Matthew Sinclair: Beware of multi-billion pound projects bearing jobs

Matthew Sinclair is Director of the TaxPayers' Alliance.

I've been writing a lot about the problems with high speed rail.  The project is huge so there is a lot at stake.  Early last month the TPA released a research note looking at the flaws in the business case for HS2 from senior railway executive Chris Stokes.  Since then we've been looking at the incredible cost of the scheme - at well over £1,000 per family including the "Y" to Manchester and Leeds.

That vast cost is why the Government's claims that it will create lots of jobs - the subject of our new research note out today - need to be taken with a whole bucket of salt.  The first London to Birmingham stretch will cost £17 billion.  Any investment on that kind of scale will obviously create work for some people. Spending that much erecting 20 foot tall solid gold statues of Phillip Hammond would create jobs importing the gold, casting it into statues and then putting them up.  Burying such a massive amount of cash would take quite a few strong backs with spades.

We can't spend the money twice though; there is an opportunity cost to putting so much money into HS2.  The vital question is how the 40,000 jobs that the Government expects to create with high speed rail compares with the number of jobs that it would likely create otherwise, in the public or private sectors.  That figure is a bit spurious, as many of the positions are temporary, and it isn't the boon to the Midlands that it sounds like as most of the jobs are in London, but let's take it as given for now.

40,000 jobs from a £17 billion project means that each job is costing well over £400,000.  By contrast, in the wider economy the capital stock is about £3.2 trillion and that supports over 30 million jobs; just over £100,000 a job.  In other words, every job created by high speed rail comes at a cost of four jobs in the wider economy.

That shouldn't really surprise us.  High speed rail is capital intensive, not labour intensive.  It doesn't mean the new line is a bad idea in itself, there are reasons to make investments other than creating jobs, but it does mean the Government are misleading people if they try to sell high speed rail as a job creation scheme.  And, with the rest of the business case collapsing, it further strengthens the case they need to cancel HS2.