The design failure of HS2

Kuba writes*

High-speed 2 (HS2), the UK’s cross-national railway plan, has already earned its place as one of the greatest failures of infrastructure planning in modern history. Proposed in 2009, it was meant to connect London with Birmingham and the North of England through high-speed rail. It was originally meant to cost £37.5bn. However, by 2020 the estimated cost had ballooned to around £110bn according to both independent and government assessments.

A key defence of the project was that it would reduce regional inequality by connecting the richest and poorest regions in the country. The project was meant to help other regional development schemes such as the ‘Northern Powerhouse’. However, by 2023 the Prime Minister decided to cancel the parts of the route in northern England, thereby making the project irrelevant in terms of regional development. Cost-benefit analysis equally deemed it no longer cost-effective. Building a faster connection between London and Birmingham simply could not be seen as a part of an effective ‘levelling up’ programme to help left-behind parts of the nation. Its inability to provide any benefit beyond the two largest cities and its incredible cost of £300mn per km of track deservedly gave it the recognition of being a ‘pointless’ project.

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The failure of this project derives from mismatches in rights and political power between those directly affected by the railway’s construction and those who were meant to benefit in the North. The 2017 Act that specified how HS2 Limited (the public company tasked with carrying out the project) could make land acquisitions gave communities near the proposed line a great deal of legal power.

The Act did not provide the standardised compensation system common in many other European countries when making land acquisitions for building infrastructure. As a result, councils petitioned constantly for aesthetic design changes and greater compensation, with local Conservative MPs more than happy to demand more concessions. One particularly brazen example is that of the government paying £7mn for a new golf club  to complete a small land acquisition. Many councils have delayed construction by using the 2017 Act to force HS2 Limited to seek local approval for parts of the construction process. Buckinghamshire Council delayed work by nine months simply by challenging HS2 Limited’s right to bring in construction vehicles. The institutional design of the project has allowed excessive rent-seeking, i.e., expensive, mostly aesthetic, design concessions that significantly increased costs.

The constant political and legal risks the project has faced due to the disproportionate legal and political power of small, wealthy communities along the route bestowed upon the project an ‘uncertainty premium’. This uncertainty premium has been recently further justified by the cancellation of the Northern part of the route. This has meant that the train factories based in the North of England supplying HS2 are likely to close — removing a key goal of regional development.

Millions in the north of England will not benefit because of the disproportionate power given to southern wealthy communities. Whilst these communities enjoy their huge concessions, cities in the North must face their wasted investment on a project that never came to be.

Bottom Line: Legal powers given to southern, rural, wealthy communities  enabled rent-seeking that undermined HS2 at the expense of the North of England.

* Please help my Real Donut Economics** students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

** Why “Real”? In short, because (a) Raworth’s claims to being a “21st century economist” denies that all of her ideas were presented by others in the 20th century and (b) she presents no viable mechanisms (besides “be nice”) for achieving equality and sustainability. My students are more realistic. In long? Read this.

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

5 thoughts on “The design failure of HS2”

  1. This is an interesting and upsetting post! Does this mean that the southern part of the railway is in use? And is there any particular reason why the construction started in the South, were there any power-dynamics involved in this decision too? These are not particularly helpful tips for your essay, but questions that came up while reading your post.

    1. Hello Kuba, this is a rather sad post. Railways when built right can be so helpful. I really liked the fact that you explained the politics involved with all the rent seeking happening. I would love to know more about the legal risks involved and maybe you can elaborate on it in your essay (in brief).Good luck!

    2. Hello Kuba, this is a rather sad post. Railways when built right can be so helpful. I really liked the fact that you explained the politics involved with all the rent seeking happening. I would love to know more about the legal risks involved and maybe you can elaborate on it in your essay (in brief).Good luck!

      1. There are two main legal risks I will hope to expand upon. The first is the broader, institutional power of the executive (or effectively the Prime Minister) in decision-making. The ability of the PM to drastically change or even cancel parts of the project has helped produce an ‘uncertainty premium’ – costs expand as firms involved in the plan start to price in rising uncertainty regarding the project’s future. Secondly, there is the legal problem of the parliamentary Act detailing the relative legal rights of the government and those directly affected by the construction of the railway being highly vague in its language. This essentially created a massive incomplete contract problem that has allowed for rent-seeking, lawfare enthusiasts in rural, Conservative villages (including councils) to drastically increase the project’s cost.

    3. The Southern part of the railway is still not built, large areas of land have been cleared and sectioned off for its construction. There is definitely a further power dynamic involved in choosing to make phase 1 start in London that I did not expand upon, however on the surface this appears as a continuation of HS1 which linked London and the Channel Tunnel. Many have criticised the planned high speed connection between Birmingham and London as mostly pointless, indeed now that the Northern leg has been cut off, cost-benefit analyses universally have shifted to a net cost. There have also been criticisms of the fact that the densely populated North has poor regional rail services which are not necessarily improved by the original plan. All in all, this is another tale of powerful regional divides in the UK.

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