Dr Richard Wellings: High Speed 2 is a flawed project

Dr Richard Wellings is Deputy Editorial Director at the Institute of Economic Affairs.

Earlier this week, in a piece for ConservativeHome, Karen Lumley MP launched an astounding attack on the IEA’s latest research paper, High Speed 2: the next government project disaster? Her article was astounding firstly because it failed to to address the detailed criticisms of HS2 set out in our analysis, and secondly because in places it parroted almost verbatim a briefing released by the ‘Yes to High Speed Rail’ campaign.

Contrary to the assertions of the high-speed rail lobby, our study shows that the economic case for the proposed scheme is very far from robust. Indeed, we conclude there is a high risk that HS2 will be the latest in a long line of government big-project disasters with higher-than-forecast costs and/or lower-than-forecast benefits.

The list of failed schemes includes the Channel Tunnel Rail Link (now known as High Speed 1), where passenger numbers after completion were only a third the level estimated at the planning stage. The line was uneconomic and most of the capital costs had to be written off – at huge expense to taxpayers.

HS2 is also uneconomic, of course. On a commercial basis it will be hugely loss-making, since the costs will far exceed the revenues – hence the need for such enormous subsidies. And the bulk of the financial risks will be borne by taxpayers, who will be forced to fund the scheme whether or not they use the train services. The main beneficiaries will be a fairly small number of relatively wealthy rail travellers, including long-distance commuters subsidised to make even longer trips, while the costs will be dispersed across the tax-paying population of the UK.

Richard Wellings: How the next government can lower business costs by simplifying the tax system

Dr Richard Wellings is Deputy Editorial Director of the Institute of Economic Affairs.

Businesses are the key to a strong economic recovery, but they are being strangled by red tape. They must devote a large share of their resources to complying with regulations rather than engaging in the entrepreneurship that creates wealth. Under New Labour, the regulatory burden has increased substantially. It is extremely difficult to measure the costs of that red tape, but, in one field - the costs of tax collection - there has been serious work. There are huge and increasing costs imposed by Britain’s incomprehensible tax system.

Gordon Brown’s years of tinkering have introduced more and more complexity. The UK now has the longest tax code in Europe. A new Institute of Economic Affairs study, Taxation and Red Tape, reveals that there are 8,300 pages of primary tax legislation in Britain, compared with 1,700 in Germany and 1,300 in France. Indeed, we probably have the longest tax code in the world outside India - which is, of course, notorious for its bureaucracy. The average Finance Act since 2000 has been three times as long as the average Finance Act in the 1980s – a damning indictment of New Labour’s record.

As a result, the compliance and administration costs of taxation have now reached a staggering £15-20 billion per year – equivalent to the government’s entire transport budget. And Britain is losing ground to her competitors. The UK is one of only 3 out of the 43 most advanced economies where the costs of tax collection are not falling.