Joel Benjamin makes a socialist case for scrapping HS2 and infrastructure mega-projects.
20 February 2020.
HS2 is a fast-rail mega project, conceived by New Labour amid the heyday of the UK’s failed Private Finance Initiative (PFI) experiment in the mid to late 2000s. The HS2 project is most closely associated with former Labour Transport Secretary Andrew Adonis.
Lord Adonis, the author and lead proponent of HS2, has been a board member of HS2 Ltd since 2015 on a sweet retainer of £950 per day, alongside a multi-year stint as Chairman of the National Infrastructure Commission.
After the change of Government in 2010, the Conservatives continued HS2, not least because it primarily benefits corporates constituting the big money support base for both the Conservatives and New Labour, namely audit consultants like KPMG, property and construction firms, and big banks and City donors, providing 51% of Tory funding.
While the ‘Preston model’ of community wealth building seeks to break up big public contracts into smaller chunks suited to local suppliers, the HS2 mega-project is oriented towards multinational construction and service corporations, while claiming to benefit the North?
HS2 Ltd, the Quango which oversees HS2, initially operated from offices in London’s Canary Wharf – only relocating to Birmingham in 2016 after criticisms that a project supposed to be about re-orientating the UK economy to the North, was yet again London-centric.
It’s important to state clearly and upfront that as a former planner of infrastructure projects, I’m not opposed to infrastructure per se, but object to City/private sector led infrastructure mega-projects, which are about developing finance, not financing (public-interest) development.
Depression-era fascist origins of Public Private Partnerships in infrastructure
In the past century, big infrastructure emerged as a key tool of economic and social policy in the wake of the 1930s Great Depression, which made millions unemployed – necessitating large-scale, state-led, 'Keynesian' economic stimulus operations to get countries working again.
For example, the US Public Works Administration (PWA), led a major program of public works, organising and providing funds for the building of civic works such as government buildings, airports, hospitals, schools, roads, bridges, and dams – spending $3.3 billion with private companies to build 35,000 projects from 1933 to 1935 under the Roosevelt New Deal.
Richard Brooks explains in the Private Eye Podcast (4:40 mins into Episode 18) that the original concept for the UK PFI infrastructure model was borrowed from Benito Mussolini’s fascist infrastructure program during the 1930s recession, which began with the world’s first motorway between Milan and Varese.
Over time, infrastructure has morphed from a public good to an economic tool used to balance depressed economies, and finally perverted into a global bubble in private investor led projects, designed to meet the investment needs of banks and hungry pension funds, with infrastructure projects now constituting around 8% of global GDP.
Infrastructure is a fee gravy train for professional 'advisors'
A recent report by the UK National Audit Office (NAO) has found that, as of March 2019, £7.4bn has been spent on HS2, and of this, £2.94bn has been spent on consultant and contractor engineering and design costs.
In 2013, KPMG paid £242,000 for the first HS2 report, which was criticised by Andrew Tyrie MP, Chair of the Treasury Select Committee, who accused KPMG of relying on a rubbish-in-rubbish-out computer model’. Henry Overman, professor of economic geography at LSE and a former adviser on HS2, went further:
They [KPMG] apply this procedure, which is essentially made up, which provides them with an estimate. It is something that really shouldn’t be done in a situation where we are trying to inform public debate using statistical analysis.
Professor Overman said that he thought the then £15bn estimate for economic benefits of HS2 could be overstated by a factor of six to eight.
The bulk of the remaining HS2 spending has gone on land and property acquisitions, costing £3.29bn to date. HS2 made a ‘mistake’ in assessing its land and property costs, the NAO revealed. The organisation assumed professional fees linked to the deals would be part of the purchases. They are not and have added £90m in costs to date.
For a similar amount to what has already been blown on HS2, the UK’s passenger rail network could have been electrified – with the current share of electrified UK railways coming in at a paltry 42% vs. European neighbours like Switzerland at 100% electric.
A taxpayer-funded bung to the outsourcing and financial sectors
Much of the critique of HS2 has focused solely on its rapidly expanding cost and complexity – a phenomenon referenced by academics as the iron law of mega-projects – ‘over time, over budget, again and again.’
For a country that exported the PFI/PPP infrastructure model to the world, the UK is particularly bad at doing infrastructure, with typical costs inflated by 20% compared to international benchmarks. A 2018 report found HS2 to be 25% more expensive than comparable rail projects elsewhere.
Close scrutiny of the most expensive cost overruns on global infrastructure projects reveals a disturbingly high percentage of UK as well as Commonwealth and dependency countries present.
HS2 and outsourcing
A proliferation of privately designed, financed, and operated ‘public’ infrastructure like HS2 further hollows out the state sector, inhibiting state-led innovation and skills development in future – at precisely the moment the climate crisis demands large-scale state-led intervention.
In the 1970s, before the UK PFI experiment, 70% of planners and 50% of architects used to work in the public sector. After 30 years of failed PFI outsourcing, the figure today is less than 3%.
Despite obvious links between infrastructure mega-projects and private sector outsourcing – much of the Left has been engaged in various forms of apologism for HS2, on the basis any mass-transit link displacing car use must be a good thing – no matter the economic or social costs.
In a recent puff piece for the Independent, Jon Stone leapt to the defence of HS2, claiming the project had simply been poorly explained and undersold, and no-one would remember the price tag once operational:
Will HS2 suffer from cost overruns? Probably. Delays? You bet. Infrastructure projects are rarely delivered on time anywhere in the world, not least in Western democracies with little things like rule of law and environmental regulation. But once they are finally delivered, nobody cares: you probably don’t even remember that the Channel Tunnel or Jubilee Line extension were fiascos in their time; nobody would get rid of them now.
Britain’s railways were largely built in the Victorian era, for a different kind of travel. Today, the same lines carry a mix of express intercity trains – the kind which HS2 will take – and stopping local and commuter services, the kind people use to get to work, or pop to a neighbouring town.
This mix is a very inefficient way to run a railway, for a reason that is quite obvious if you think about it: trains cannot overtake each other on the same set of tracks. They would bang into the back of one another if they tried. Not good. To get around this, local stopping trains need a large gap behind them in the timetable, so the express trains behind them do not catch up.
Despite Stone’s concerns, the problem of conflict between slow and fast train services can be largely overcome by the regular installation of short ‘passing sidings’ – overtaking lanes connected to the same rail line, on which to bypass slower-moving trains.
HS2 is ultimately a solution in search of a problem – a new rail line, ploughing through open countryside, historic properties, and ancient forest woodlands, deemed necessary to address overcrowding on privatised and underfunded UK main lines. Yet, as the New Economics Foundation note in their report, A Rail Network for Everyone:
There is no over-arching strategy for the UK rail network. Moreover, due to the privatised nature of the train franchise operation – and because access to detailed passenger data from train operators is denied due to commercial confidentiality – it is difficult for researchers outside of government and network operators to build an accurate picture of where the problems on the network lie, when they occur, and therefore whether or not HS2 addresses them.
Since HS2 was envisaged a decade ago, the UK has largely transitioned from coal-fired power generation to renewables and gas, meaning 30-40% of the freight haulage volume on UK rail lines, previously dedicated to shifting coal around the country, is no longer required.
The Office of Rail and Road (ORR) says that of the seven categories of freight shifted by rail transport over the past four years, coal, once the UK’s major commodity fell the most, by 20% in 2015/16, collapsing 39% in 2016/17, to 1.4 billion net tonne/km hauled in 2016/17, falling a further 13% in 2017/18. Coal power and freight will be gone entirely by 2023.
In light of recent reductions in freight movements, the case for building expensive new HS2 rail lines, rather than electrifying, repurposing, and improving the existing rail network, is questionable.
Back to the future with Beeching
In addition to alternatives for electrifying and repurposing the existing rail network, various proposals have been mooted for reopening the swathes of regional rail links mothballed under the Beeching rail closures.
The Campaign for Better Transport estimates that reopening of the Beeching regional rail lines (some of which currently carry freight) would cost approximately £4.76-6.39bn.
At a time when a majority of both Labour and Conservative voters back rail nationalisation, given well documented problems with the UK’s fractured, privatised rail model, it is unclear how HS2 will improve regional economic imbalances or enhance the state’s capacity to plan, design, and build public railways again in the future.
A publicly funded project of the cost, scope, and ambition of HS2 should be transformative, but instead HS2 simply represents an expanded and thinly disguised corporate welfare program.
More fundamentally, given recent failures of PFI infrastructure companies like Carillion and Interserve, it is clear that the drivers of comparatively high-cost UK infrastructure, namely financialisation and rent-seeking by a layer of private consultants, have not been addressed within the HS2 project, nor will they be while the Labour Party and wider Left continue to lend their uncritical support to the HS2 model.
Questions HS2 proponents should answer:
· How do you defend a project that claims to be about re-orienting the UK economy to the North, yet is structured to serve the interests of multinational corporations and further hollows out public sector capacity to design, build, and operate rail?
· Given the inflated costs of HS2, are alternatives like rail network electrification and optimisation and reopening of the Beeching lines, at less than 1/5th of the price tag (to say nothing of the opportunity costs), not preferable?
· Have the DFT or HS2 Ltd seriously modelled new opportunities presented by declining rail freight volumes to re-orient slack rail freight capacity towards serving regional rail commuters?
Joel Benjamin writes for Mutiny.