One thing as predictable as an increase in the projected cost of building HS2 is the response from business lobby groups. Sure enough, as the high-speed railway was reported last week to be hurtling towards a potential cost overrun of almost £30bn, trade bodies barely paused to consider this astonishing figure and instead insisted that HS2 should be built anyway.
To be scrupulously accurate, the CBI nodded to the idea that “taxpayers’ money should always be spent wisely” and that HS2 should “strive” to stay on budget. And the British Chambers of Commerce opined that “no public project should be written a blank cheque”, a notably abstract form of words.
But both organisations then returned to trumpeting the supposed wondrous benefits of the rail link for jobs, connectivity and economic growth. Director-general Carolyn Fairbairn wants the new prime minister to make “a clear re-commitment” to HS2 with “no equivocation”. Claire Walker, co-executive director of the BCC, also wants him to lash himself to the rails. The government “must reaffirm its commitment to the delivery of HS2”, she declared.
Is this how the CBI and the BCC think their members run their own businesses? Do they think boards routinely make binding pledges to build, say, a new factory even if the costs of construction have exploded? Do they believe an extra £30bn for HS2 doesn’t matter?
Once upon a time, the rail link was meant to cost £32bn in its entirety. In 2012, that became £42bn. Then £56bn. Now, according to the FT, Allan Cook, the new chairman of HS2, has written to the Department for Transport to say the final costs could be between £70bn and £85bn.
If private money were at stake, rather than public funds, one can imagine how the conversation in the boardroom would go. There would be a rigorous re-examination of costs and benefits. The directors would ask if there are better ways to deliver “a catalyst for economic growth”, to use HS2’s language. Would up-grading commuter and regional routes, or speeding up travel within Birmingham, Leeds and Manchester, deliver more bang for the same buck?
The commercial question would be framed this way: at what point does HS2 become so expensive that alternative infrastructure investments deliver better value?
If the CBI, the BCC and other fans of HS2 mean what they say about “no blank cheque” they should volunteer an answer. If their support is truly conditional on cost, how much is too much? Does £70bn-£85bn qualify? If not, is £100bn also acceptable? More?
Strange as it sounds given Boris Johnson’s previous “fuck business” remark, the new prime minister sounds more businesslike than the business folk on the subject of HS2. Unlike the lobbyists, he’s at least asking about money. He has been critical of spiralling costs and has commissioned Douglas Oakervee, a former HS2 chairman, to conduct an independent review.
There’s no guarantee that Johnson would change direction in office, but a call for facts and analysis is surely justified. On its current trajectory, HS2 is a financial monster that will consume the lion’s share of government spending on rail for years.
The CBI’s call for no equivocation flies in the face of the business world’s usual demand for government to engage in evidence-based decision-making. If the costs of HS2 could be almost two and half times the original estimate, equivocation is far more sensible than a rigid refusal to look at the numbers.
Bring Star back to Earth
Expect craziness, warned China experts, and they were right. The launch in Shanghai of Star Market, a new Nasdaq-style stock exchange, was accompanied by wild speculation. Every stock surged in value and one, chipmaker Anji Microelectronics Technology, rose by 520% from its float price.
Nasdaq, lest we forget, has not always been immune to irrational exuberance – think the dotcom bubble, circa 1999. But the Chinese authorities, if they’re serious about creating a respected market for domestic technology firms, would be well advised to try to calm proceedings.
China has been down this Nasdaq-style route in the past with an exchange called ChiNext, which is still going but seems to have been tarnished by corporate scandals among listed firms. Star Market, with the promise of higher governance standards, is intended to be an improvement. Before passing judgment, let’s see how it copes with its first bear market, which will come sooner or later.
