HS2: Michael Heseltine puts weight behind project

Former Conservative Cabinet minister supports £50bn scheme but says private sector should contribute

Tory grandee Lord Heseltine has come out firmly in favour of the £50 billion HS2 high-speed rail project (PA)

Tory grandee Lord Heseltine has come out firmly in favour of the £50 billion HS2 high-speed rail project.

But he says the scheme's timetable should be accelerated and that the private sector should contribute to the cost.

And the former Conservative Cabinet minister adds that supporting HS2 is as much an act of faith as a reliance on figures, and that the UK “must consider carefully the cost of not acting” over HS2.

Lord Heseltine's views come in a speech in London tonight to the Royal Town Planning Institute.

He says: “HS2 is about our country's competitiveness for a half century or more. It is about so many more people sharing growth that has, for too long, been concentrated on London and the South East.

“It's all about drawing together our economy as a whole as well as improving our access to the enlarged, and enlarging, home market of Europe. It is not about 30 minutes off London to Birmingham (journey times).”

He goes on: “Any responsible judgement must urge Government to act now. Parliament has overwhelmingly agreed to allow spending in preparation for the whole line, sending the clearest signal about our determination to build in this country infrastructure that will match in quality (not exceed) what the rest of the world is, or will be, doing.

“What possible case is there for the public purse to carry the cost of the stations? The property development involved can only be imagined by a quick glance at today's Kings Cross and St Pancras (stations in London), with plans for 35,000 jobs and nearly 2,000 new homes.”

Lord Heseltine says the Government “should immediately declare Urban Development Corporations in the appropriate areas thus not only capturing the planning gain for the taxpayer in order to further reduce the cost but also to transfer the costs of stations to the private sector”.

He adds: “But there is something else. Why does the Government need to hang onto the track? We have a clear precedent. This Government sold a 30-year concession in 2011 for HS1 (the Channel Tunnel rail link) to a Canadian Pension Fund for £2.1billion.

“I understand that at the same ratio, something in the order of £10 billion could be realised for a similar concession on HS2.”

HS2, whose first phase from London to Birmingham will cut through Tory heartlands in the Chilterns, is set to cost £42.6 billion plus £7.5 billion for the trains. The first phase is due for completion in 2026, with the second phase, taking the line to north east and north west England, due to be completed by 2032/33.

In his speech tonight Lord Heseltine says he has two suggestions on cost-cutting for Sir David Higgins, the incoming chairman of the project's promoters, HS2 Ltd.

Lord Heseltine says Sir David “should consult appropriate institutions about the financing of the project in part during construction in order to ensure their participation in the long term concession” and “he should also explore the possibility of accelerating the whole project thus offering further savings”.

He points out that the benefit-cost ratio for HS2 had recently been reduced from 2.5 to 1 to 2.3 to 1, meaning that for every £1 spent on the scheme there would be an economic benefit of £2.30.

Lord Heseltine goes on: “These figures are based on calculations of cost and demand up to 2036 - 23 years ahead. Opponents had a field day.

“I make no attempt to impute the motives of those who produce such calculations. If you ask daft questions you can't blame people who produce daft answers.”

He continues: “But let me say something about the daft questions. Department for Transport rules lay down that after 20 years all assumptions of growth in demand for rail must be frozen.

“Put simply, statisticians are permitted to calculate demand in growth at 2.2per cent per annum (it has been 5.2per cent pa from 2002 and 2012) but in 2036 - just three years after the service is fully operational - they have to assume that growth stops.

“Another set of figures that show that if growth simply went on after 2036 at the same rate as before it to 2049 then the ratio could move as high as 4.5 to 1. You take your pick.”

The ex-minister goes on: “Let me leave the ladies and gentlemen of the slide rules. They know no more and no less than you and me. They are excused from the one calculation that really matters on the ground.

“No one is asking as what might happen as a result of such an investment. I tell you frankly, I don't know either.. I didn't know in East London in 1979 (when he had a plan for regeneration), but I believed.

“All over the world governments are making decisions about a future which they cannot predict but in which they believe. I tell you another thing I didn't foresee in London Docklands in 1990. I couldn't know that HS1 would attract £10 billion of private development around the new station sites at Ebbsfleet (in north Kent), Stratford (in east London) and Kings Cross.”

Lord Heseltine goes on: “So, yes, we have to keep the cost down. But we must also consider carefully the cost of not acting. The cost of dither, doubt and delay. The cost of standing still while our competitors move ahead. If we hadn't built Canary Wharf, how many of the jobs there would be in Frankfurt instead?

“I find it incredible that we are solemnly judging HS2 without any calculation of the potential investment that might flow as a consequence of its construction. And with no fear of how that investment would flow elsewhere if we were to lose our nerve and abandon it. But that is the basis on which the debate is being consulted.”

He concludes: “Not many of those in power to make decisions will be around to judge the world of the HS2 but others of younger generations will judge us.

“Will they look around and praise our vision, the investment we made, the competitiveness they intended or will they make a harsher, less charitable judgement ? Are we the generation that slipped behind and let it happen?

“I praise the government and parliament that has made clear its determination that that shall not be.”

Created a life peer in July 2001, the former minister took the title Baron Heseltine of Thenford in the County of Northamptonshire.

This is close to Banbury in Oxfordshire and to the proposed route of HS2.

Lord Heseltine told the BBC Radio 4 Today programme that HS2 could revitalise the cities of the Midlands and northern England.

He said: "Here is a really imaginative project in order to try to do something to rebalance the UK."

The peer added that he had spent his political career "trying to get a sense of adventure, a sense of expansion, a sense of 'can do' back into those great towns of the Midlands and the North that made this country in the first place".

But Professor Henry Overman, from the London School of Economics, who sat on the HS2 analytical challenge panel, told Today the scheme was "not particularly good value for money compared to other transport projects".

He added: "Sometimes the leap of faith is important. I'm just not sure that's true in the case of HS2."

PA