Balls's threat to abandon support for HS2 sets him up for war with Adonis

Andrew Adonis, the head of Labour's growth review and the architect of the project, has warned that cancelling the programme would be an "act of national self-mutilation".

The most significant line in Ed Balls's speech to the Labour conference was on HS2. Having previously warned that there would be no "blank cheque" from his party for the new high-speed line, he went further today, questioning whether it was "the best way to spend £50bn for the future of our country".

Balls said:

Under this government the High Speed 2 project has been totally mismanaged and the costs have shot up to £50bn. David Cameron and George Osborne have made clear they will go full steam ahead with this project – no matter how much the costs spiral up and up. They seem willing to put their own pride and vanity above best value for money for the taxpayer.

Labour will not take this irresponsible approach. So let me be clear, in tough times – when there is less money around and a big deficit to get down – there will be no blank cheque from me as a Labour chancellor for this project or for any project.

Because the question is – not just whether a new high-speed line is a good idea or a bad idea, but whether it is the best way to spend £50bn for the future of our country. In tough times it's even more important that all our policies and commitments are properly costed and funded.

The signal from Balls that Labour is actively considering withdrawing support from the project raises the possibility of a major party split over the issue. Andrew Adonis, the former transport secretary and the architect of HS2, recently argued in the New Statesman that it would be an "act of national self-mutilation" to cancel the programme. As the party's shadow infrastructure minister and the head of the party's growth review, he remains a significant figure and would likely have to resign his post if Labour came out against the project.

In his piece, Adonis warned that the urgent need to increase rail capacity (the West Coast Main Line will be full by 2024) meant there was "no free lunch - or pot of gold which can be diverted to other projects in anything but the very short-term, with more costly consequences thereafter". But many in Labour would like to transfer funds from HS2 to a mass housebuilding programme. It would allow the party to differentiate itself from the Tories while remaining within George Osborne's fiscal envelope. Today, Balls made it clear that he is sympathetic to their demands.

Shadow chancellor Ed Balls speaks at the Labour conference in Brighton. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.