Patrick McLoughlin MP: We can't afford not to build HS2

Patrick McLoughlin is the Secretary of State for Transport and MP for Derbyshire Dales.

Yesterday saw the Second Reading of the HS2 Preparation Bill in parliament. It was a significant milestone for the project, with Parliament voting on it for the first time. It also enabled me to explain to the house why I believe this is the right project for Britain and how we are managing the costs of the project, as well as reassuring MPs that I am committed to compensation that is fair and design that minimises the environmental impact.

HS2 is a vital part of the infrastructure overhaul that this Government is delivering so that our country can compete in the global race. It will be the first line to be built north of London in 120 years and the simple fact is that, without it, the key rail and road routes connecting London, the Midlands and the North will soon be overwhelmed. Rail travel has doubled in a decade and even on moderate forecasts, the West Coast Mainline will be full by the mid 2020s. Therefore, this is not a choice between upgrading the existing railway and building a new railway. It is a choice between a new high speed line and a new conventional railway. The significant additional benefits make high speed the right answer.

As well as addressing the issue of capacity, HS2 offers huge opportunities to create jobs and boost our economy. Our conservative estimates are that the project will create 100,000 jobs. The Core Cities group goes further, predicting that it will underpin four times that number, with 70 per cent of them outside London. It is expected to provide around £50 billion pounds worth of economic benefits for the economy, with some estimates suggesting it will add more than £4 billion before it is even open. Our towns and cities, particularly across the North and Midlands, cannot afford to lose out on these opportunities.

Whilst we can’t afford not to do it, it is vital that we control the costs and deliver maximum value to the taxpayer. That is why I am writing to HS2 Ltd setting them a target price for delivering phase 1 of £17 billion. This accounts for important recent design changes to the scheme such as the decision to build a tunnel from Old Oak Common to Hortholt.

As a responsible Government, we must be prudent. This means allowing the right level of contingency and for that reason the Government has set an overall indicative amount for the project of £21.4 billion for phase one and £21.2 billion phase two, a total of £42.6 billion in 2011 prices which includes £14.4 billion of contingency. Clearly that is a large contingency and we expect the final costs to be lower but that is the right way to plan and manage the project.

There will of course also be requirements for new rolling stock on key intercity routes linking London and the North over the next twenty years – we’ll need that with or without HS2. We are therefore budgeting £7.5 billion for HS2 rolling stock. To put this into perspective, the current Intercity Express programme to replace trains on the East Coast and Great Western lines which is creating jobs in the North East will cost £4.9 billion.

I do not take these figures lightly, but the fact is that infrastructure is an investment in economic growth. That is why we are investing £14.5 billion to build Crossrail, just as £11 billion has been invested in new infrastructure at Heathrow since 2003. It is also important to understand these costs in context: over the period of construction, the cost of HS2 will be less than 0.15 per cent of GDP. This is an investment that this country can sustain and one that it needs.

As well as controlling costs, I am absolutely determined that we design HS2 carefully, consult properly and compensate fairly. All major infrastructure projects have a degree of controversy. Yet while I can't deny that a project of this scale will have an effect and there will be those with understandable concerns, I do believe the positive experience of our first high speed line in Kent shows that the consequences can be managed. Indeed, on the detailed route for phase one, we can already point to effective mitigation, with 5.8 of the 12.4 miles of the phase one route that crosses the Chilterns in tunnels and 3.5 miles of it in deep cutting.

As well as effective mitigation, it is my duty to deliver a compensation package that is fair. That is why we decided to introduce the exceptional hardship scheme and why, very soon, we will start a new consultation on the full compensation scheme for the first stage. This will include consideration of a range of options including a property bond, on which many MPs have made representations.

Yesterday’s vote demonstrated once again that there is cross-party support for the project and it underlined the strong belief in parliament in the benefits it will deliver. There will no doubt be challenges on the way. The fact is that the easiest thing for the government to do would be not to build it. But that would also be the wrong thing to do. HS2 is a once in a generation project that can be an engine of growth for the whole country.