1. Transport
  2. Rail
July 26, 2019

HS2’s left-wing critics feed the “maxed-out credit card” myth at their peril

By Tom Follett

The UK’s new railway HS2 is set to swoosh unsympathetically through the countryside just eight years from now. As such, it has attracted the usual clutch of opponents

But amid the concerned villagers, one group stands out. These critics hail from the left, and their issue is not the green fields, but a feeling that the money would be better spent on local transport networks in the cities. By killing HS2, goes this argument, its £56bn budget would be liberated for local causes.

Coming from the left, this is a curious way to frame an argument about spending. By linking the fate of HS2 to improvements in local transport, it reinforces the view that the barrier to local investment is the national finances. The implication is that, as things stand, there is no capacity left in the budget for local projects.

This is a frame of thinking straight from George Osborne: the “maxed-out credit card” which he skillfully deployed to cull a host of public projects and shrink the state. It also runs against Labour’s own economic position that austerity is a political choice, not a necessity.

In practice, the amount of money available depends on which infrastructure projects the government thinks worth investing in. It borrows what’s necessary to pay for them, because as long as the economic gain is more than the borrowing costs, the project will – eventually – pay for itself through increased activity.

The route. Image: Wikimedia Commons.

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Borrowing too much could eventually increase costs. But many economists argue we are far from that point. With the cost of public borrowing currently at a historic low, they say there’s plenty of room for more long-term public investment. The money is there for improvements in local networks without needing to take from HS2.

Virtuous circles

The real barrier to investing in local transport was that, until recently, the Treasury’s definition of “worth investing in” did not account for the cumulative effect that improved transport would have on local economies over time. Too much emphasis was placed on the effect projects would have in isolation, instead of seeing investment as part of a regional industrial strategy.

While poor connections held Northern cities back, London’s stronger economy justified higher public spending. But each project strengthened its economy further, which in turn strengthened the case for future investment – and so, it kept getting more and more.

That situation is now starting to change. Investing to improve the productivity of the “left-behind” parts of the country is high on the minds of Tory and Labour politicians alike. Strategic factors beyond the usual cost/benefit calculations are recognised as an important part of decisions. Ambitious plans are being drawn up in many cities.

The cheap money is out there to fund these plans. But HS2 or no HS2, cities won’t be able to take advantage of it until the government decides a sustained progamme of local investment is a political priority that will deliver growth.

Those who would simply switch out the budget from HS2 also have little to say on how to solve the issues that it’s needed to fix. Namely, more people travelling between Birmingham and the North; freeing-up space for manufacturers to import materials and export goods along existing lines; and relieving the unreliable and congested West Coast artery. Spending on local transport, while also vitally important, can’t resolve these.

Whether HS2 is technically the cheapest way to achieve the goals is a fair question. Endless reviews return the same conclusion: it is cheaper to build from new in the fields than pouring concrete around the current route, the most intensively used in Europe, while it’s still running.

More often, though, those who would see “the money” simply reallocated are silent on the goals, or argue that local networks are more important.

This is a shame, because it reinforces the myth of a zero-sum choice between equally important priorities. It implies that financial constraints, the “maxed-out credit card” is the problem. In fact, the long-running undervaluing of the importance of a balanced economy is to blame. It sets up the idea that local and national prosperity are mutually exclusive. Building a sustainable economy along the Green New Deal model demands both.

HS2’s critics on the left are right to fight for fairer investment in all parts of the country. But tying that need to HS2’s budget makes no sense – and risks feeding a dodgy spending myth that helps neither.

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