In his Autumn Statement yesterday, the Chancellor announced the establishment of a £23bn national productivity investment fund.
The £23bn will be spent over five years, so an average of £4.6bn a year. The spending is weighted towards the later years; in the first year, 2017-18, the figure is just £2.4bn.
The government plans for the construction phase of HS2 to begin in 2017. It is thought that the annual spend on the project will be around £3bn but in some respects this reflects an optimistic scenario considering the dramatic budget increases being experienced in other current rail schemes. For example, the Great Western electrification has seen costs increase by a staggering 300% in three years.
If the high-speed rail project is subject to the same inflationary pressures the annual spend may rise significantly or the construction programme starts to slip, pushing back the 2026 completion date for phase 1.
Even with the new investment fund, spending on HS2 represents a substantial part of the nation’s infrastructure expenditure. As a centrepiece, the project represents very poor value for money for taxpayers. The connectivity claims made for it will only be realised through significant further spending from the public purse. And crucially, in terms of redressing the North-South divide, HS2 will actually exacerbate the national economic imbalance for many years.