HS2 project ‘should be put on hold’
Tuesday 8th October 2013, 12:21AM BST.
The HS2 rail link between London and the North should be put on hold, a powerful Commons committee has recommended as it warned of “serious shortcomings” in the project’s research.
MPs said a “more convincing” economic case was needed for the scheme, which the Treasury now estimates will cost £42.6 billion – a 17% increase on its previous projections.
The controversial route should “not proceed” until the Government has produced fresh analysis that shows how the project would deliver major benefits, such as jobs and regional economic growth, the Treasury Select Committee said.
One recent independent study put the eventual cost as high as £80 billion, while there have been reports that the Treasury is working on the cost being more than £70 billion and the Public Accounts Committee has also questioned the project.
Treasury Select Committee chairman Andrew Tyrie said: “There appear to be serious shortcomings in the current cost-benefit analysis for HS2. The economic case must be looked at again.
“The Bill should not proceed until this work has been done and the project has been formally reassessed by the Government.
“At £42.6 billion, excluding a large contingency reserve, the construction cost of the project has increased by 17% even before it has started. It is a huge infrastructure project.
“A more convincing economic case for the project is needed. We need reassurance that it can deliver the benefits intended and that these benefits are greater than those of other transport schemes – whether in the department’s project pipeline or not – which may be foregone.”
The concerns were raised as part of the committee’s inquiry into the 2013 spending round that set departmental settlements for the 2015/16 financial year, which starts just weeks before the next general election.
MPs warned that plans for a cap on so-called “annually managed expenditure”, which is made up of elements of public spending that can go up and down due to factors beyond the Government’s control, have the “potential to have a significant impact on the benefits received by those in society who are most in need”.
They called for Treasury analysis on the impact of plans to introduce a seven-day wait before new claimants become eligible for benefits to be published after fears were raised about the move.
The committee also issued fresh warnings about the Government’s Help to Buy mortgage guarantee scheme and the decision to ring-fence NHS, schools and international aid budgets.
It said the Government had done ” little to allay” concerns that the main impact of the scheme to boost home ownership initially could be to raise house prices rather than increase supply.
MPs questioned whether the Bank of England Financial Policy Committee (FPC) had the power to cancel the scheme after Chancellor George Osborne suggested it provided a “double lock” that would help to stop it being extended indefinitely.
The second phase of the state-backed mortgage scheme got under way yesterday, three months ahead of schedule, as part of a Tory push to show they are tackling the cost of living.
Mr Tyrie said: “It may not have the effects intended over its proposed three-year life. The decision to bring the scheme forward by three months does not alter our concerns.
“Given the chequered history of government interventions in residential property, great care will need to be taken in both the construction and running of this scheme.
“Mistakes could distort the housing market or carry threats to financial stability.
“The Government needs to clarify whether anything has been added by the recent announcement to the FPC’s existing power to make recommendations to the Treasury. It is not clear at the moment.”
The committee “remains concerned” about the decision to protect some departmental budgets, which it fears can lead to “inadequate financial discipline” and can distort spending.
“The risk is two-fold,” Mr Tyrie said. “First, that ring-fenced departments may be subject to less financial discipline and scrutiny than non ring-fenced departments. Second, that as each year goes by there is a risk that ring-fencing distorts the allocation of resources between Government priorities.”
A Government spokesman said ministers remained confident that the costings of HS2 were “robust” and would be strengthened by the updated strategic case for the project which is due to be published shortly.
“HS2 is absolutely vital for this country if we are to meet the urgent capacity needs we face,” the spokesman said.
“The project is on course, under control and will be delivered within the agreed budget.
“We are confident that our analysis is robust and conforms with government spending guidance. The case for HS2 will be further improved when we publish shortly the updated strategic case – including cost benefit analysis – which will show high value for money for the project.”