Anger in Britain grows as Sunak weighs scrapping part of HS2 high-speed rail line

Rishi Sunak faced growing anger from business leaders, politicians across the spectrum and even a major donor as he weighed whether to shorten a flagship rail project that may cost the UK £100 billion (US$123 billion).

The prime minister and chancellor are locked in talks over whether to halt the Birmingham-to-Manchester leg of High Speed 2 over concerns its cost is spiraling out of control.

A decision may come as early as this week before Conservatives gather for their annual conference in Manchester.

“We do have to respond to the budgets,” Defence Secretary Grant Shapps said in an interview with the BBC on Sunday. “We have been hit not just by coronavirus but also by war in Ukraine, and I think any responsible government looks at that and says does this still stack up for what the country requires in terms of where it’s spending its resources?”

A HS2 construction site at Euston station in London. File photo: AP

While Shapps didn’t detail what Sunak is likely to decide, his remarks fed speculation that the Conservative government will drop a major part of the project that was at the heart of its strategy to “level up” prosperity in northern communities.

Tories won support from those areas away from Labour in the last election and need to retain that backing to win again.

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The Sunday Times separately reported Sunak is looking for ways to cut inheritance tax, which Shapps called “deeply unfair” without confirming there would be a change.

His remarks signal the Conservative Party, trailing the Labour opposition in polls, is juggling its priorities ahead of an election widely expected next year.

The inheritance tax measure would appeal to the party’s wealthy backers, but the idea of further pruning HS2 touched off a broad backlash.

Sunak is working on a series of policy changes on housing, infrastructure, immigration and industrial policy over the coming weeks, people familiar with the plans have told Bloomberg.

The government is concerned that inflation is jacking up the costs of HS2. It’s already spent £24.7 billion on HS2 as of June, with a total budget for the first phase of the project from London to Birmingham of as much as £45 billion.

Beyond that the numbers are more opaque. The official cost of the whole project is £71 billion – though the government’s own review said it could exceed £100 billion.

“The sequencing of what happens next is a perfectly legitimate question,” Shapps said on the BBC. “A serious government looking at the long-term future makes these decisions even when sometimes they’re not popular at that moment, in the interests of the country at large.”

The projected cost of the line has soared to more than £100 billion (US$123 billion). Photo: Reuters

Scaling back HS2 would also be a blow for suppliers. Work on the project has been led by a range of UK and European engineering companies, including Balfour Beatty Plc, Vinci SA, Ferrovial SE, Eiffage SA and Kier Group Plc. More than 3,000 businesses have done work on the project, which supports 3,000 jobs, according to HS2.

Infrastructure has been one of the few strengths for the construction industry this year, which is reeling as homebuilders slash projects after soaring mortgage rates strained affordability for more buyers.

Dropping a major part of HS2 would be a drag on the sector and the broader economy at a moment when analysts say a recession is increasingly likely.

Business groups including the British Chambers of Commerce and CBI have already urged the government to stick with HS2, saying it will both support jobs and improve productivity.

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Former Conservative prime minister Boris Johnson, a longtime champion of the project, said cutting it back even further “makes no sense at all”.

“It is no wonder that Chinese universities teach the constant cancellation of UK infrastructure as an example of what is wrong with democracy,” Johnson said.

Manchester Mayor Andy Burnham, a member of the opposition Labour Party, said people in northern England were “always treated as second-class citizens when it comes to transport”.

The government has also delayed work on bringing the line all the way to Euston station in central London. When it opens, some time between 2029 and 2033, trains will start and finish at Old Oak Common station in the city’s western suburbs.

London Mayor Sadiq Khan said that would create “a ridiculous situation where a ‘high speed’ journey between Birmingham and central London could take as long as the existing route, if not longer”.

“The government’s approach to HS2 risks squandering the huge economic opportunity that it presents and turning it instead into a colossal waste of public money,” Khan said in a letter to Sunak.

Additional reporting by Associated Press

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