How Labour now plans to claim victory on HS2

Rather than risking the blame for killing the project, Labour has decided to take the credit for saving it by forcing the government to reduce costs.

Update: The plot thickens. A Labour spokesman tells me that the Guardian's story is "nonsense", adding "there is no change in position. We support HS2. We will examine the costs and benefits and will not give a blank cheque." 

It looks like David Cameron's dramatic threat to cancel HS2 if Labour comes out against the project has had its intended effect. After months of uncertainty following Ed Balls's suggestion that the programme's £42.6bn budget could be better spent elsewhere, today's Guardian reports that the party will support the new line if incoming chairman Sir David Higgins is given "a free hand" to reduce costs. Andrew Adonis, the original architect of HS2, who wrote in a recent piece for the NS that cancelling it would be an "act of national self-mutilation" has been drafted in to advise Miliband on Labour's strategy. Confronted by warnings from northern MPs and council leaders not to play "political games" with a multi-decade national project, the party has stepped back from the brink.

When I spoke Adonis last month, he told me that the current contingency fund of £14.4bn was "too large" and that the cost "needed to come down" when the HS2 bill had its second reading next spring. Labour's focus will now be on challenging the government to do just, positioning itself to claim victory if and when it does. By taking aim at the spiralling cost of HS2 ("all they've done since coming to office is add £10bn to it," Adonis complained to me), the party is seeking to demonstrate its commitment to fiscal responsibility and to dispel the belief that it believes the answer to every problem lies in spending more.

By reaffirming its support for the project in principle, Labour appears to have abandoned the position expressed by Balls at last month's party conference, when he openly speculated whether the HS2 money would be better spent on would be "building new homes or new schools or new hospitals". Earlier this month, the new shadow transport Mary Creagh echoed the shadow chancellor's words when she warned "we need to ensure it is the best way to spend £50 billion for the future of our country."

But in her response to yesterday's updated cost-benefit analysis of the project, Creagh was notably less ambiguous, stating that "Labour has always supported HS2 [emphasis mine] because we must address the capacity problems that mean thousands of commuters face cramped, miserable journeys into cities like Birmingham, Manchester, Leeds and London. However, we cannot give a Government that is mismanaging this, or any project, a blank cheque. Our message to David Cameron is clear. Get a grip on this project, get control of the budget and get it back on track." 

Rather than risking the blame for killing the project, Labour appears to have decided to take the credit for saving it.

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
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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.