Policy Exchange report says scheme no longer value for money

A former Downing Street transport adviser has urged the chancellor to take an axe to HS2 in order to mitigate spending cuts elsewhere.

Andrew Gilligan, who advised Boris Johnson during his time as prime minister, claimed that reducing the scheme to the elements where construction has already begun could deliver a tenth of the spending cuts reportedly planned by Jeremy Hunt.


Source: HM Treasury

Cutting HS2 could provide fiscal space to allow Hunt to maintain spending elsewhere, according to Gilligan

In a report for right-wing think tank Policy Exchange, Gilligan claimed that the project was no longer value for money and that while its benefits are “not small”, they are “not big enough to justify the scheme’s extraordinary cost”.

He said: “It is not too late greatly to limit the damage. It is untrue, as some have said, that there is no fat in the public sector. There is HS2”.

According to the most recent HS2 business case, published in June, the scheme will deliver £1.10 in benefits for every £1 of taxpayers’ money spent, and only when “wider economic impacts” are taken into account.

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Gilligan claimed this business case assumed that HS2’s day-to-day operations would be highly profitable – with fares covering operation as well as the costs of rolling stock and infrastructure renewal – and that the scheme would be delivered close to budget.

He suggested that both of these assumptions may no longer hold – noting that covid had seen commuting reduced to 70% of pre-pandemic levels, while a recent leaked HS2 board meeting revealed the first phase was “very unlikely” to meet its target cost and that the final figure could be “many billions more than the reported estimate”.

The Department for Transport has since instructed the project to find savings and efficiencies to bring projected costs in line with targets.

Gilligan’s claimed savings (in 2022 prices)

  • Cutting section of phase 1 between Euston and Old Oak Common: £4bn-5bn
  • Halting redevelopment of Euston station: £1.7bn
  • Cutting phase 2a: £5bn-7bn
  • Cutting phase 2b: up to £21bn
  • Cutting HS2 East: £9bn

The report recommended cutting all sections of the scheme on which construction has yet to start, leaving only a line between Old Oak Common and the city centre terminus in Birmingham, with a branch to Handsacre, where trains can rejoin the West Coast Main Line.

Rishi Sunak and Jeremy Hunt are reportedly looking to achieve seeking £54bn in savings by 2027/28, with £33bn of this supposedly to be achieved through spending cuts.

Gilligan claims a radical cut to HS2 would save around £3bn a year by 2027/8 and more than £44bn in total, calculated in today’s prices (HS2’s own budgeting continues to be calculated and reported in 2019 prices).

“HS2 is not an instant way to avoid all cuts. Much of the spending in the next few years is on parts of the scheme that are too late to cancel,” he said.

“But meaningful sums can still be saved in this parliament, and very significant sums indeed from the middle of this decade, well within the window for fiscal tightening planned by the chancellor.”

The transport secretary Mark Harper recently re-stated that the government “remains committed” to delivering HS2, after levelling-up secretary Michael Gove hinted at the possibility of a review on Sunday.