Rising HS2 cost could undercut spending review

Thursday 27 June 2013

The government may have announced sweeping cuts in its bid to combat the deficit, but it also said it planned to reinvest in a huge infrastructure programme that will bring about a large number of opportunities for contractors, freelancers and self-employed professionals in a wide range of industries. However, at the same time as the government was setting aside funds to improve the UK’s rail network, its most controversial project threatened to undermine the £100 billion spending plans.

HS2, the high-speed railway line which is already the UK’s most expensive capital project, has some critics claiming that it is spiralling out of control after its budget shot up by £8 billion yesterday (June 26th).

Chancellor George Osborne told the House of Commons that the government plans to invest in infrastructure to encourage economic growth - including another £16 billion cash injection for the contentious rail project. Though he did not commit any new money as budgets were cut across the public sector, he did offer some certainty over some of the major projects which will begin in earnest in the next decade.

But no sooner had he sat down than transport secretary Patrick McLoughlin announced that he planned to increase the budget for HS2 by over 20 per cent. According to the Financial Times, this took the total budget from £34.5 billion to £42.6 billion.

Mr McLoughlin said that £12.7 billion of the budget was set aside as a contingency fund to help the project cope with sudden price rises and similar unforeseen circumstances. As a result, he hoped that the project would not actually require all of the funds allocated to it.

“As a responsible government, we must be prudent, which means allowing the right level of contingency,” he added.

Campaigners against the divisive rail project were quick to point out that the government had saved £11.5 billion through the spending review and handed the lion’s share over to HS2. Indeed, the campaign group Stop HS2 has said that the data is already out of date since it is based on 2001 figures, implying that further support might be necessary along the way. In fact, the group argues, neither the original nor the new budget include the cost of the physical trains, meaning that even more funds will be ploughed into paying for the rolling stock.

Joe Rukin, campaign manager at Stop HS2, described the increased support for the project as “a kick in the teeth to everyone affected by the cuts”.

But HS2’s chief executive Alison Munro said that the new budget demonstrates “a clear mandate not only to deliver the infrastructure, but also to work with the towns and cities to create a true engine for growth.“

Overall, Mr Osborne cut departmental spending for 2015-16 by 2.7 per cent once inflation was accounted for, but this figure masked the far more extensive cuts in non-protected areas. Local government was among the areas hit the hardest, helping to offset budget increases for key areas such as social care, the intelligence agencies and foreign aid.

By Victoria McDonnell

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