HS2 was an England only project from the start
Professor Stuart Cole, CBE. Emeritus Professor of Transport Economics and Policy, Prifysgol de Cymru / University of South Wales
HS2 was an England only project from the start.
Originally intended to provide extra capacity on the London to Birmingham rail route with a high-speed line following the European pattern and where construction costs were acceptably higher than a conventional speed railway. There were to be two extensions – to Manchester and to Leeds though these were sophisms to placate the north of England.
HS2 was a good project in terms of the principle of expanding the decarbonised railway. The rest of the world is building high speed lines as the preferred way of improving rail infrastructure and attracting more passengers.
However, HS2’s costs escalated from the original 2014 cost estimate of £50 bn to £101 bn (2020) following changes in specification and construction cost inflation.
A national Audit Office report (2020) showed HS 2 was now costing nearer £200m per kilometre where the French TGV cost £32m.
Block grant
Three rail issues have arisen in relation to the Welsh block grant which is based on the Barnett formula – a device set up in 1980 and now part-funds the devolved governments.
Firstly, it took until 2003 for Cymru to have its own single franchise rather than three separate franchises managed from London. The contractual payments to England’s train companies forms the legal contractual basis of the Barnett consequential payment in the block grant for train operations.
Secondly, HM Treasury argues that HS2 does not attract a Barnett consequential payment in the block grant. This resulted from the Welsh Government turning down the offer of responsibility for rail infrastructure under the 2005 Railways Act.
As that expenditure is not devolved all Welsh rail infrastructure is an ‘England and Wales’ joint HM Treasury account.
The Welsh Assembly Government as it was at the time gave several reasons for not taking up the offer:
There was insufficient rail expertise and a shortage of capacity and understanding. The answer there was to recruit rail staff. This was more about fear of the unknown and a reluctance by civil servants to advise the same approach as Scotland.
It took the responsibility and has benefitted from the HS 2 expenditure through the Barnett consequential and if HS 2 had been built in full there would have been a significant reduction in journey time to Glasgow and Edinburgh.
Capital was tight and where would the investment come from. Well only from HM Treasury through the Barnett consequential funding.
Integrated
England’s network was integrated too closely with that of Cymru. This again was peculiar as cross-border motorway and major road agreements had been set up over many years.
Thirdly, as the Welsh Government became more established it has consistently asked for devolved rail infrastructure powers including funding from HS 2 expenditure. As the House of Commons Welsh Affairs Committee have recommended, HS2 expenditure should attract Barnett consequential payments.
HS2 is planned, built and managed by HS2 Ltd, a Special Purpose Vehicle company (SPV) owned by the UK Department of Transport. It is not funded by Network Rail expenditure which forms the basis for the rail infrastructure element in Scotland’s block grant.
The Scottish Government has therefore received a Barnett consequential payment for HS2 and ironically Scottish destinations would have reduced journey times from English stations.
Wales has no such benefits.
Consequentials
The Elizabeth Line (the London east-west Crossrail route), another SPV, attracted Barnet consequential payments. So, one might reasonably argue that as HS2 was funded similarly then Wales is ‘owed’ £1.25 bn based on the £25 bn already spent on the Birmingham – London section clearly an England only scheme.
As the rail network (apart from Core Valley Lines) in Cymru is managed by Network Rail, it has the responsibility to invest where the greatest return will be found. Ministers who direct Network Rail will also have the Northern Powerhouse rail expectations to fund.
Cymru is likely to do badly in that dichotomy. However examination of HM Treasury’s budget forecasts will not distinguish between Cymru and England expenditure.
Although Welsh Government is not bound to increase rail infrastructure expenditure because of increased block grant, one would expect some of it to be spent on key routes – electrification and increased line speeds (with lower journey times) to Holyhead and to Carmarthen; re-signalling of the Marcher (north – south line) and increased capacity on rural lines.
The King’s Speech on Wednesday (17 May 2024) declared the railways’ central role in Labour’s economic growth plans; this surely means planning and funding of these schemes will now go ahead quickly.
In addition a return to the two schemes in the original high speed rail proposals which brought benefits to Cymru would be welcomed. London to south Cymru and west of England and HS2 with electrification of the north Cymru Wales main line
Lord Peter Hendy’s Union Connectivity Report said, ‘railways in Wales require radical overhaul far beyond the benefits of HS2’. Peter Hendy, recently head of Network Rail and now Rail Minister in the new Labour Government, should follow his report’s advice and correct many past policy errors.
One might expect from the Labour party heralded ‘special relationship’ between Welsh and UK governments, a financial arrangement more beneficial to Cymru than the Barnett Formula.
To achieve this Peter Hendy and Chancellor of the Exchequer Rachel Reeves must now begin immediate discussions with our Transport Secretary, Ken Skates and Finance Minister, Rebecca Evans.
The deal must be backdated to accommodate the underpayments under the old system. This will then enable adequately funded rail enhancement/upgrading decisions to be made in Cardiff not Westminster.
HM Treasury officials will not be in favour of such a scheme as it will increase costs. At present it pays a five-year financial period (called the Control Period) sum to Network Rail which includes Cymru.
As our railways are currently underfunded compared with England there will be a net increase in expenditure.
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We all now that and the last Tory government denied us the money like Scotland and Northern Ireland had a couple of Billion each and it looks very likely Labour will do the same as for as Wales is concerned Tory to Labour in London SAME HORSE DIFFERENT JOCKEY with their attitude towards Wales
What frustrates me the most is the Welsh public were more animated over the 20 mph default speed limit, although well intentioned and should have been implemented better, than they were the Conservatives robbing Wales of £4 billion HS2 consequential when they put it as an England & Wales infrastructure build. And this insult was only made worse when hypocrite UK Labour stated when challenged would they to right the wrong said Wales would not get HS2 consequential and there was no money even though Keir Starmer announced that he was prepared to match the Tory pledge of spending £3… Read more »
Well, 20mph negatively impacts and inconveniences them every single day and the government shows no signs of moving on the issue despite the public repeatedly making their feelings known.
HS2 is far away, out of sight, out of mind, easily forgotten and not a constant irritation.
That may explain the difference in reaction.
And Keir going back on his word? Shocker, who could have ever anticipated that? 66% of voters, yet their voice counts for nothing in our backwards system.
What has happened here, regarding the 20mph issue, is that it has been highjacked, by the ‘Welsh’ Tories, for political gain. 20mph zones have been in place in many areas across the UK for years and not attracted half as much interest. Then, there’s also the fact that only 35% of Welsh roads have been affected, so it has hardly brought Wales to a stop. For me it seems certain politicians have put political gain before human lives and it’s wrong.
I think the reason behind this is, that the majority of people here read the English based media, and being right wing in its outlook, used the 20mph laws as a stick to bash a leftwing party, and one that was based outside England, to say to the English, ” look how bad it is under Labour, you are better off with the Torys”, at the same time they were able to ignore the HS2 issue, as they basically dont give a toss for Cymru. As long as it’s us, Cymru, losing out and not England, why would the English… Read more »
We are such a soft touch. We complain and whinge but yet we and the Welsh government do sod all about it. Other nations would have rallied round and strongly protested but not in Cymru.
I suspect its because we have a Labour government in the Senedd as well as Welsh Labour MPs in Westminster who are more committed to England and the Westminster LP than Wales.
Jo Stevens say she wished she had ‘done her job or even known what her job entailed’…
Watch out Cymru…
“the responsibility to invest where the greatest return will be found” This statement lies at the heart of everything that is wrong with the UK economy. It sounds very reasonable doesn’t it. Who doesn’t want taxpayer value for money. But if this means only backing projects where the taxpayer “debt” is repaid as quickly as possible then this will always benefit spending in the strongest part of the economy. The bit that needs the investment the least. In other words this benign sounding policy will grow London at the expense of everywhere else. The returns instead need to be measured… Read more »
You can complain about the Westminster government only investing in Southern England as much as you like.
Fact is the Labour Senedd has been no better, all the investment in Cardiff and the surrounding area, no large public transport projects in mid and north Wales, billions sunk into Cardiff airport which continues to decline and hundreds of millions to electrify Cardiffs rail links, and the mega bus depot that STILL isn’t being used.
Nothing will change until we stop endorsing the 2 party monopoly and get the greedy, self serving money grabbers out.
Great you’re endorsing Plaid who will put Cymru’s needs and ambitions before those of the Anglocentric British Nationalist parties duopoly.
The Cardiff Capital Region is half the Welsh population so it’s not the same.
Ultimately, and we are all aware of this, the only way we will get a decent rail service is my gaining independence and funding it ourselves. It may not happen overnight but it would happen eventually because the will would be there and so the finance would be found. Currently, the will in Wales is there but not in Westminster, which holds the purse strings. The people of Wales have to realize that, if they want a better quality of life in the future, they have to do it themselves and not rely on an England, that really just doesn’t… Read more »
Jo Stevens, HS2 does exist. 4 billion please…
Yeah, but classed as “England and Wales” so they could use our taxes to partly pay for it. Wales, or the people of Wales. I love you but sometimes I wonder will you ever wake up to how we are treated?!
It was a London centric railway for the benefit that city. The rest of England does not benefit as the cities already have fast trains to London, which could be made much faster. The business case was dire.