Thursday 4 July 2013

Is HS2 Finally Dead? Instead Let's Look At HS3.

In the futuristic comic 2000AD's most famous strip "Judge Dredd", a post apocalyptic America's population was concentrated into three Mega Cities, surrounded by a nuclear wasteland called "The Cursed Earth".

Sometimes, it feels that we are ruled by people with a similar perception of our country: we have one Mega City - London - with nothing but a barren post-industrial wasteland North of Watford.

The dominance of London is not new, but it has rarely been quite so dominant as it is today. As one American put it unkindly, London is a first rate city in a second rate country. The ever growing asymmetry in both economic and cultural terms between London and the rest of the country is now becoming profoundly damaging. Powered by the seemingly limitless ability of London to suck in the best national and international talent, the city continues to grow in both population and total wealth while the rest of the country continues to languish in recession. As a result our policies and priorities have become hideously London-skewed.

This is true in rail transport as it is in most other areas: in recent years London has seen the High Speed 1 line to Paris and the continent, the extension of the Docklands Light Railway, Thameslink, the completion of the London Overground orbital and, of course, Crossrail. Not content with all that, the route for a  proposed Crossrail 2 line has recently been put out for public consultation. Of course there are regional schemes, but the investment disparities are still huge. For instance, it was recently revealed that more was being spent on a single Crossrail station than on an entire electrification scheme from London to South Wales!

Part of the business case for the ruinously expensive "High Speed 2" (HS2) rail project was that it would help lessen the North-South divide by reducing journey times between the Midlands, the North and London. However, cynics noted that in practice it was just as likely to suck in yet more business activity into the capital, which is exactly what happened when the French built the TGV from Paris to outlying French regions.

There are practical reasons why this should be so. Imagine you are a young professional living in high wage, high cost London, and a job opportunity comes up in relatively lower wage, lower cost Manchester. It makes absolutely no financial sense for you to continue pay high property prices in London plus the astronomical commuting costs of a regular journey North. Instead, you may consider relocation, but in practice this does not happen because London and South East based professionals know that, once out of that property market, they are very unlikely to be able to get back into it. The perception is that a move North is a one way ticket that  many are consequently reluctant to make (note the enormous resistance of BBC staff to move from London to Salford). This has the counter-intuitive result that companies which rely on high-end professional talent often relocate to the high cost South away from the North because of the need to attract staff.

It is not the same the other way around. A professional in Manchester can stay domiciled there and take a higher paid job in London, knowing that their lower housing costs will offset at least some of the cost of commuting. The result is a sucking into London of talent and business. The risk is that HS2, which will at least reduce the amount of time spent commuting, will tend to exacerbate this phenomenon, leaving Northern cities as ever more hollowed out dormitory towns.

Yesterday, Peter Mandelson really put the cat among the pigeons in his article in the Financial Times (£) stating he no longer believed in HS2. Good. Mandelson admitted the business case was not far short of drawn on the back of a fag packet in any case. Once again, UKIP have proved brave and prescient  in standing out against this absurd scheme.

However, that doesn't mean there isn't a case for looking at high speed rail as an answer to some of our economic problems and the North-South divide in particular. Instead let us look at the case for a series of high speed regional lines connecting major cities in the North and Midlands.

Apart from the issue of house price disparities already described, one of the major problems British cities other than London have in attracting professional talent is the lack of a critical mass in terms of the positions and opportunities available in any one location: a highly specialised professional may find themselves limited to a handful of opportunities compared to what London has to offer, meaning being located in the regions brings with it substantial risk. If they find themselves having to leave their job, then the choice may well be between unemployment, moving home, or finding a job and commuting long distances on slowish trains or roads between, say, Manchester and Sheffield. Thus, the professional employment market in a great many fields essentially lacks liquidity.

Instead of blowing upwards of £42bn on HS2, why not look instead at creating ultra-fast rail services between Leeds, Sheffield, Manchester and Liverpool? Or between Birmingham, Nottingham and Leicester? Or Bristol, Cardiff and Swansea? These could be tightly integrated with local mini "Crossrail" type schemes such as the one already proposed for Cardiff, substantially reducing total commuting times and helping to create much better "market liquidity" in matching skills and people. Thus, other areas of the country would be much better to compete with London for talent.

Yes, many people have questioned whether new communications technology will vastly reduce the need to travel to work in any case, making such schemes as much a white elephant as HS2. However, this argument would have considerably more credibility if people hadn't been suggesting this for several decades now. Because 70% of communication is non-verbal, in practise nothing beats the nuances of face to face communication. Short of being able to project a 3D hologram of yourself next to your colleague, that is very unlikely to change.

All this still leaves the considerable issue of financing. Well, as far as schemes linking Northern cities are concerned,  giving local authorities control over taxation of shale gas exploration and production may be at least part of the answer. Indeed, a Northern "HS3" network could well be justifiable on the back of an economic renaissance powered by shale.

Of course, such thinking is unlikely to resonate with our cowardly, myopic and London-centric Political Class. Sadly HS2 will probably still go ahead, in the process amplifying London's dominance still further. All the more reason for UKIP - which is clearly emerging as a party of the regions - to continue to resist HS2, instead championing such "HS3" schemes and in so doing make ever greater inroads into the support for the clapped out LibLabCon.