HS2 - the costs get worse but what options are there?

You may expect the us here at C@W to deplore the rising costs of HS2 (hint, looking back to 2013, we have amazingly been consistent on this) as the gross workings of an excessive public sector.

The sheer rise in costs in incredible, nearly quadrupling from the initial estimates and there are some reasons why which make it so:

1) Ploughing through the home counties and London has led to a lot of legal challenges as a lot of expensive compulsory purchases of land. In China, where they doe things more cheaply, they given you an option of leaving your house or being bulldozed within it - saves on funeral costs too.

2) In a bid to be green a lot of allowances have been made not to damage the countryside. Again in many countries the simpler and cheaper option is to build up and over the forests etc on a raise trainline. It looks terrible and long term is more costly to maintain but is much cheaper to get going with.

3) With a dearth of other big contracts to do, the private companies involved have gold plated the contracts to extract as much value as they can from the Government.

Despite this, what else are the Government going to do to revitalise the North. In a less climate change affected state we could build a ton of new airports like the US and have much easier access to flying but that is not 'going to fly' with politicians today. There are no easy choices that will enable large scale upgrades and whilst extending motorways is all very well that needs to be done as well, not instead of HS2.

Additionally, electric trains can be run off a main grid so again they are long term a more sustainable form of mass transit.

All in all, it will be very disappointing if the Government cave in to lobbying and cancel this project at a time when UK borrowing costs are still near all time lows. If anything we should be pressing the button on these projects and looking to extend the service to Scotland and Northern Ireland over the next few decades.

Keynes Has Never Left The Building

They're Big

When you step back from the detail, all the arguments about how HS2, Hinkley Point and all the other white elephants are justified are just so much empty sophistry.

Certainly the civil servants will always come up with complex calculations about how every minute of saved journey-time adds to GDP, ditto every car-passenger-mile that is converted into a rail-passenger-mile.  It's a great game for all concerned.

But at the end of the day, it's the civil engineering lobby that turns up in Downing Street and says: listen, we only exist because of the Channel Tunnel, Crossrail, the Olympics, T5, HS1, the Jubilee Line extension, the Ring Main etc etc etc to the end of time.

Yes, JM Keynes has never left Whitehall.  Keynsian doctrine is the only conceivable rationale behind gigantic programmes such as the onshore and offshore wind-farm mania.  It works for the civil engineers - and the consultants, and the lawyers, the financiers, the lobbyists - all good British service industries.

I wouldn't mind quite so much if the hardware content was more local.  My understanding is that we have a world-class tunnelling industry in this country, so Crossrail (e.g.) is pretty good in this regard (though don't enquire too closely where the worker-ants hail from).  But the wind-farms ... OK, let's not get started on that one.

So -  back to the topic in hand.  Severn Barrage, anyone ?

ND

Re-Balancing in the UK - what the indicators tell us

You can tell how balanced the UK recovery from the Great recession is from two sets of results out this morning. Firstly Morrisons, the King of the North and source of fresh, but cheap food, has had a bad time of it of late. Sales our down and the CEO is forced to come out with 'we are working at pace' type of rhetoric.

In contrast John Lewis, the owner of Waitrose has come out with some more very good results, despite in general retailers tailing off a little over the hot summer in terms of performance.

To me what this amply demonstrates is that the recovery is still very Southern and London based. Wealthy areas are seeing the benefit of better jobs and payrises and are able to generate new jobs. Indeed the ONS figures out yesterday bare this out. Of the 207,000 new jobs created, 200,000 are in London and the South-East. Also, the confidence people get from their house price going up by big margins has brought renewed optimism, but only in London and commuter land

By contrast, in the north of the country, the fall in public sector jobs continues and there is little private sector kindling to inspire a recovery. House prices are not rising at the same rates and so a steady state continues, albeit at a much lower level than in the now distant past of the early naughties.

And yet, despite this obvious contrast in the economy, many Labour and Tory MP's are dead set against HS2. Willing to believe any scare stories about the massive cost over-runs which are now up to 4x what the original plan was (most large projects that I have seen or watched tend to come in between 2-2.5x initial estimates, so £40-50 billion, over 20 years is about right for the full project).

We desperately need to upgrade the roads and my default position is usually to invest in roads as this accounts for 95% of traffic and journeys. However, in the very long-term, surely connecting the rest of the Country more easily to the growth region of the UK should be a high priority. Not only that but there is record money availabe in Europe in Infrastructure funds, pls long-term bank debt available too - the private sector can easily be tapped right now for investment. It must be worth a billion or two a year out of £700-odd billion spending to try this. After all, this whole North-South divide thing is not exactly a new phenomen is it?