Transport Committee
Oral evidence: High speed rail: update, HC 1193
Tuesday 25 March 2014
Ordered by the House of Commons to be published on 25 March 2014.
Members present: Mrs Louise Ellman (Chair); Jim Dobbin; Jim Fitzpatrick; Jason McCartney, Karl McCartney; Mr Adrian Sanders, Chloe Smith; Martin Vickers
Examination of Witnesses
Witness: Sir David Higgins, Chairman, HS2 Ltd, gave evidence.
Q1 Chair: Good afternoon, Sir David. Welcome to the Transport Committee. Are you confident that High Speed 2 has all-party support?
Sir David Higgins: I hope so. I am doing a lot of work in the lead-up to the Second Reading debate, which we hope will be on 29 April. As I am doing this morning and tomorrow morning, I am regularly meeting small groups of parliamentarians to answer questions in the lead-up to the Commons debate, so I hope we will have an informed debate.
Q2 Chair: You say that you hope it has all-party support. Do you think it has?
Sir David Higgins: We are in a clearer position now than we were six or eight weeks ago. I hope that my report sheds light on the fact that the budget for phase 1, which is what the hybrid Bill is about, is adequate and can deliver the project, and that the timetable, while tight, is achievable. It sets out the important decisions we need to focus on to ensure that the project can be delivered within budget.
Q3 Chair: Your report focuses a great deal on the importance of connectivity, particularly in the north. Does that mean that you think High Speed 2 is more important for connectivity in the north than it is for additional capacity in the south?
Sir David Higgins: It is both. You cannot have phase 2 without phase 1. The sequencing of the Bills is right. The first objective is to solve capacity. There is no way to address capacity issues in the south without a new additional line. The west coast upgrade was effective and showed the release of capacity, but there was a limit to what it could do. It is therefore about capacity in the south—and in some parts of the north—but the big game changer for the north is connectivity, both north-south but also, as my report says, east-west, and integrating with existing rail services.
Q4 Chair: What makes you so confident that HS2 will indeed boost the north and not take economic activity away from the north to the south? Some of the opponents of HS2 think that that is more likely to happen.
Sir David Higgins: There are obvious benefits to the south; it does release commuter traffic on the southern section, from Birmingham south. But you just have to look at what is happening today with the concentration of business in the south, which continues to increase. We need to do something to reverse that and to attract business back to the north, particularly major companies.
Q5 Chair: In your report, as well as talking about the north-south links, you talk about east-west links, particularly Liverpool to Hull. Do you see that as a package? Are the east-west links part of the package of HS2 or something that can be seen separately?
Sir David Higgins: We need to take time in the second stage to consider the east-west connection. While High Speed 2 addresses some of those issues by increasing the lines from Birmingham to Leeds and Birmingham to Manchester, it never addresses east-west completely; nor was it expected to do so. The important thing is therefore to consider the normal railway spending review—the Network Rail plan. If you look at the period from 2020 to 2030—control periods 5 and 6—we should plan those control periods to tie into High Speed 2 phase 2 planning.
Q6 Chair: In your report you do not identify specific cost savings in phase 1, but you say that there could be savings further along the line—something of that nature. What exactly do you mean by that?
Sir David Higgins: I hope that what I set out is the scale of the contingency. On page 15 of the report, I set out that the contingency the public would be aware of for stage 1 is about £5.7 billion, but for the actual contingency, you need to look at the rolling stock as well as the track. My recommendation—it is just a recommendation—on the High Speed 1 link gives a total contingency for phase 1 of £7.4 billion. That is an adequate contingency. It is a bit over 30% of the total project costs, so it is enough to deliver phase 1. There are no savings today, but the key point I make is that, provided we make difficult decisions on scope today and understand that time and uncertainty deliver cost challenges, we can save a substantial amount of the contingency—if we make the right decisions at the right time.
Q7 Chair: You say that the contingency allowance is about recognising risk. What do you see as the main risks?
Sir David Higgins: The main risks are time and change of scope. I challenge a number of key parts of phase 1, in particular, on scope. It is really important to make decisions such as Euston or Old Oak Common now—certainly before we start construction. The way you lose a lot of money is by changing your mind once construction starts. Of course, time is money. It is money not only on the cost of how long it takes to build something but on inflation.
Q8 Chair: You say time is money. Can you expand a little on that? You are talking about certain decisions that need to be taken now. What do you mean by now? Surely there has to be proper consultation on whatever is decided.
Sir David Higgins: Indeed. We have to have proper consultation. Of course, Parliament is the institution that needs to give the powers—ultimately, Royal Assent—to start the process of phase 1. If we keep to the current schedule, construction should start in 2017. That is only two and a half years away. An enormous amount of work needs to be done, particularly with complex stations such as Euston or to deal with utilities. Often it takes two years to get the right blockades just for utility relocation or planning to carry out work on the existing network. It is important that we understand that to hit the right start dates we must make the important decisions on scope soon.
Q9 Chair: Your report suggests at least two major changes from the current proposals, which are out to consultation. One is to do with dropping the HS2-HS1 link; the other is to do with Crewe. What are the implications in terms of time of the recommendations that you are making? The Government have already said that they are willing to consider them. What does that mean? Will more time be involved while these matters are looked at again?
Sir David Higgins: First, we need to put them in context and to look at what authority they have. My recommendations are just that; they are only recommendations. We work to a brief set by the Government and the Department.
On the High Speed 1 link, the Government have responded and said that they will look at dropping that, but they will want a further report on other methods of linking High Speed 1 and High Speed 2. On Crewe, no decision has been made. Mine is only a recommendation. Clearly, the route for phase 2 is out for consultation. That process is reviewed independently; independent assessors review and report back to the Department on the recommendations for the route. I have suggested that, if in the second stage the Government choose the route west through Crewe, we should bring that forward. We get a lot of benefit from taking it to Crewe because historically Crewe has been a railway junction. It connects on to Liverpool, north Wales, the west coast line and, of course, through to Manchester, so it is a very logical junction.
Q10 Chair: The suggestion you have made for Crewe is a major change. You are talking about Crewe becoming a major interchange. Do you think that considering that would take up more time? Would there need to be a new consultation on that? After all, it has not yet been decided.
Sir David Higgins: You are correct. Of course, Crewe is not part of the hybrid Bill to be considered by Parliament. There is no intention of making it part of this hybrid Bill; it would have to be subject to a separate Bill. If it is accepted as the route, the Government will decide how best to handle that—whether it becomes part of phase 2 or whether it is brought forward in a separate Bill.
Q11 Chair: It would have to be a separate Bill and not be part of the current Bill.
Sir David Higgins: It would not be part of this process. That is correct.
Q12 Chair: In relation to the link between High Speed 1 and High Speed 2, what is your understanding of the time the Government expect looking at that again to take?
Sir David Higgins: This is the study that they have asked us to carry out. They have not set a timetable for how long that study will take. Technically, they have said that they will accept the recommendation to drop the High Speed 1 link, and they have asked for a further review to look at other ways of linking the lines. They have not set a timetable for that, but I would expect it to be some time within the next 12 months.
Q13 Jim Fitzpatrick: Good afternoon, Sir David. Can I follow up on the Crewe dimension and the extra Bill? Is that a discussion you have had with the Department for Transport? Are they saying that a Bill would run immediately after a paving Bill or after 2016? What is the time scale for this additional Bill?
Sir David Higgins: They have not responded at all on that. The sequence is that, first, they need to get in the independent reports on the consultation on phase 2, and then make a determination on the route. Only then can they consider what methods there are of bringing Crewe in earlier.
Q14 Martin Vickers: Sir David, you mention in your report—you have touched on it already—the east-west connections; in particular, you mention the north trans-Pennine area. Of course, we want to open up areas such as the one I represent and to get the benefits of economic growth. The Government have identified the Humber estuary, for example—not just the north bank, where we had the good news about Siemens today, but the whole of the estuary—as a renewable sector. How do you see the south bank of the Humber—the northern Lincolnshire area—benefiting from HS2? If we are to go forward and retain public support for it, the benefit needs to be not just on the direct routes but in the more distant areas.
Sir David Higgins: You are right. Over the last month I have been visiting the eastern leg. I have been to Leeds and I met business leaders and local authority representatives from Bradford, Wakefield, Leeds and other areas—Nottingham, recently. The clear message I get is that we need to be able to explain the benefits to cities that are not directly connected to High Speed 2. There should be a story, because we are delivering a lot more capacity, but we also need to tie it in with an investment programme in the rest of the network. It is not a case of either/or—of High Speed 2 or the traditional railway investment programme. We have to explain that.
Normally that would not happen until the next control period was getting into preparation. Coincidentally, the timing proposed for the Second Reading of phase 2 is about the same time that Network Rail, which will become a public body in September, will need to submit its strategic business plan to Parliament. There is an obvious linkage in being able to consider both those plans for the period starting in 2020, so we understand how that investment can be co-ordinated.
Clearly, there is electrification work that needs to be planned in Hull. Line speed upgrades are also needed. We need to look at freight capacity. A lot of work has been done on freight; we continue to look at freight capacity in terms of gauge clearance. There has been work in Liverpool. We need to understand the ambitions of Liverpool port right through to Hull.
Q15 Chair: What would the mechanism be to make sure that happens?
Sir David Higgins: When I was in Manchester last week, I really encouraged local representatives and city leaders to come together in some form of association so that they offer a united client group that can deal with us, Network Rail and the Department. If you look at the way they worked together to sponsor the northern hub, which is already under construction and will bring a lot of benefits, they could work together politically as a group, because this is not a debate that will be won in six months. The Second Reading of phase 2 is planned for 2017, so for the next three years-plus we must maintain political support for the right answer for the second phase. My message to them is, “Divided you will not win political support. United as a region you will gain political support for the investment necessary in phase 2.”
Q16 Karl McCartney: Underneath your left arm you have a very nice picture of the UK. Did you have anything to do with putting that together? I am going to be very parochial.
Sir David Higgins: Who did I leave off? I know the second question you are coming to.
Q17 Karl McCartney: I will give you a guess—I am the MP for Lincoln. Lincolnshire is a huge county in the east midlands, but the county city of Lincoln does not even appear there. We are on the east coast line, with one service down and up a day, and we have cross-country services, but it looks like we are missing out. You have spoken to my colleague Mr Vickers from the north of Lincolnshire. How do I sell to my constituents that there will be any benefits whatsoever from HS2?
Sir David Higgins: First, you do not necessarily have to be directly on the line. You will benefit from existing lines, so the east coast will benefit from released capacity. The other thing we have not made enough of is the huge opportunity in jobs. The vast majority of High Speed 2, both first phase and second phase, will be designed, engineered, built and manufactured in the north, the midlands and Yorkshire, so there is a huge opportunity. Only this morning I was speaking to an MP from Scunthorpe about the substantial investment in steel manufacturing in that area, and the opportunities that will come from that. The opportunity that will come from High Speed 2 is skilling and jobs, in particular.
Q18 Karl McCartney: But Lincoln is the gateway to Lincolnshire. I do not know whether you are even planning to go to Lincoln at all or to meet the various great and good there; obviously I would hope to be among those if you were to do so, although I am quite happy to have a meeting with you outside that. There are getting on for 1 million people who live in Lincolnshire, but at the moment, looking at the document you have produced, we are not figuring in your plans at all.
Sir David Higgins: That is the whole reason why we need to co-ordinate. There is a big investment programme of electrification under way in that area. There are signalling improvements in the existing control period. In Lincoln itself, agreement has been reached with the local authority on bridges over the level crossings, which I know is something that has been very difficult for a long time. I followed that very closely in my last job.
Q19 Karl McCartney: The first one is being built at the moment, which is good news.
Sir David Higgins: Yes, I know it well. We need to co-ordinate investment programmes so that you can understand that the existing railway will not be starved of funds during this period.
Q20 Karl McCartney: You mentioned Crewe. Do you foresee that the node would be where the existing rail lines are in Crewe, or completely separate? Do you completely rule out Stoke as an opportunity for moving economic expansion to another part of the midlands?
Sir David Higgins: I do not rule out Stoke at all, because it is not my role to determine the route. Under the current plan that is out for consultation, the line goes under Crewe; there is a line coming off the high-speed service that goes into the old station in the middle of the town. It was always planned that the station would be upgraded in the west coast route modernisation, but that was then deleted for cost-saving benefits; a major overhaul has always been planned for the station. Rather than have a branch line going into the old line, people should expect to come to Crewe and be able to interchange to three or four different train services at a major station south of Crewe, on railway land but adjacent to the A500, which is a dual carriageway. The key is to make that station considered not as Crewe but as a major interchange for the region, with easy access either by road or by other services to the station, which will be 45 minutes down from London.
Q21 Chair: Has any assessment been made of the cost of the Crewe proposal?
Sir David Higgins: No, not at this stage. If it is approved as the route—dare I say it?—it will be part of phase 2. I was interested in the Crewe leg because it is a relatively straightforward section of railway in the proposed course. A lot of it tracks the existing railway line, so its cost per mile is low compared with the average cost per mile of the whole of HS2. From a value point of view, you get additional value by going to the north six years earlier, for a cost that is below the average cost.
Q22 Jason McCartney: There are three areas I want to cover: cross-party support, jobs and the north, primarily Yorkshire. In terms of cross-party support, were you able to watch, or have you read in Hansard, the Secretary of State’s statement on your report yesterday?
Sir David Higgins: Yes.
Q23 Jason McCartney: I was in the Chamber. We were told there was cross-party support, but did you note, as I did, that there were then 100 caveats, conditions and potential changes to the plan? Do you agree with me that it will be very hard because everyone has so much wriggle room—we have already heard different plans and ideas—and that there is a real chance that this whole project will just be shunted down the sidings for years to come?
Sir David Higgins: Yes. Crossrail took three years in Committee stage. I do not dispute that Parliament has the absolute authority to review and rigorously to debate this, but, as I said in my report, time is money. We could well lose a lot of time or we could gain many conditions, which could add significant cost to the overall project. People ask me, “What is the biggest risk?” My biggest risk is time. The legislative programme is therefore a substantial part of that risk.
Q24 Jason McCartney: Do you believe that the time element—speeding up the legislation programme—is the way to get through all those caveats and conditions that keep being laid down for cross-party support?
Sir David Higgins: The key is proper consultation and making sure that we resource the Committee process adequately, so that proper debate can be had. It will be complex, and a lot of issues will be raised. We just have to make sure that we have the right technical experts there to answer the Committee’s questions.
Q25 Jason McCartney: Coming on to jobs, one way, certainly in my part of Yorkshire, of getting everyone on board is to say the number of jobs that would be created. It is interesting that you have been speaking to Nic Dakin in Scunthorpe about steel, engineering jobs and technological jobs. Lord Deighton’s report certainly emphasises that. When we are looking at cost against British jobs, what can we actually do to make sure the jobs are here? What can we do in Parliament to ensure that?
Sir David Higgins: Plan in advance. I fully support the report. I know you are going through it after my evidence, so I will not go into great detail, but it flags up that the only way to get the maximum out of this is to work with the universities and colleges to skill an industry that is short of resources. It is an industry that has been stop-start all the time. This project will run for 15 or 20 years and is a great opportunity to start investing. Take parents with children who are five years old. By the time the first phase is ready to open, those children will have the chance to be apprentices, or to go into training colleges that will work on this project or start on phase 2. We will only get there if we plan now to invest in the skills.
Q26 Jason McCartney: Yes. Crossrail is running an event in Parliament today about apprenticeships working on it, which is a good way to sell the programme.
Finally from me, in your report you talk about bringing forward the benefits to the north to the year 2027, which is only 13 years away. By that, do you mean this potential new interchange at Crewe? Do you include that in the north, or do you mean having the stations in Sheffield and Leeds operational by 2027? I cover Huddersfield, which is not too far away from there.
Sir David Higgins: I mean that, potentially, if the route is chosen, Crewe could be delivered by 2027—less than a year after the first phase is opened. I have said that the rest of the Y, which covers up to Leeds, could be finished by 2030, depending on Royal Assent in 2020.
Q27 Jason McCartney: Is that the earliest possible date for the Yorkshire leg of the Y?
Sir David Higgins: Yes, realistically. The various critical path diagrams on page 11 of the report show that a lot of things are happening at once on that leg.
Q28 Jason McCartney: You are very good at briefing everybody here in Parliament; we appreciate that. You talked about starting building from the north at the same time to get support in the north. By that, did you mean the infrastructure for the stations or actually laying rail track?
Sir David Higgins: We cannot build until we get Royal Assent.
Q29 Jason McCartney: Is that still a possibility though?
Sir David Higgins: You do not have the powers to assume land, to acquire land or to fund or finance something until you have Royal Assent. With the best will in the world, phase 2 will have Royal Assent some time in 2020, provided that there is no change of heart. When I talk about starting from the north, I mean there is nothing to stop starting from the north, at the top, and building the stations as soon as Royal Assent is achieved. Even though the plan was to open the stations in the north in 2033—some 13 years later—my point was, first, why not look at this stage to bring it sooner, and then, why not build the shell of the stations in the north straight away? As you can see, the plan shows some stations such as Manchester starting in 2023. There is no reason why you cannot start Manchester earlier. In fact, if you talk to Manchester, they will say that they would like to start their planning for Manchester Piccadilly even before that, working on the existing railway and planning for that.
Q30 Jason McCartney: But some people are interpreting this as actually laying the track, aren’t they?
Sir David Higgins: You cannot lay the track until you have the powers to do it.
Q31 Chair: Are you saying, Sir David, that, once Royal Assent was given, it would be possible, and indeed likely, that you would want to start some building from the north, which could be stations?
Sir David Higgins: Yes. There is no reason why you would not do that. In fact, it would be a cost-effective way of doing it. You would want to engage the supply chain in the north because it would be a more effective way of delivery. Some of it does depend on cash flow. It is years away, I suppose. Who is to know what the requirements or constraints on cash expenditure will be in 2020? That is something you would have to consider in planning that.
Q32 Chloe Smith: In starting my questions, I want to refer back to the rather unfortunate KPMG report that we discussed in this Committee some time ago. I call it unfortunate because it omitted quite a lot. Effectively, it told half the story; a lot of us had a great interest in the other half of the story that was untold by it. However, one thing it did highlight was something that the north of Scotland, East Anglia and Cornwall all have in common, which is distance from either phase 1 or phase 2. I represent a Norwich seat. You will be very pleased to know that we have a unified rail campaign on what we think we need in our region. Could you elaborate on your vision for east-west rail? I mean real east-west rail—not stopping at Milton Keynes or Cambridge, but the real east.
Sir David Higgins: You are right. I think the report said that Aberdeen, Norwich and somewhere in Cornwall would be affected. I thought, “These are the most extreme ends of the nation, and they are going to feel the impact of High Speed 2.” I am not sure about that when I look at other programme investments that were planned in any case. I understand how they calculated it. They probably assumed termination of certain through services on the east coast, affecting Aberdeen. That may or may not happen, with the extra rail capacity.
To answer your question, there are obviously two east-west rail links that people talk about. There is the Cambridge-Oxford corridor. As you will know, there is a substantial investment programme starting in Oxford and going across to Bicester and Bedford. The links through to Cambridge, of course, are more difficult because the old line was not safeguarded and houses were built over a reasonable chunk of it, but there is an extensive programme of electrification. It is important to start that on the Oxford side and to get it working. That work is well in train.
The other east-west link, which has electrification work already under way, is Liverpool to Manchester. There are other improvements. When you ask, “What is Crossrail 2 in London?” most people—certainly in the industry—understand what that is. Crossrail 2 probably will not start for another decade, depending on parliamentary timetables, and will not be finished until 2030 or beyond, but everyone is talking about it. They probably even have Crossrail 3 planned, but no one has trans-Pennine 1 or northern hub 2 even thought of. I am challenging our industry and northern leaders to work on those plans to speed up access. There need to be more ambitious plans to reduce the time for a journey of 35 miles between Leeds and Manchester that takes just a few minutes under an hour. That is really unacceptable. It is like saying that you will have four trains an hour from Reading to London and they will take roughly an hour to get in. Everyone in Reading would riot, wouldn’t they?
Q33 Chloe Smith: They would indeed. Some people in Norfolk, Suffolk and Essex also riot on the speed of our track. Can I press you a little on the opportunity for improving those east-west links? I am well aware of the existing work and the campaign in the two areas you mentioned, which is positive. If I have read your report correctly, either you or the taskforce mentions Milton Keynes as a place that ought to get ready to link to HS2. Following on from the Chair’s question, in practice how do you see that proceeding? What needs to be done to ensure that east-west rail could benefit from linking to HS2?
Sir David Higgins: Your point about Milton Keynes was not in my report; it was from the growth areas taskforce. There are substantial new services that would be available on the existing route. I suppose that flags it. People will say, “How will Milton Keynes benefit, because it is not on the route of High Speed 2?” Correct, but there will be freed-up capacity on the west coast, on London Midland and on the east coast. How do you use that spare capacity on the east coast to benefit the east of England? That is a good question.
We now have a tripartite board that includes the Department for Transport, Network Rail and High Speed 2, and it has been operating for two months. They have asked Network Rail to do a study to build up a timetable nationally from first principles: first, to start a process of consultation—I believe they will do that in the next four to six weeks—to understand what the needs are. We always build timetables incrementally at the moment. With all the extra capacity that will come on the north-south corridors, including the east coast, how will the cities benefit from new train paths? That is what you are looking for in terms of answers on the benefits that will come to the east of England.
Q34 Chloe Smith: Do you also see ways for suburban and rural areas to be able to link to the network? It is fairly easy for us to refer to cities making links. Could you elaborate on how you see those who do not live in cities being able to take the benefit?
Sir David Higgins: There are a few ways. First, there is the strengthening of the existing network. The other thing is that we need to think of interchanges. If you look at European models, they are very familiar with being able to have very high capacity interchanges. They then feed other transport services such as bus, road, rail or tram into the interchanges, and have connections to them. One of the huge potential advantages I see of Crewe is to give a link to north Wales and through to Holyhead, which would be able to have direct services that would then come on to the fast line. We need to think of opportunities like that, either with direct services—the classic convertible—or being able to come to an interchange that can have frequency of services.
Q35 Chloe Smith: My final question is on how we will be able to measure improvements such as this. In terms of the areas that you would like to see in due course linking to the high-speed network, what kind of evidence base should they be looking for, in due course, to prove that their infrastructure has got better? That may be in terms of speed or capacity—you tell me which of your arguments is best in that sense. What should they be looking for and how should they measure it?
Sir David Higgins: To promise something in the future is very difficult. The last three months have been an incredibly difficult period for the national railway infrastructure, particularly its southern section, because of all the flooding. It was a sustained period that had not been experienced in over 100 years, yet the one railway service that operated uninterrupted, at perfect regularity and reliability, was High Speed 1. There were no problems with any level of service or defect on that railway line. That is a modern railway.
What will be the level of service? With a modern, 21st-century railway, we will be able to guarantee a level of resilience and predictability for people planning to travel around the country. How that will flow through in terms of reliability or jobs, I suppose only time will tell. This is an intergenerational project; it spans generations and it is a long-term investment. Its beneficiaries will be children at a young age today, who will come through and get jobs—not only jobs in the manufacturing and the operation of the railway, but jobs that will be stimulated by a far more balanced economy, as cities in the midlands and the north are better connected together, and to London. What will be the benefit to cities if you reduce the time it takes to get to London from the current two hours to one hour? It is hard to tell, but I think it will be substantial in terms of what it does in attracting jobs.
Q36 Mr Sanders: There are 500,000 Cornish men and women who will be somewhat disappointed at your earlier comment that, because they live on the periphery of the UK, the KPMG report does not matter to them. It does matter; they are taxpayers, and you need their taxpaying money in order to move this project forward. One area of the country that is less on the periphery is Devon. The KPMG report said that Devon will see its economic output fall by £52 million a year. We cannot expect every part of the country to benefit, but it certainly should not be the case that any part of the country actually loses.
Sir David Higgins: I know. I found that staggering. I could not understand why building a railway north of London and so far away from Devon and Cornwall, as you note, would have a deteriorating impact on the economy of Devon. I do not understand how they worked that out.
Q37 Mr Sanders: The Government commissioned KPMG to look at the regional economic impact of HS2. They kept that bit of the report secret. It was only an FOI request that revealed that damaging information.
Sir David Higgins: You can only assume that it is making an assumption on the sum allocation of train paths and timetabling, which will not happen for many years to come.
Q38 Mr Sanders: But aren’t all the figures connected with HS2 based on an assumption—those that are in favour as well as those that may not be?
Sir David Higgins: Of course. You are absolutely right—they are all based on assumptions. One thing we already know, however, from living with the existing Victorian railway north of London, is what the reliability is and how many trains there are. We know about the lack of resilience and we know the cost—£9 billion was spent, and all it did was buy time. We now know that that was not the solution to provide a long-term viable railway for both freight and passenger, long distance north of London. We get that—that is proven.
Q39 Mr Sanders: Even if you try to sell it to the people of the far south-west by saying that they would benefit from rolling stock that might be freed up from the east and west coast main lines, that is complete nonsense, because we do not have an electrified railway to use the electrified trains that would be handed down to us. How are you going to sell this to those areas of the country, and get MPs like myself to vote for this Bill, when we will be voting to disadvantage our constituents and our local economies?
Sir David Higgins: I think it is about fairness. The entire debate about High Speed 2 is about fairness. With Crossrail 2, London and the Greater London area will benefit from £80 billion-worth of major capital works on its railways. Nearly 50% of all national expenditure on railways goes on London-centric businesses—three times per capita, on London-centric expenditure. Why is that happening? Perhaps it is because most major decisions on everything are London-centric. I look at the north and the poor investment there. You are right about cascading of rolling stock, but I tell you, if you want to see bad cascading of rolling stock, go to the north and understand what the north has to put up with. It is time that the north had a fair allocation—
Q40 Mr Sanders: I am sorry to prick your balloon again, but the south-west has just taken the hand-me-downs from Northern Rail. We are actually below the north.
Sir David Higgins: I know. We have had this discussion before.
Mr Sanders: According to your own report, expenditure per head is far less in the south-west than in any other region. That is the south-west that includes the northern bit, which will be having investment from electrification at Bristol. The far south-west will fall further behind.
Q41 Chair: Apart from the London question, how will High Speed 2 benefit the south-west?
Sir David Higgins: It will not directly benefit the far south-west at all, because this scheme cannot do everything everywhere in the country. The only way we can focus on it is by ensuring that manufacturing and jobs give the best opportunity for small businesses, and people in the far south-west have the skills to benefit.
I know we have talked about this previously, and you have reminded me that Bristol is not the far south-west, but a huge investment programme is happening on electrification through to Cardiff and Swansea. A lot of work will happen at Bristol, with the depots and everything else, but you are right—the electrification does not go that far yet. It is important to understand what future investment there is both in resilience and in electrification in future control periods.
Q42 Mr Sanders: Would it help you politically to have the support of far south-west MPs and, possibly, East Anglian and Aberdeen MPs? Would you support proposals to spend a fraction of HS2 on perhaps electrifying the line to the far south-west?
Sir David Higgins: I do not think it is a case of either/or. It is certainly not my position to be able to allocate money in the control periods—
Mr Sanders: No, but you could have a word with the Secretary of State and say, “Look, this is embarrassing. It would be really helpful if some extra money could go south-westwards, to bring their railway up to scratch.” The issue is not that they have to benefit but that they do not lose. That is the issue; it is about not losing. They do not expect to have to benefit.
Q43 Chair: Would the sort of proposals Mr Sanders is talking about be things that could be included in Network Rail’s control period—whatever it may be?
Sir David Higgins: That is exactly what I am proposing.
Q44 Chair: So they could. That would not be jeopardised by HS2 going ahead.
Sir David Higgins: That is exactly right. I am proposing that phase 2, which is about the critical issue of connectivity, looks in a combined way at the Network Rail control periods that span 2020 to 2030, which is also the period for the construction of phase 2. We should make sure that we understand where the planned expenditure is for that period so that it complements the investment in phase 2. People will want that answer both to make the most of the high-speed capacity going north and to know that other parts of the network will not be reduced, or lose capital expenditure. Crossrail 2 needs to be planned into that level of expenditure, too.
Q45 Jim Dobbin: I am a north-west Member of Parliament, despite my accent, but I am not coming in to defend the north-west; I hope you are going to provide what we really need up there. I am not a London Member of Parliament either, but I spend quite a lot of my life in London, so I have an interest in what is happening here. I want to raise the issue of Euston. Can you tell us exactly what is going there? What is the timetable for the first phase? Would it require a change to the Bill?
Sir David Higgins: The answer is, yes, it would. It would require an amendment to the Bill. We need to work out the timing of that, if it is accepted. The Government have asked us to look at what it would involve. It is complicated. The current proposal in the hybrid Bill is the logical way to expand capacity at Euston. The more ambitious plan to develop all of Euston was not put into the Bill because it is very difficult to do. The only way you can do it is to divert some services out of Euston, either during construction or longer term, at Old Oak Common. That is the only way you can free up enough capacity while still leaving the long-distance services coming into Euston—by converting some of the commuter services out. We have had that discussion with TfL and with the Mayor. They understand and support it, but it is a difficult logistical exercise. We all understand that Euston is a tired station. We do not want to have a station that is effectively two stations, old and new. Unless we push everything to the extremes, we will regret not having tried to do it.
Q46 Martin Vickers: Following on from the Euston issue and the HS1-HS2 link, are there any alternative options for the link that have particularly stood out at this stage and that might be worthy of future consideration?
Sir David Higgins: That is the subject of the study. The Secretary of State asked us to carry out a study to look at all options, including high-capacity links that would connect the two lines, as well as physical links between the two stations. We will come back with that study.
Q47 Martin Vickers: Finally from me, you will have appreciated even from this afternoon’s hearing that you are dealing with a very volatile political issue. Can we assume that your arguments have been based solely on the business, economic and commercial arguments and that you have left the politics to the politicians?
Sir David Higgins: Is this in relation to the High Speed 1 link?
Martin Vickers: No, the whole HS2 project.
Sir David Higgins: Yes. I carried out this review over eight weeks and I sourced an independent team. They were able to liaise with the High Speed 2 team, but I wanted an independent team to look at schedule and cost, to challenge all of that independently and to come back with something that did not curry favour. I looked at all that. The most important thing on projects such as this is to force the difficult decisions and the decisions on scope earlier. Hopefully that is what I have set out. I am not saying that these decisions are easy, but that is what I hope we have highlighted. The obvious answer was to say that I had found £1 billion or £2 billion, but I am saying no; there may well be savings in time but not now, because we have done nothing to deliver savings at this stage. It is too early.
Q48 Chair: What are your proposals on rolling stock for HS2? How will that be provided? Can it be built in the UK?
Sir David Higgins: There is a huge opportunity with rolling stock. It is not just the rolling stock for High Speed 2; there is a rolling stock plan for the next 20 to 30 years across the UK, because we have to catch up on rolling stock and electrification. As we get more of the network electrified, which will bring efficiency gains and capacity benefits, there is a plan to have a national rolling stock strategy. We should insist that this country is heavily involved in the manufacture here, in this country, of rolling stock. It is not just the cabins and the heavy bogies; it is the technology that goes on the rolling stock. In future, trains get smarter and tracks get dumber. At the moment, trains are not intelligent, but the next generation of trains will monitor and determine how track and train need to be maintained on a cost-efficient basis, managing risk in that process. That will be a technology where the UK can lead the world; in some ways, we already do. It is a huge opportunity, as an industrial cluster, that we should grab.
Q49 Chair: Who should commission the rolling stock for High Speed 2?
Sir David Higgins: Ultimately the rolling stock is integrated. In future, as trains get smarter, system integration becomes the biggest single commissioning risk. It does not matter who the organisation is, but it needs to be the same organisation that delivers the telecommunications, the power and the infrastructure that then co-ordinates the commissioning of the rolling stock.
Q50 Chair: There is a current problem in the north, where electrified lines might not have the right trains to run on them. We do not want that to happen with HS2, after all the debates on it.
Sir David Higgins: No, we do not.
Q51 Chair: Does it need a change in system to make sure that the right rolling stock is available at the right time?
Sir David Higgins: There have been some very good reports. There is a report by Richard Brown that was prepared for the Rail Delivery Group and the Department. It looks at the potential for rolling stock standardisation and procurement over the next two decades. I know that the Department for Transport is looking at how it co-ordinates the whole of franchising and management of rolling stock itself. It recently announced a new structure within the Department to handle that.
Q52 Jim Dobbin: During this evidence session we have not talked about freight at all. I am curious to get your ideas about how HS2 will impact on freight and the capacity for freight.
Sir David Higgins: Modern railways separate freight from passenger and high speed from commuter. They do that because it means that you can run a far higher utilisation of the railway. If you look at the TGV services in France, they take high-speed trains only. That means that maintenance of the track is much cheaper and much more cost-effective. They maintain it from 12 midnight until 5 in the morning, which is a very effective way of doing it from a safety and cost point of view. Then you have the more mixed-use railways, which take the heavy freight. There is a substantial increase in freight capacity on the west coast that comes with the releasing of the current 11 train paths on that line. We get 18 new train paths per hour in either direction on High Speed 2, which releases a lot of capacity in extra train paths on the west coast.
We need to continue to invest in the freight network nationally. I know you will be well aware of the gauge clearance that is under way from Southampton and cross-country on the Felixstowe line. That is obviously important and something we need to consider. Further investment is happening in Liverpool now. I know Network Rail is looking at buying the various freight marshalling yards to have more open access to those. Those are all important improvements in freight capacity.
Q53 Chair: Should the High Speed 2 link to Heathrow be reinstated, or pursued, if it is decided to have expansion at Heathrow rather than the hub option?
Sir David Higgins: The connections to Heathrow were always considered as part of the second stage. The critical terminal for west London is Old Oak Common. Part of my recommendation there is to consider the scope of Crossrail, which is partly about expanding Crossrail’s capacity to the west. A key part of that is access to Heathrow. That all comes under the banner of Crossrail and Old Oak Common.
Q54 Chair: You referred to Crossrail 2 and the additional potential investment—
Sir David Higgins: No, this is Crossrail itself—Crossrail 1.
Q55 Chair: Will Crossrail 2 be necessary once HS2 is operational? Will it be required?
Sir David Higgins: Yes. I have been a supporter of Crossrail 2, and I went to the launch a year ago. Crossrail 2 is essential to provide capacity on the Wimbledon-Waterloo line into Waterloo itself, as the terminating station, and then cross-country. It will also take capacity away from Euston. Crossrail 2 is an essential piece of London infrastructure and it should be planned. The plan for Euston needs to be future-proofed so that Crossrail 2 can be built.
Q56 Chair: Thank you very much, Sir David.
Sir David Higgins: It’s a pleasure. Thank you.
Examination of Witness
Witness: Lord Deighton, Commercial Secretary to HM Treasury and Chair of the Growth Taskforce, gave evidence.
Q57 Chair: Good afternoon, Lord Deighton. Welcome to the Transport Committee. A great deal of your report is about transforming the economy, particularly the northern economy. Are you confident that that will be achieved if High Speed 2 goes ahead?
Lord Deighton: The basic conclusion of our report is that it has the potential to be transformational, but there are things that we need to do to capture that full opportunity. I suppose that is a qualified yes.
Q58 Chair: You say that potentially it can transform the economy. In your report you talk a great deal about different organisations and structures that should be set up locally and regionally to make that happen. Do you think those are achievable?
Lord Deighton: Yes, they are absolutely achievable. I was lucky to have some outstanding expertise on my taskforce, particularly when it comes to regeneration. Among them were people who have done probably the more successful regeneration projects we have had in this country—Manchester, Sheffield, the Olympic park and some of the work going on in Manchester with Howard Bernstein now. For me, one of the more interesting things was how clear and agreed they all were about how you needed to approach this kind of opportunity. There was not a lot of debate. They just knew, “This is what you need to do. You need to get to it now and to have an ambitious plan, based on a clear vision for the city. You need to have a delivery body that has the capacity and the powers to get the job done and is designed in line with the geography you are covering. You need to link those plans into the other things you are doing and you need to have support from central Government for the things where it needs to get behind you to make sure that it can all happen.”
Q59 Chair: Your report refers in some detail to problems local authorities may be having, particularly in relation to funding. You talk about some of the restrictions on local enterprise partnerships operating efficiently, perhaps because of their size or because of differences between LEPs. Do you think that those problems can be overcome? The people on your taskforce had been involved in a great deal of regional regeneration. Did you feel that the problems and shortcomings could be overcome?
Lord Deighton: They can be overcome, but I would not underestimate what it will take or the scale of what would be imposed on those cities. This will be a bigger project, in the main, than anything they have tackled before. Some of the authorities are very small. As you know, there is a station destined for Toton. It is rather like a massive spaceship arriving in a tiny little local authority. That is an extreme example, but in every case this would stretch their capability, which is why of course we need help from the centre.
I know it is a very simplistic way of looking at it, but, for me, everything follows from giving the city leaders the opportunity to express their vision for the future. How can their city be competitive not just in the UK but across Europe in the future? The gap between London and our secondary cities is far greater than the gap between capital cities elsewhere and their secondary cities. One of the big opportunities for HS2 is to narrow that gap. That is the vision that our city leaders need to have. For them to get the support they need, they need to be able to lay out that vision in a plan people really buy into, so that they understand the connectivity that people are trying to create; they understand the development, whether it is residential, commercial or retail; and they understand how everything fits together into how the city will look in five, 10 or 15 years. With that clarity of vision and specificity of plan, you will find that the other bits fall into place.
It is at that point that you need to start looking at how you finance it—how the private sector might get involved. Initially, of course, you have the parts that the HS2 budget itself will cover. At the moment, essentially that covers the stations. There are the parts that you might go to the local growth fund to cover, and the parts that you might get from other budgets. For me, that follows on from having a vision, a plan and a delivery body that are capable of making all of this happen.
Q60 Chair: What should be happening now? What should we be seeing now?
Lord Deighton: The beginning of all those things. I will give you some examples. We should see a vision and a masterplan in the station cities for how the station will be redeveloped. For example, three or four weeks ago I was in Birmingham with Albert Bore, the city leader, launching their masterplan for Curzon street. The Mayor of London has already announced that we will have a mayoral development corporation to pull together the Old Oak Common opportunity. He has chosen that particular delivery body because Old Oak Common collects three or four different local authorities, so you really could not leave it to the traditional way of getting things done. You really need a body that looks right across the area and has the capability to deliver, and to develop it as a coherent whole.
Q61 Chair: As you say, the bulk of this activity should be taking place in the cities and, sometimes, on a regional basis, depending on the areas covered, but what should the Government be doing to support it?
Lord Deighton: Yesterday I was delighted that the Secretary of State, Patrick McLoughlin, asked HS2 and LCR—as I am sure you know, LCR is essentially the regeneration arm of Network Rail, a body where some of the expertise already exists—to work together to come up with the kind of regeneration expertise that could be positioned at the centre, and to demonstrate how that would work, particularly with the station cities around the country, to help them with their regeneration plans. That is the right thing to do. I am delighted to see that it demonstrates a certain urgency on his part to get on with it.
Q62 Chair: How would you like that to work? Would it be about putting expertise into the planning or would it be about funding? What kind of input would that be?
Lord Deighton: It depends on the individual circumstances of the city and the plan. It is really important that these plans are led locally, that the vision for those cities is laid out locally and that there is local buy-in to what is required. I very much see the central function as being to help with that by transferring knowledge from other projects and helping to deal with some of the issues that may exist in Whitehall, whether in terms of funding, planning or dealing with the broader regional and local government network and how it all integrates. I was here earlier with David talking about how you define a client for the north. Integrating a city with a region and figuring out what is right for the overall north and midlands is a challenging question. That moves outside the station cities.
Q63 Chair: You have also recommended that there should be a dedicated Minister responsible for High Speed 2. What would you want that Minister to do? Could we relate that to what happened with the Olympics, where there was a dedicated Minister?
Lord Deighton: It is interesting, because everybody on my taskforce who was more London-centric was saying, “No, it has to be done locally,” whereas everybody on my taskforce who was from the north or the midlands was saying, “We absolutely have to have somebody in the middle helping us.” The request for real central co-ordination and drive came out of the big cities, in particular. That is my first observation.
The second, of course, is that we are asking for central drive and co-ordination to deliver the wider economic benefits. Everybody thinks that the Secretary of State for Transport is doing a splendid job with HS2, but it is about the ability to get Government joined up and to come together in a united mission to drive delivery across the country. Of course, that is what we had with the Olympic games and the Paralympic games. While building a railway line does not quite have the inspirational stardust that we were able to generate with the games, the spirit of people working together around a combined objective, where you have something really important to deliver, and aligning them now with what we can get out of it, if we all work together, is incredibly powerful. One of the main things we were trying to accomplish with our report was not to say that we were coming up with anything breathtakingly original; it was simply to say, “If you want a framework for really getting everything out of this that we can, you need to start now. Here is not a bad way of looking at four clusters of activity that you need to really make a difference.”
Q64 Chair: In the case of the Olympics, was the dedicated Minister able to deal with cross-cutting issues and problems where different Departments either did not agree or were not talking to one another?
Lord Deighton: For the Olympic games, we had Tessa Jowell in the early period and Jeremy Hunt in the second period. The key thing was that they were both senior and very well-respected people in the Cabinet who were able to get their colleagues—in particular, the Prime Minister in each case—to respond when you needed their focus. Frankly, that is what was at the heart of our recommendation—to make sure we can get focus from the very top when we need it, and pull the individual Departments together.
One thing I have already done to create the same effect is to work with Jeremy Heywood, the Cabinet Secretary, who has pulled together the senior officials across the five or six Departments that are most relevant—the Department for Transport, the Treasury, DCLG, BIS, Work and Pensions, and Education—to get them to begin to think about their response in the same joined-up way that would create the leadership response that would involve a senior Government Minister running the whole thing.
Q65 Chair: Did that work?
Lord Deighton: Yes. Jeremy is very good at getting their attention.
Q66 Jason McCartney: Looking at your recommendations, Lord Deighton, I am particularly interested in the procurement process and making sure that local SMEs get full advantage in that. As you will be aware, one thing that regularly comes up is that there has been a big issue when we talk about council procurement, national Government procurement, tender finder and things like that. The response and the recommendations are still quite generic at this stage. In terms of specifics, what do you think we can do to show that regional and local SMEs will really get the benefit from the contracts for this major project?
Lord Deighton: That is a very important question. Our recommendations are deliberately generic because we want to give the Government room to come back with the specific, detailed, implementable things they would do within that range. That is quite deliberate. We could have come up with some very specific recommendations, but, frankly, with this kind of taskforce and the sort of evidence call we did, you would need more work to have total confidence behind a specific recommendation. That is just a bit of background across all of them so that you understand why we did it that way. In terms of procurement, it is absolutely vital that we make sure that we have the spread both regionally and down the supply chain into smaller businesses.
Q67 Jason McCartney: Do you think we need a target?
Lord Deighton: The principal thing you need to start off with is an engagement programme, and a way of procuring that allows for the participation of a very wide group of companies. Some kind of open-source system—for example, CompeteFor, which is the one we used in the games and which they modified to use for Crossrail—is extremely effective, because then smaller companies know what is going on. The second thing you have to do is make sure that the procurement principles that you bed into HS2 itself, because they will be doing the procurement, absolutely adhere to making sure that this works and that you will be delivering substantial contracts broadly and deeply.
The next thing you need to do is make sure you have an arrangement with your top-level contractors that imposes the same approach to their suppliers as you are effectively imposing on them; it has to be forced right through the process. Of course, your point of maximum leverage is when you are awarding the initial contract to the top-tier contractor, so your relationship with them and how they then operate is incredibly important. A lot of attention has to be paid to that.
One of the other things that is critical, and is really what is behind our report, is that the sooner you start, the more chance you have of making this happen. We also need a combination of HS2 and the Government. One of the recommendations that we did not make but that they may come back to us with is that the rail engineering business should be a national strategy. We have aerospace and the nuclear industry as industrial strategies. One of the logical conclusions for them to draw from our recommendations is that we should do the same with rail engineering. That would require a real breakdown of what our capability is in this country, and how we need to support it to make sure that we have companies that are in a state to win the contracts.
Q68 Jason McCartney: Sure. Do you think that a few key specifics in terms of companies involved in projects would really help? In terms of the Olympics, the flower torch-lighting mechanism for the opening ceremony was made in Yorkshire. That got lots of media coverage in Yorkshire, so we all felt part of the Olympic games. Do you think there could be something like a trainee engineering college—probably in Leeds, but obviously I would like it in Huddersfield, which I represent—or the involvement of something in Huddersfield, the institute of railway research at Huddersfield university, so that everyone in part of the north could say, “We are going to do that section. Scunthorpe is going to do the steel for the rail lines. We are going to assemble the trains,” and we could really start to win over hearts and minds on this?
Lord Deighton: That is the ideal result, but I am not sure that the ideal way to get there is through having targets. I am not a particular fan. You talked about some of the things we did in the Olympics. We did all that without targets. We thought it was absolutely the right thing to do because we knew we needed hearts and minds.
Q69 Jason McCartney: I do not believe in top-down government, by the way.
Lord Deighton: I am glad to hear that.
Jason McCartney: Just to get it on the record.
Lord Deighton: You are drawing a picture on outcomes that I think we would all find very attractive. I think we can get there without targets. I think we can get there by the right process of engagement and involvement, and the right activities from Government, HS2 and regional bodies such as LEPs supporting businesses to get ready.
Q70 Jason McCartney: Will you visit or try to involve the institute of railway research at Huddersfield university? The Secretary of State opened it at the beginning of last year. It is a fantastic centre, with 30 fantastic academics already working on railway research for Australia, the United States and the continent. There are all sorts of opportunities for the north to be involved.
Lord Deighton: All good stuff. The key, which is what we are really looking for in the Government’s response, is to take a coherent, long-term view—in that case, of the pipeline of skills. The beauty of having a project of this length and scale is that you really can plan on a strategic basis. From a skills point of view, we really need to lay out the demand pipeline of what you need to build the railway. You can go right back to school, through to college, apprenticeships and universities, to make sure that the system is producing a supply of labour that matches that demand, with the right built-in assumptions about attrition in different places. Then you have to figure out how to integrate that with our other industrial requirements in industries that have virtually the same skill requirements and where we generally regard ourselves as having a deficit. The outcome should be not only that we create great career opportunities for our young people but also that we have a well-skilled work force that can deliver a terrific railway on time, on budget and with all the functionality you want. You then end up with a world-beating industry that can go on and win business everywhere. That is the ideal outcome if you get all these things working together in harmony.
Q71 Chair: Could the rolling stock be manufactured in the UK?
Lord Deighton: I do not see why not. That should be our objective, or at least to have as much of it manufactured here as possible. Clearly Hitachi is smelling the coffee and figuring out where the opportunity is. The advantage of both the scale and the long lead time is that we can position ourselves for that opportunity.
The trick here—Sir David was really alluding to this—is to figure out where are the high value-added skills and opportunities for the rail industry of the future. The same applies to advanced construction skills. Much more of it is digitally oriented or systems integration oriented, rather than just about making a railway carriage. We can also use this to shift ourselves to a place in the value chain where, first, we will be more competitive, because these are the things we do well, and, secondly, we will provide people with the kinds of well-paying jobs that we should be targeting for our young people now.
Q72 Chair: Who should be responsible for making this happen?
Lord Deighton: Like all the things here—it is really part of the call for action—it has to be joined up; that is its power. It needs to be a combination of HS2 and its own procurement effort and a variety of bodies, some of which, as Mr McCartney has already said, exist for the rail industry at the moment. Really it is about BIS, with Education, pulling together our capabilities so that we have a coherent plan.
Q73 Martin Vickers: Following on from Mr McCartney’s comments, I put in my bid to have the skills college in northern Lincolnshire, with its long-standing engineering heritage.
On the skills issue, with all the major projects that are going on—the continuation of Crossrail, the massive investment the Government are making in the rail network and so on—do you envisage that we can provide the skilled labour that we need in sufficient time to meet not just the HS2 project but all the other projects? Can we source sufficient raw materials?
Lord Deighton: It is the same generic answer that I have given to most questions: yes, but only if we do a lot of very good work, and it had better start now. On skills, one of the more interesting bits of evidence we got, which made people stop and think a bit, was when we were told that we do not have the skills to build the railway we are trying to build now, without HS2, let alone adding on a project with these enormous requirements. Developing a capability to deliver those skills is not a trivial exercise. One of the things we should look for in the Government’s response is that it is fundamental to demonstrate that we understand what is required, we understand the pipeline and how long it will take, and we can match what is popping out of the pipeline right next to the people who are required. We should demand that that is proved to us, because it is not business as usual; it is taking another look at how you really get this done.
Q74 Martin Vickers: What about the demands on sourcing the raw materials at a reasonable price? If they become rare—
Lord Deighton: That is all part of the procurement exercise. Getting procurement right is critical. The size of this not only allows you to have huge bargaining power, whether you are sourcing domestically or internationally; it also enables you to bring people together in a way that enables them to innovate down the supply chain, improve the product and do things in a different way. That is one of the other things we want to see HS2 do in the way it works with its supply chain. What we do not want is for it to be taking ideas from smart, small UK companies that it then bids out and they cannot win on, so that somebody else does it. We need somehow to incorporate some of our smartest businesses in the supply chain into a process that improves the whole delivery of the rail line. Something of this scale and length can enable you to change the way you do business. That is what they should be looking to do in their procurement.
Q75 Martin Vickers: In your recommendation on freight, you say the Government should invite the industry to plan ahead. Are you satisfied that the freight industry is moving in that direction and recognising the potential not only of HS2 but of the additional capacity on the existing network? You specifically mention the possibility of limited freight running on HS2 track.
Lord Deighton: The obvious and most straightforward piece of work that needs to be done is on how we utilise the freed-up capacity. We have talked about that a lot today. Freight is a very obvious candidate for utilising that freed-up capacity, but I would like to see them take a step back and say, “Does the existing capacity plus HS2 allow us to look at how freight operates on the existing rail network in a different way, to squeeze out of it more than a few additional marginal pathways?” I would like a slightly more fundamental look. The freight industry did not really seem to have benefited from what I would describe as a proactive, ambitious look at what it could do for this country. This is the right time to do that.
Sir David explained how the high-speed rail line looks. There are examples on HS2 of where freight can travel on high-speed trains, where it is economically sensible for it to travel very fast. However, as you know, it all gets a bit complicated if you put traditional freight trains on the high-speed network. Utilising the existing network is where we should demand a very well thought-through plan.
Q76 Chair: Will there be any more money for local authorities to help them to plan for HS2?
Lord Deighton: Not out of any new budget. I touched on this a bit earlier. There are things that are inside the HS2 budget already, and we need to be very clear with them about what that applies to. In the promising areas for regeneration around the stations, there will be the opportunity to include private capital. The most obvious and talked-about example is Euston. That is why Sir David was delighted to lay out a vision for more ambitious redevelopment there; in fact, I have met many people who are already prepared to help us with that. It is a very attractive redevelopment proposition. You need only look at St Pancras and King’s Cross and the development around there to see what can happen. I am already familiar with things happening around Piccadilly in Manchester, which are bringing in private capital. That is important.
There are existing budgets available to look at local transport initiatives, in particular. The local growth fund is the ideal candidate. We are certainly making sure that, in their applications to the local growth fund, the cities and the regions tie together the development of their HS2 plans with their priorities in bids to that fund, so there are some examples. People were very happy to have a Treasury Minister chairing this taskforce because it felt to them like the Treasury was there to help, rather than to tell them why they could not do the things they wanted to do. That is a collaborative approach I would like to instil for the future work on this project.
Q77 Chair: Let us hope that optimism materialises.
Lord Deighton: I know; that is why I hesitated before I said it. My spirit is willing.
Q78 Chair: You said in your report, “Local areas are…finding it hard to align funding to support HS2-related growth.” What did you mean by that?
Lord Deighton: It is really a comment generally on the difficulty that cities and regions find in getting money for the projects they come up with themselves. It is a simple observation from when we talked to all those cities. As you know, lots of work and thought is being given to how financial devolution might work to provide more flexibility, decision making and the ability to raise your own money through schemes that, for example, allow you to keep the uplift from any business rate improvement that comes from regeneration. Generally, those are hard to push through against the centre, which keeps a very tight grip on such things. The medium-term future is to ensure that we have a process that rewards investments that offer us the ability to realise the wider economic benefits that are at the heart of my report.
Q79 Chair: You have also recommended that the Government and Network Rail should say by the end of the year “how HS2 will affect rail services for cities off the…route.” What did you mean by that?
Lord Deighton: I should give a ringing endorsement to the sentiment that has been emerging, certainly from Sir David’s report. We visited all the main station cities, plus Liverpool; we went to London last. I took the whole taskforce with me. We used to start off with our own meeting and talk about a specific subject such as freight or regeneration. Then the local leadership, both private and public sector, would come in to talk about what they would like to do with HS2. Finally, we would have a call for evidence where people not just from the city but from the broader region would come in to talk about their hopes and fears for it.
The overwhelming impression you would be left with after all those meetings was that everybody who was not in the middle of one of the station cities was basically asking the question that you all asked about your constituencies: “What is in it for us? It all sounds great, but I am from Wakefield or Bradford and I need to understand what it means for me.” The shorthand analysis is that phase 1 is about capacity—this Committee understands that argument very well—but phase 2 is much more about connectivity, so you cannot really talk about the benefits of phase 2, or what you want to do with phase 2, without understanding what you are going to do with the freed-up capacity and what you are going to do to align it with the ongoing investment in Network Rail and, indeed, other transport investments. You have to have a coherent plan. That was certainly the most powerful message we got from the broad evidence we took.
Q80 Chair: Is this the same plan that Sir David Higgins’s report recommends?
Lord Deighton: Yes. We are all coming at the same point with slightly different bits of evidence and slightly different analysis, but it all points in the same direction. He talks about the fact that one of the challenges here is that there is not a client called the north. We can go and talk to Manchester—we know what they want. We can go and talk to Leeds—we know what they want. You can talk to Sheffield and Rotherham, and they will have some things to say. You can talk to the LEPs, which take a broader regional view—some of them are stronger than others—but how we arrive at a well-balanced, coherent view of how the network needs to look, to be developed and to integrate with HS2 to maximise the broader benefits is the question to which we really need a good answer.
Q81 Mr Sanders: This is going to be a much harder sell than the Olympics. There was a lot of scepticism about the London Olympics: “It is all going to be about London. Who else will gain?” But the thing was that nobody lost. That is the difference with this. KPMG says very clearly that certain areas of the country will lose. Is there something that can be done to help those areas in terms of their ability to offer services and to be part of bidding processes for the millions of pounds that are going to be spent and that could benefit some of the businesses in those regions?
Lord Deighton: I do not even have sailing in Weymouth to sell you this time. Just to make an amusing aside, I often describe HS2 as the same national mission as the Olympics—it will just be easier to get tickets. On your specific question, I do not know that I would set too much store by the model that KPMG used to create this sense of winners and losers. The model, like all models, is a function of its assumptions and how they are related. I would not overestimate the losers bit. I understand that some people win more than others, but it is not at all clear to me why anybody loses.
Clearly there are parts of the country that are not so directly impacted and are therefore less likely to get the benefits. Fine. I think there are two ways of dealing with that. Number one is that you have to deal with their transport challenges separately. The message that the Department for Transport has got very clearly—it is entirely consistent with our national infrastructure plan—is that the HS2 budget does not cannibalise the ongoing investment in the rest of the transport network. Those areas need to make their case to that and they need to be treated fairly within it. The second area we need to look at is procurement and where the jobs and business opportunities are. We need to draw up a map, to see what things there are in your part of the world that could deliver competitively into HS2 and make sure that they have absolutely every chance of being successful. You are right—that will be part of winning hearts and minds.
Q82 Chair: If you are querying the issue of losers from the KPMG report, does that mean you are also querying the gains?
Lord Deighton: No. What I would query is the accuracy with which you can articulate or really quantify exactly who wins and by how much. My view is that the reality depends on how good a job you do. I think the Secretary of State asked me to do this less because I was a Treasury Minister and more because I had done the Olympics. When we started with the Olympics, we knew we were going to spend a £9 billion Government budget and a £2.5 billion private budget. It was quite clear to me that we could have a very average Olympics and still spend £11 billion, or a wonderful Olympics and spend £11 billion. Our objective was to have a wonderful Olympics. Everything behind this is about how we make this investment and do this work together to milk it for all it is worth. I do not find it a very helpful exercise to try to figure out exactly where the benefits fall. I think all the things we are doing here will just grow the cake of benefits from which we can all eat.
Chair: Thank you very much.
Oral evidence: High speed rail: update, HC 1193 5