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Northern Powerhouse more important than HS2 says IOD infrastructure chief

The UK needs to keep asking the hard questions over how to get the best value for every public pound spent on infrastructure, says the IOD's Dan Lewis - and high speed rail isn't necessarily the answer.

Dan Lewis, IOD

The UK Rail Industry faces a triple challenge over the next decade. The first is the massive opportunity cost of constructing HS2 - £50 billion to the rest of the rail network’s investment programme.  The second is the still ballooning and unsustainable net debt of £39 billion of Network Rail – our very own Greece on Rails. The third is facing down what I call the Rail Blob. 

The Rail Blob is an amorphous cost-raising coalition of civil servants, railway unions, engineering companies, train builders, lawyers and consultancies who micromanage and over-engineer and so distort the market signalling between passengers and train operators.  

"With the threat of self-driving cars and unimaginably fast broadband networks just over the horizon, there is no time to waste."

To be fair, the new government has started to roll back on some of this. The move to devolve route management and payments for track to the TOCs and to set up a separate body to redevelop railway stations is clearly in the right direction. But chipping around the edges is not going to be anywhere near enough. No one appears to have told DfT, an unprotected department, who still foresee a similar debt-funded rail investment programme over the next 5 years, that it’s as basic as this - there is not enough money. 

So we need to be asking hard questions in a cash-constrained world, is the return higher from investing in inter-city agglomeration like HS2 or metropolitan agglomeration like the London Overground line?

We can’t afford to do it all and understanding agglomeration – increasing population density and economic opportunities through the transport network is key. It’s almost always the case that you can move more people, more frequently at lower cost and create more economic growth within a city than between them. 

"I had to choose, I’d go for the Northern Powerhouse over HS2 any day."

That’s why if I had to choose, I’d go for the Northern Powerhouse over HS2 any day. And we should be wary of believing that HS2 will stick to its £50bn price tag. As Professor Flybjerg, an expert in global megaprojects at the Oxford Business School says, High Speed Trains have round the world shown a 44.7% cost overrun and a demand shortfall of 51.4%. 

If the success of Michael Portillo’s Great Railway Journeys TV programme is anything to go by, we Britons love trains. And more seriously, the passenger growth forecasts are encouraging too. But the tax-funded, debt-fuelled expansion of the railways has gone far enough. Reform will require considering tough, previously unthinkable decisions like reverting to private vertically integrated regional monopolies of trains and tracks overseen by a 21st century regulator. 

With the threat of self-driving cars and unimaginably fast broadband networks just over the horizon, there is no time to waste. 

Dan Lewis is a Senior Infrastructure Policy Adviser at the Institute of Directors

If you would like to contact Antony Oliver about this, or any other story, please email antony.oliver@infrastructure-intelligence.com.