Sheffield, Manchester and Newcastle.
The other vitally important issue is that there is no such thing as a free lunch—I wish there were. If we are not going to invest in HS2, we will have to do massive upgrades of the existing lines. When I was Secretary of State for Transport, the very first public engagement I undertook was to reopen the west coast main line after the upgrade which had taken place. It was a modest upgrade by comparison with HS2 to allow for the faster running of some trains, some additional train lengthening and some additional trains. Many noble Lords will remember that upgrade. For the best part of 10 years, services were disrupted on the west coast main line almost every other weekend. The price, as it was then—now you would have to double or treble the figure—was £10 billion, of which £1 billion was spent on compensating the train companies for not running any trains. I can tell noble Lords that if you are running a train company, the easiest thing you can do is to have big upgrade work done on your lines so that you are given huge payments for not running any trains at all. That is what train operating companies love most: being paid billions of pounds for not running any trains.
If you proceed with the conventional upgrades that would be required—they are huge; you are conducting open-heart surgery on a moving patient—you will end up with a colossal cost, estimated by advisers in 2010 to be more, in cash terms, than the cost of HS2. When the Cameron Government made their alternative evaluation, they came up with a credible alternative upgrade scheme that would provide a quarter of the capacity of HS2 for half of the cost. All that is out there: this is not new information; it has all been published. The issue facing us is whether we are now going to do what Parliament itself authorised and build this line. It is under construction at the moment; we are not talking about giving it the green light. Colossal construction is already taking place at Euston: £9 billion has been spent and 2,000 people are working on the scheme. It is being constructed.
The noble Lord, Lord Kerr, is absolutely right to differentiate between sunk costs and future costs, but the crucial point is that if we are going to proceed with this scheme, to pull it up by the roots now with another big evaluation that would add further to the costs would be simply to repeat the curse of British infrastructure planning. The reason we have such a substandard infrastructure compared with so many other advanced industrialised countries is that we start projects, stop them, start them up again, stop them and then start them again. That is an accurate description of what has happened with HS2; this is the fifth review that has taken place since 2010, and the third since Parliament voted in favour of it by 10 to one.
My noble friend Lord Hunt is absolutely right to stress the importance of this project to the West Midlands. This is not a scheme that predominantly benefits the south. Some 200 of the 330 route miles of HS2 will run between the West Midlands and the north-west to Manchester, and the West Midlands to West Yorkshire up to Leeds. This will be transformational for connectivity between the Midlands and the north, and within the north. A large part of the northern powerhouse will depend on HS2, and the noble Lord, Lord Forsyth, mentioned the line from Liverpool to Manchester. Half of the northern powerhouse railway from Liverpool to Manchester will be on HS2 lines, so they need to be, and should be, drawn together.