Manchester could become part of George Osborne's vision of a "northern powerhouse". Photo: Getty
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The politics behind government backing for HS3

David Cameron and George Osborne have given joint support for proposals to improve services across the Pennines.

There’s no route, no timetable agreed for building it, and no plan for how the money for it will be committed. These are the almost inevitable credentials of the follow-up project to the existing financial and political minefield, HS2, proposed this week by the original project’s chief, Sir David Higgins.

The government has given full backing to plans for “HS3”, which would bring new rail links in the north of England, improving services across the Pennines, especially shortening journey times between Manchester and Leeds.

David Cameron is backing the plan for HS3, and the government has agreed to produce a strategy looking at the options for delivering such a project. An interim report will be produced in March.

Why, when the controversial HS2 itself is yet to find its feet, is the government supporting an uncosted follow-up infrastructure project that even Higgins himself admitted is just “the start of a conversation” on the BBC’s Today programme this morning?

Although he tried to underplay HS3 as a big, HS2-style, project by saying it’s “not just a single project” and would rather tackle challenges in the north involving “rolling stock, electrification, port challenges, freight blockages”, the BBC is reporting that it could be more expensive than HS2.

The reason is political. At the start of the summer, George Osborne was talking a great deal about creating a “northern powerhouse” with a new high-speed rail project, and the word around Westminster is that his plans for infrastructure projects in the north of England will feature in the Autumn Statement this year.

However, it’s not just about wooing northern voters. There is also an element of coalition rivalry here. During their party conference, when they weren’t coyly espousing the radical nature of staunch centrism, the Lib Dems’ positive case for remaining in government was dominated by a commitment to infrastructure plans. The Chief Secretary to the Treasury, Danny Alexander, at a fringe event, gave a hint that he was looking for new proposals in the Autumn Statement that would make further “progress” on infrastructure spending.

So HS3 is not just a case of the government trying to outplay Labour in empowering northern cities. It’s about whether the Tories or the Lib Dems can gain the most ground by promising the most attractive-sounding infrastructure plans for the voter base residing in those cities. Even if these are at present more dreams than plans.

Anoosh Chakelian is deputy web editor at the New Statesman.

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How austere will Philip Hammond be?

The Chancellor must choose between softening or abandoning George Osborne's approach in his Autumn Statement. 

After becoming Chancellor, Philip Hammond was swift to confirm that George Osborne's budget surplus target would be abandoned. The move was hailed by some as the beginning of a new era of fiscal policy - but it was more modest than it appeared. Rather than a statement of principle, the abandonment of the 2019-20 target was merely an acceptance of reality. In the absence of additional spending cuts or tax rises, it would inevitably be missed (as Osborne himself recognised following the EU referendum). The decision did not represent, as some suggested, "the end of austerity".

Ahead of his first Autumn Statement on 23 November, the defining choice facing Hammond is whether to make a more radical break. As a new Resolution Foundation report notes, the Chancellor could either delay the surplus target (the conservative option) or embrace an alternative goal. Were he to seek a current budget suplus, rather than an overall one (as Labour pledged at the last general election), Hammond would avoid the need for further austerity and give himself up to £17bn of headroom. This would allow him to borrow for investment and to provide support for the "just managing" families (as Theresa May calls them) who will be squeezed by the continuing benefits freeze.

Alternatively, should Hammond merely delay Osborne's surplus target by a year (to 2020-21), he would be forced to impose an additional £9bn of tax rises or spending cuts. Were he to reject any further fiscal tightening, a surplus would not be achieved until 2023-24 - too late to be politically relevant. 

The most logical option, as the Resolution Foundation concludes, is for Hammond to target a current surplus. But since entering office, both he and May have emphasised their continuing commitment to fiscal conservatism ("He talks about austerity – I call it living within our means," the latter told Jeremy Corbyn at her first PMQs). For Hammond to abandon the goal of the UK's first budget surplus since 2001-02 would be a defining moment. 

George Eaton is political editor of the New Statesman.