Cameron's concession to Labour on HS2 costs

After ministers previously pledged to deliver the new line "on budget", the PM now promises that it will come in "under budget".

After HS2 avoided derailment last week, David Cameron used his speech to the CBI to reaffirm the case for the new line, accusing Labour of "playing politics with Britain’s prosperity" and "betraying everyone north of Watford" by refusing to commit to the project.

But his address also contained a significant concession to the opposition. After Labour signalled that its support for the line was conditional on HS2 chairman Sir David Higgins being given "a free hand" to reduce costs, Cameron said:

Britain has shown it can build great infrastructure like HS1 or the Olympics on time and on budget. And with Sir David Higgins in charge - the man who built the Olympics - we will do that for the north-south line too. He has agreed that the first vital step will be to bring his penetrating eye and expertise to a specific task. To report on the costs [emphasis mine]. And to maximise the benefits for all parts of the country as quickly as possible. He has already said the line could come in 'substantially' under the current budget. And he has also made it clear he needs cross-party support to do it.

The PM later emphasised that he wants HS2 to come in "under budget". That contrasts with the previous commitment from ministers to merely deliver the project "on budget", a notable shift in rhetoric that Labour is rightly chalking up as a victory. 

In his own speech to the CBI, Ed Balls again warned that there was no "blank cheque" for the HS2 but also emphasised that the party would continue to scrutinise "the benefits" (rather than merely the costs) of the scheme to "ensure this is the best way to spend £50bn for the future of our country". 

The shadow chancellor's warning that the money could potentially be better spent elsewhere (first made in his conference speech) is a sign that the party's stance hasn't softened as much as some have suggested. 

David Cameron addresses delegates at the CBI conference in London this morning. 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.