HS2: George Osborne says rail route is engine for growth

George Osborne: "I think it is the engine for growth in the north and the midlands"

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The HS2 high-speed rail network will be an "engine for growth" for the north of England and the Midlands, the chancellor has said.

George Osborne admitted the £32bn project was expensive and would take many years, but said it would create "tens of thousands of jobs".

But critics say the plan is flawed.

Some argue that there is little evidence to suggest the introduction of the line will help reduce regional inequalities in the country.

The first phase of the high-speed rail project will link London to Birmingham. Now the government has announced that its preferred route for phase two will run northwards along two branches - one to Manchester and Manchester Airport; the other to Toton near Nottingham, and then on to Sheffield and Leeds.

Construction is set to begin in 2017, with the first trains expected to run in 2026, Transport Minister Patrick McLoughlin told Parliament. The second phase will open fully in 2033, he said.

Heal the divide?

Mr Osborne's fellow Conservative MP, Andrew Bridgen, said his North West Leicestershire constituency would have "all the pain and none of the gain".

Analysis

This morning all roads to Manchester were gridlocked. As usual. All snarled up, a nasty mess of lorries and commuters.

There's a huge infrastructure problem here. Freight has increased 60% since 1995. There simply isn't enough rail capacity to shift it off the roads.

But what if there were an additional rail line to London? HS2 as well as the West Coast main line. North West-based haulage giant Eddie Stobart says the increase in capacity would transform its business. In doing so, it might also transform many people's commute.

And hey presto, the region's moving again. Or so the theory goes. It's about keeping people, parts and products on the move.

But what about the businessman who told me he'd leave Warrington if HS2 didn't stop at his town? There may also be economic losers if it gets businesses relocating too.

"It's going to cut my constituency north to south, destroy lots of countryside and put fear and planning paralysis to a lot of my communities."

Mr Osborne acknowledged that "you can't build a brand new railway line without having some impact on families" but added that there would be "a very generous compensation scheme".

On Sunday, Deputy Prime Minister Nick Clegg suggested that the extension of the high-speed rail line would "heal the north-south divide".

But Prof John Tomaney from the School of Planning at University College London (UCL) said that, given the evidence in countries where high-speed lines have been introduced, such as France, Spain and South Korea, there was very little evidence of reducing regional inequalities.

"On the contrary, in fact the evidence seems to suggest that it's the capital cities which gain principally from these developments," he told the BBC.

"A very good example would be the Madrid to Seville line in Spain. That line was built in order to promote the growth of Seville. But in actual fact, following its completion, Madrid grew at a much faster rate than Seville.

"In fact the gap between their economic performances widened. The relationship between Seoul and Busan [in South Korea] is very similar."

Regeneration debate

Music mogul and rail enthusiast Pete Waterman said that HS2 would regenerate major areas of Britain.

HS2 image of proposed train Critics say the route will not reduce regional inequalities

"Just look at what the Olympics did for parts of South East London - some people complain about the cost, but the area has been completely transformed. The same will happen [with the HS2 hubs]," he told the BBC.

But Richard Wellings from the Institute of Economic Affairs (IEA) disputed this.

"If you look at somewhere like Doncaster, which has had a very fast link to London for decades now, it still remains one of the poorest towns in the UK. If you compare its policy statistics with neighbouring boroughs that don't have the same links to London, they're very similar."

'Economic error'

There have been many estimates of the economic impact of HS2. The government says that for every £1 spent there will be £2 in economic benefit.

The HS2 business case, put forward by the Department for Transport in February 2011, concluded that phase one, from London to the West Midlands, would generate £20bn in economic welfare benefits, mostly as a result of time savings to business travellers.

The total benefits for the whole network were estimated at £44bn, although the accountants KPMG put their estimate much lower, saying HS2 could boost annual economic output between £17bn and £29bn in 2040.

IEA Deputy Editorial Director, Richard Wellings questions the business case for High Speed 2.

According to the government, phase one would create about 40,000 jobs. That includes a potential 30,000 jobs in "planned employment growth" around the high-speed rail stations, 9,000 in construction of the line and 1,500 in the operation of the trains.

But groups who oppose HS2 say the business case is based on unrealistic assumptions - that projections do not take into account competition from conventional rail - and question the strategic benefits.

A separate study by KPMG, commissioned by the West Midlands Integrated Transport Authority (Centro), found that HS2 would add some £1.5bn in gross value to the West Midlands, the equivalent of a £300 rise in average wages.

But the IEA's Mr Wellings said the government was making "a basic economic error" with HS2.

"It's not just the basic cost of around £33bn, there'll also be loads of add-ons - leaking infrastructure around the stations, the huge regeneration schemes that will be taxpayer funded - the kind of thing we saw along the route of HS1.

"So this is very, very bad news for taxpayers and the wider economy," he told the BBC.

But the British Chambers of Commerce (BCC) said projects like HS2 created "confidence, jobs and competitiveness".

And Sir Richard Leese, chair of Manchester City Council, said that while high-speed rail did not guarantee growth, it would give both major cities and smaller towns in the north "a better chance".

"Fundamentally in the north of England it's not about speed, although shorter journeys are better for the economy, it is about capacity. It's about more capacity for passengers and more capacity for freight as well."

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