David Cameron Pledges HS2 'Fightback' In Face Of Criticism

Prime Minister David Cameron (right) and Transport Secretary Patrick McLoughlin (left) travel by train to a regional cabinet meeting in Leeds.
Prime Minister David Cameron (right) and Transport Secretary Patrick McLoughlin (left) travel by train to a regional cabinet meeting in Leeds.

David Cameron has pledged a "fightback" on HS2 after a barrage of criticism cast doubt on the flagship high-speed rail project's future.

The Prime Minister insisted there were "huge benefits" to the plans as the government published a new study arguing it would drive growth in the regions.

The analysis by accountants KPMG suggests the economy could receive a £15 billion a year boost from the proposed link between London and cities in the Midlands and north of England.

Transport Secretary Patrick McLoughlin is stressing the importance of the increased capacity on the route, rather than merely the speed.

He has also dismissed fears that the £42.6 billion budget could spiral out of control.

MPs on the Commons spending watchdog issued a scathing report on the scheme this week, warning that the apparent benefits were dwindling as the costs soared.

The case for the massive project was based on "fragile numbers, out-of-date data and assumptions which do not reflect real life" with no evidence that it would aid regional economies rather than sucking even more activity into London, according to the Public Accounts Committee report.

But Mr McLoughlin will point out that the KPMG research, commissioned by HS2 Ltd, estimates the Birmingham area's economy will be boosted by between 2.1% and 4.2%, there will be a 0.8% to 1.7% benefit to Manchester, 1.6% for Leeds and 0.5% for Greater London.

He will say: "It addresses that vital question: will HS2 create jobs and growth in the North and Midlands, where they are needed most? The answer is absolutely clear. Yes.

"High Speed Two will make Liverpool stronger. Manchester stronger. Leeds stronger. Britain stronger. A £15 billion annual boost to the economy.

"With the North and Midlands gaining at least double the benefit of the south."

The Exchequer could benefit from £5 billion a year in extra tax receipts as a result of the boost to the economy, KPMG said.

The Transport Secretary's speech forms part of a coordinated campaign announced by Mr Cameron to counter what he has called an "unholy alliance" of sceptics.

Prominent critics have included Labour's Alistair Darling, who first approved the project as chancellor, former business secretary Peter Mandelson, and the Institute of Directors, which dismissed it as "a grand folly".

It is also fiercely opposed by some Tory MPs - many representing communities which will be disrupted by construction work and train noise on the route.

Mr McLoughlin will say that without the new line, the UK's transport network will become "clogged".

He will say: "The reason we need HS2 isn't for its speed, though speed is obviously a benefit. HS2 will allow you to get from Birmingham to Leeds in 57 minutes and from Manchester to London in 68.

"The benefits of faster journeys are easy to explain. But speed is not the main reason for building the new railway.

"The main reason we need HS2 is as a heart bypass for the clogged arteries of our transport system."

Addressing the cost of the scheme Mr McLoughlin will state that the £42.6 billion budget includes a £14.4 billion reserve "which we are determined to bear down on", with work being done by project managers at Oxford University's Said Business School to examine the scope for reducing the contingency fund.

Richard Threlfall, KPMG's head for infrastructure, building and construction, said the firm's analysis "shows beyond reasonable doubt that HS2 brings net benefits to the country of many times the scheme's cost".

"It shows the UK will be £15 billion a year better off with HS2, recovering the cost of the scheme within just a few years," he said.

"Our analysis also shows that HS2 will significantly help counter the corrosive effects on our country of the widening north-south divide. There has been a long-running debate about 'who wins' from HS2, the north or the south? The answer is both."

The British Chambers of Commerce has written an open letter to the Prime Minister urging him not to abandon the scheme.

The letter said: "Imagine our country today without the M25, the Jubilee Line, or the Channel Tunnel - all investments that were fiercely opposed and contested before their construction. HS2 is no different."

Shadow transport secretary Maria Eagle said Mr Cameron had failed to take a lead on HS2 and accused him of "dither and delay" over the scheme.

She said: "Far too many people have to stand on their way to and from work, often in cramped conditions, despite paying thousands of pounds for their season ticket. The only credible way to free up space for more commuter services is if we shift the growth in long distance journeys on to a new high speed line.

"David Cameron has disastrously failed to provide the leadership necessary to build support and make progress on actually delivering the vital new north-south rail line.

"As a result of three years of dither and delay, there is no prospect of securing parliamentary approval for the first phase of the scheme before the next election. The Government must now redouble their efforts to make the new north-south rail line a reality and ensure it remains on budget and on track."

In an effective admission that the flagship project has been called into question, Mr Cameron posted on Twitter this morning: "The fightback on #HS2 begins today with the Transport Secretary, Patrick McLoughlin, highlighting the huge benefits to the UK & our economy."

However, campaign group the TaxPayers' Alliance said the new method of analysis applied to HS2 should also be used to examine alternative proposals.

Matthew Sinclair, chief executive of the TaxPayers' Alliance, said: "The Government has squandered taxpayers' money on a cynical attempt to win over the many, many people who think this white elephant is the wrong way to spend tens of billions of pounds of their money.

"The report is based on the dodgy assumptions in the Government's own business case and the additional services they have promised, despite their budget actually relying on cuts to existing services.

"This is not a serious attempt to assess the merits of HS2, just another expensive propaganda exercise. The Government must scrap HS2 and look again at less grandiose, but better value, projects that can deliver the capacity needed on Britain's rail network."