Balls and Cable sound the alarm over HS2. Who will U-turn first?

It is no longer unthinkable that one or both of Labour and the Lib Dems could go into the next election pledging to scrap the project.

High Speed 2 is an increasingly rare example of an issue on which there is a consensus among the three main parties. But Peter Mandelson's recent rejection of the project as an "expensive mistake" and the 25% rise in its estimated cost to £42.6bn (even before a shovel has touched the ground) has created the space for a more nuanced debate about its costs and benefits. 

So it is striking that both Vince Cable and Ed Balls are now making sceptical noises. Cable told Today this morning:

Well, the case for High Speed 2, which is still being made – I mean, the figures, as you know, are being revisited – have to meet a standard of cost/benefit analysis which the Treasury seeks, and which meet the requirements of the Green Book, as it’s called, on public investment.

And Balls told the FT:

We need to keep a close eye on value for money. I am concerned about the rising costs. As a Leeds MP I can see the benefits for the region and the north of England, but it is not a blank cheque...we have to know the benefits justify the expenditure, so therefore value for money continues to be an important test for me.

It would be wrong to assume that Balls is preparing the ground for a Labour U-turn. Ed Miliband remains personally supportive of the project and HS2 evangelist Andrew Adonis, the party's shadow infrastructure minister, who Miliband has just appointed to lead a growth review, is also determined to prevent any backsliding. But it is no longer unthinkable that one or both of Labour and the Lib Dems could go into the next election pledging to scrap the scheme. In these straitened times, £42.6bn is not to be sniffed at. As one Labour MP recently put it to me, "just think how many houses we could build with that". 

A placard placed by the Stop HS2 Campaign sits in a hedegrow near to the planned location of the new high speed rail link in Knutsford. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.