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19 November 2021

The hidden cost for Boris Johnson’s government of scrapping HS2 plans

The cry to “just spend the money on improving local railways” sounds electorally appealing, but comes with its own problems.

By Stephen Bush

Will the government pay a political price for scrapping HS2’s Birmingham to Leeds leg and for downgrading its ambitions for rail improvements in the north of England and the East Midlands? The plans get a thorough going-over in the regional papers. And just as the national papers inevitably shape the BBC’s coverage and approach, so too can the Yorkshire Post and the Manchester Evening News – both of which rail against the plans – influence what is ultimately the most important bit of political real estate in the British media: the BBC’s homepage. 

But the good news for the Conservative government is that HS2 has never been a very popular programme. The cry to “just spend the money on improving local railways” has always been more electorally fruitful and has been taken up by almost everyone in politics at one time or another, be they anti-HS2 Conservatives on the government back benches or the Green Party in England and Wales.

Now, of course, as I wrote yesterday, that’s a false economy: we need a rapid upfront improvement in infrastructure to meet our green commitments and to improve the productivity and economic performance of the United Kingdom’s great cities, which, other than London, have long lagged behind the continental average. 

But focusing on local improvements is a popular line politically, and is something the Conservatives can say, entirely accurately, they are doing. 

But there are three political problems that would spook me were I a Tory. First, one reason why people tend to argue for regional improvements rather than HS2 is that they think the former will happen faster than the latter. But the timetable for these plans is exactly the same as that for HS2. The mood music around the integrated rail plan makes it sound like these improvements may be with us in short order: even keeping to this timetable may feel like a broken promise by 2024, in a way that HS2 still being under construction wouldn’t be.

The second is that regional rail delays are caused by these services sharing a track with the intercity trains, which means problems on one line inevitably cause problems on another, and also make the intercity trains run slower. So the promised improvements for local rail don’t really materialise without having that segregated service for high-speed and inter-city trains in any case. 

The third is this: while neither the Conservatives nor Labour want to talk about it, the biggest new headache Rishi Sunak faced in his last Budget was the effect that leaving the EU single market and customs union has on the UK’s projected growth, and what that means for tax revenues. While such projections can and have been wrong, predictions for the cost of the “Brexit tax” accords with what we are seeing in the British economy already. 

If you want spend more on the state’s day-to-day activities without increasing borrowing, as both Sunak and Labour’s Rachel Reeves do, then you have to increase either growth or taxes. 

What links those in the Conservative electoral coalition, from the wealthy pensioner who owns a home outright in Surrey to the young family in Derby with a Help to Buy mortgage, to the retiree in social housing in Hartlepool, is that they are all beneficiaries from the era of ultra-low interest rates and low inflation. It is true to say that they are also, in many ways, voters who benefit during economic stagnation rather than higher growth – which might mean higher inflation and therefore an end to the age of low rates.

But if you have to start, for whatever reason, eating into that coalition, whether because of inflation or because you are raising taxes, then things get gnarlier, both for households and the government. And one way to get out of that if you don’t want to return to the single market or the customs union is to increase the economic performance of our core cities. There almost certainly isn’t a direct political cost to not doing HS2 and there probably never will be. But an indirect one? Quite possibly.

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