Parts of HS2 to be delayed for two years, government announces
The government has announced the construction of sections of HS2 will be delayed by two years to save money.
The high-speed railway was initially set to link London and the West Midlands with a further phase extending to cities in the North.
However, Transport Secretary Mark Harper said on Thursday: “We have seen significant inflationary pressure and increased project costs, and so we will rephase construction by two years, with an aim to deliver high-speed services to Crewe and the North West as soon as possible after accounting for the delay in construction.”
The delay will affect the northwest section of HS2, from Birmingham to Crewe, and then from Crewe to Manchester.
In a written ministerial statement, Mr Harper said the government is “prioritising HS2’s initial services” between Old Oak Common in west London and Birmingham Curzon Street.
The delay will affect the northwest section of HS2, from Birmingham to Crewe, and then from Crewe to Manchester.
On delivering services to central London, he also hinted at delays, saying: “We will address affordability pressures to ensure the overall spending profile is manageable.
“We will therefore take the time to ensure we have an affordable and deliverable station design, delivering Euston alongside high-speed infrastructure to Manchester.”
A planned extension to Leeds was already shelved in November 2021.
Labour said the latest delay meant the North was again having to “pay the price” for government failures.
Louise Haigh, the shadow transport secretary, said: “Tens of thousands of jobs, and billions in economic growth are dependent on this project.
“The North is yet again being asked to pay the price for staggering Conservative failure.
“Conservative chaos and chronic indecision is holding back jobs, growth and costing the taxpayer.
“This is the biggest project in Europe and delays pile costs up in the long run – ministers now need to come clean on precisely how much their indecision will cost taxpayers and the North.”
Raising a point of order in the Commons, Labour MP Sarah Owen also attacked Mr Harper for “avoiding scrutiny”.
She said the cabinet minister “should have had the decency to come to this House and explain to members why they are doing this” instead of publishing a written statement “at nearly 5 o’clock on Thursday afternoon”.
Commons speaker Lindsay Hoyle also criticised the way the delay was communicated, with his spokesperson saying: “The Speaker has consistently told the government that major policy announcements should be made to the House first so that members have the chance to ask questions on behalf of their constituents, rather than hearing about them via the media.”
Delay ‘could lead to higher costs’
Delivery of the high-speed railway has been a core pledge of the Conservative government but it has been plagued by delays and ever-increasing costs – from estimates of about £33 billion in 2010 to £55.7bn for the whole project in 2015.
By 2019, the estimated cost had soared to at least £71bn, excluding the final eastern leg from the West Midlands to the East Midlands.
Ministers are understood to be delaying construction of the northern section in the hope they can spread the cost over a longer period of time so it was more affordable annually.
Chancellor Jeremy Hunt is set to announce his spring budget next week and will have Rishi Sunak’s target in mind – to get government debt to fall as a percentage of GDP within five years.
The high-speed trains were set to go from London Euston to Birmingham and up to Crewe and Manchester
However, the Confederation of British Industry (CBI) said the delay would hit confidence in the rail industry and could ultimately lead to higher overall costs for HS2.
John Foster, the CBI’s policy unit programme director, said the news “will ultimately reduce investor and contractor confidence in the rail sector”.
“To mitigate further loss of confidence, it is critical that government tackles the inflationary pressures which are biting hard across the infrastructure sector,” he said.
“Delays to projects may create short-term savings, but they can ultimately lead to higher overall costs and slow down the UK’s transition to a better, faster and greener transport network.”
HS2 a ‘colossal mistake’
Leader of Birmingham City Council, Ian Ward, said the delay is “another betrayal of the Midlands and the North, making a mockery of the government’s empty promises to level up the UK economy”.
But Conservative MP and former chief secretary to the Treasury Simon Clarke said delaying construction “would be a sensible decision”.
“Having observed HS2’s progress as chief secretary, I have serious doubts as to value for money and cost control,” he said.
Greg Smith, the Conservative MP for Buckingham, called for the government to “accept the whole thing was a colossal mistake and scrap it, all of it”.
Just last week, rail minister Huw Merriman told the Commons the government is “absolutely committed” to delivering HS2 but admitted “cost pressures” must be examined.
HS2 Ltd chief executive Mark Thurston said the project had suffered a “significant” impact from increased costs in building materials, fuel and energy due to high inflation.
Please use Chrome browser for a more accessible video player
HS2 unearths unexpected treasure
HS2 is Britain’s biggest infrastructure project and has had support from governments of all stripes since it was first mooted more than a decade ago.
But last month, the government reportedly planned to make drastic changes that would almost halve the number of high-speed trains per hour and services would travel slower to save money.
Aerial view of the HS2 Euston station construction site in London
The Department for Transport (DfT) said at the time it “does not comment on speculation” and said the government “remain committed to delivering the project”.
In January, Chancellor Jeremy Hunt said he did not see “any conceivable circumstance” in which the original plan would not be followed after reports the high-speed line could stop before reaching central London.
There were claims the last leg of HS2 into Euston could be scrapped and replaced with a new hub at Old Oak Common in the suburbs of northwest London, where it is set to stop before travelling into Euston.
The government did not deny the reports or that a two to five-year delay to the entire project – currently due to be completed between 2029 and 2033 – was being considered due to record high inflation impacting costs.
The UK economy grew by 0.1% between July and September, according to the Office for National Statistics (ONS).
However, despite the small positive GDP growth recorded in the third quarter, the economy shrank by 0.1% in September, dragging down overall growth for the quarter.
The growth was also slower than what had been expected by experts and a drop from the 0.5% growth between April and June, the ONS said.
Economists polled by Reuters and the Bank of England had forecast an expansion of 0.2%, slowing from the rapid growth seen over the first half of 2024 when the economy was rebounding from last year’s shallow recession.
And the metric that Labour has said it is most focused on – the GDP per capita, or the economic output divided by the number of people in the country – also fell by 0.1%.
Reacting to the figures, Chancellor of the Exchequer Rachel Reeves said: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers,” she said in response to the figures.
“At my budget, I took the difficult choices to fix the foundations and stabilise our public finances.
“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal,” Ms Reeves added.
The sluggish services sector – which makes up the bulk of the British economy – was a particular drag on growth over the past three months. It expanded by 0.1%, cancelling out the 0.8% growth in the construction sector
The UK’s GDP for the the most recent quarter is lower than the 0.7% growth in the US and 0.4% in the Eurozone.
The figures have pushed the UK towards the bottom of the G7 growth table for the third quarter of the year.
It was expected to meet the same 0.2% growth figures reported in Germany and Japan – but fell below that after a slow September.
The pound remained stable following the news, hovering around $1.267. The FTSE 100, meanwhile, opened the day down by 0.4%.
The Bank of England last week predicted that Ms Reeves’s first budget as chancellor will increase inflation by up to half a percentage point over the next two years, contributing to a slower decline in interest rates than previously thought.
Announcing a widely anticipated 0.25 percentage point cut in the base rate to 4.75%, the Bank’s Monetary Policy Committee (MPC) forecast that inflation will return “sustainably” to its target of 2% in the first half of 2027, a year later than at its last meeting.
The Bank’s quarterly report found Ms Reeves’s £70bn package of tax and borrowing measures will place upward pressure on prices, as well as delivering a three-quarter point increase to GDP next year.
Business
Chancellor’s Mansion House speech vows to rip up red tape – saying post-financial crash rules went ‘too far’
Chancellor Rachel Reeves has criticised post-financial crash regulation, saying it has “gone too far” – setting a course for cutting red tape in her first speech to Britain’s most important gathering of financiers and business leaders.
Increased rules on lenders that followed the 2008 crisis have had “unintended consequences”, Ms Reeves will say in her Mansion House address to industry and the City of London’s lord mayor.
“The UK has been regulating for risk, but not regulating for growth,” she will say.
It cannot be taken for granted that the UK will remain a global financial centre, she is expected to add.
Money blog: Britain’s most affordable town revealed
It’s anticipated Ms Reeves will on Thursday announce “growth-focused remits” for financial regulators and next year publish the first strategy for financial services growth and competitiveness.
Rachel Reeves
Bank governor to point out ‘consequences’ of Brexit
Also at the Mansion House dinner the governor of the Bank of England Andrew Bailey will say the UK economy is bigger than we think because we’re not measuring it properly.
A new measure to be used by the Office for National Statistics (ONS) – which will include the value of data – will probably be “worth a per cent or two on GDP”. GDP is a key way of tracking economic growth and counts the value of everything produced.
Brexit has reduced the level of goods coming into the UK, Mr Bailey will also say, and the government must be alert to and welcome opportunities to rebuild relations.
Mr Bailey will caveat he takes no position on “Brexit per se” but does have to point out its consequences.
Please use Chrome browser for a more accessible video player
Bailey: Inflation expected to rise
In what appears to be a reference to the debate around UK immigration policy, Mr Bailey will also say the UK’s ageing population means there are fewer workers, which should be included in the discussion.
The greying labour force “makes the productivity and investment issue all the more important”.
“I will also say this: when we think about broad policy on labour supply, the economic arguments must feature in the debate,” he’s due to add.
Keep up with all the latest news from the UK and around the world by following Sky News
The exact numbers of people at work are unknown in part due to fewer people answering the phone when the ONS call.
Mr Bailey described this as “a substantial problem”.
He will say: “I do struggle to explain when my fellow [central bank] governors ask me why the British are particularly bad at this. The Bank, alongside other users, including the Treasury, continue to engage with the ONS on efforts to tackle these problems and improve the quality of UK labour market data.”
Business
Reeves has welcome support from Bank’s governor as she goes for growth and seeks to woo City
When Gordon Brown delivered his first Mansion House speech as chancellor he caused a stir by doing so in a lounge suit, rather than the white tie and tails demanded by convention.
Some 27 years later Rachel Reeves is the first chancellor who would have not drawn a second glance had they addressed the City establishment in a dress.
As the first woman in the 800-year history of her office, Ms Reeves’s tenure will be littered with reminders of her significance, but few will be as symbolic as a dinner that is a fixture of the financial calendar.
Money latest: UK gas prices spike
Her host at Mansion House, asset manager Alastair King, is the 694th man out of 696 Lord Mayors of London. The other guest speaker, Bank of England governor Andrew Bailey, leads an institution that is yet to be entrusted to a woman.
Ms Reeves’s speech indicates she wants to lean away from convention in policy as well as in person.
By committing to tilting financial regulation in favour of growth rather than risk aversion, she is going against the grain of the post-financial crash environment.
“This sector is the crown jewel in our economy,” she will tell her audience – many of whom will have been central players in the 2007-08 collapse.
Sending a message that they will be less tightly bound in future is not natural territory for a Labour chancellor.
Her motivation may be more practical than political. A tax-and-spend budget that hit business harder than forewarned has put her economic program on notice and she badly needs the growth elements to deliver.
Rachel Reeves on budget day. Pic: PA
Her plans to consolidate local authority pension schemes so they might match the investing power of their Canadian and Australian counterparts is part of the same theme.
Infrastructure investment is central to Reeves’s plan and these steps, universally welcomed, could unlock the private sector funding required to make it happen.
Bank governor frank on Brexit and growth
If the jury is out in a business financial community absorbing £25bn in tax rises, she has welcome support from Mr Bailey.
He is expected to deliver some home truths about the economic inheritance in plainer language than central bankers sometimes manage.
Britain’s growth potential, he says, “is not a good story”. He describes the labour market as “running against us” in the face of an ageing population.
With investment levels “particularly weak by G7 standards”, he will thank the chancellor for the pension reforms intended to unlock capital investment.
Please use Chrome browser for a more accessible video player
Governor warns inflation expected to rise
He is frank about Brexit too, more so than the chancellor has dared.
While studiously offering no view on the central issue, Mr Bailey says leaving the EU had slowed the UK’s potential for growth, and that the government should “welcome opportunities to rebuild relations”.
There is a more coded warning too about the risks of protectionism, which is perhaps more likely with Donald Trump in the White House.
“Amid threats to economic security, let’s please remember the importance of openness,” the Bank governor will say.
Keep up with all the latest news from the UK and around the world by following Sky News
All that is welcome for Ms Reeves.
Already a groundbreaking chancellor, she is aiming for a political and economic legacy that extends beyond her gender and the dress code.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports7 months agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Environment1 year agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway