Knives out for HS2 as Lord Wolfson calls for it to be scrapped to protect public purse

hs2 train tracks

Liz Truss risks falling into a “gambler’s trap” by ploughing on with HS2, as business leaders and academics urge her to ditch the £98bn rail line to help protect public services.

Lord Simon Wolfson, the chief executive of Next, said the controversial project is a “waste of money” and should be scrapped to help manage the nation’s finances.

His intervention quickly drew the backing from prominent figures as well as those involved with analysing HS2's original business case. The Government's latest official budget for building HS2 is £98bn.

Sir Paul Marshall, chairman of hedge fund Marshall Wace, told The Telegraph that he supported Lord Wolfson’s calls to halt work on the high-speed rail line.

Meanwhile, Jeremy Hosking, the multi-millionaire financier behind Marathon Asset Management, also called for the Prime Minister to reverse the decision by Boris Johnson to give HS2 the green light.

He told the Telegraph: “It shouldn't have got anywhere near this stage. What is intriguing to me is that in the midst of this national financial calamity, no one has mentioned the £100bn elephant in the room, even though we're looking for £100bn.”

Ms Truss and her chancellor, Kwasi Kwarteng, have been subject to a furious backlash over plans for sweeping tax cuts combined with a refusal to set out in detail how they will be funded, aside from indicating there will be cuts to departmental spending.

Borrowing costs have also soared in the wake of the tax cut announcement, putting even more pressure on public finances and the Government’s plan to borrow more.

Lord Wolfson, a Conservative peer who is also a prominent Tory party donor, said: “At a time when the government is desperately looking to seek for savings, HS2 has got to come under the microscope again, because it's a vast amount of money, who knows how much it is going to cost.

“In terms of the current crisis, if HS2 is not a good investment, then cancelling it will have two positive effects. First of all, it will reduce government debt going forward.

“But the other thing it will do is it will release a whole load of resources that, at the moment, are being channelled into that project. From the steel to the fuel to the labour, and the skills. [All of which] will obviously be released back into the economy.

“It will both reduce borrowing but also ease pressures on the supply side of our economy,” he said, adding: “I personally think it is a waste of money.”

Former Prime Minister Boris Johnson’s decision to give HS2 the green light in the spring of 2020 followed the ‘go/no-go’ Oakervee Review, which offered caveated support for Britain’s biggest building project.

Professor Stephen Glaister, part of the Oakervee Review panel, said that the report’s support for the scheme was based on it being built in full and was contingent on a series of governance changes being implemented.

This meant last year’s decision to scrap the eastern leg of HS2 towards Leeds undermined the value for money of the overall project.

Professor Glaister said: “What Oakervee actually said was: ‘Go ahead, but not until several things have been sorted out.’”

These included the design of the new London Euston station, engineering contracts and clarity of the exact route.

“It was very much a conditional tick from Oakervee. [But] all of that was forgotten.”

HS2 supporters were quick to point out that many billions of pounds have already been spent on the project. Aborting it now will likely cost billions more.

But Mr Hosking said: “That’s the trap that the railway industry set for the Treasury. ‘It’ll cost £20bn and just get started.’ Before you know it, you are in the sunk cost trap.”

Lord Wolfson added: “The reality is that whole: ’Well, we spent a lot of money, so we've got to spend an awful lot more’; that is the gamblers trap, isn't it? You start losing in the casino, and you've got to put more money in.

“I think that's something that all of us in business learn at a very early stage where if you have made a mistake, the sooner you change your mind, the better. What you spent, you spent, you can't undo that. Given that they have got a lot more to spend on they'll have already spent. It would make a lot of sense to review it.”

Professor Glaister said: “Given where things have gone in the last few days, it's certainly clear that the magic money tree, money for public services… is going to be that much harder to find.

“In other words, a pound saved, if you can save it, on not doing HS2 is going to be more valuable in terms of keeping all the other public services going than it was in the past.”

Labour peer Lord Tony Berkeley, the vice chairman of the Oakervee Review who quit after disagreeing with its findings, seized on Lord Wolfson’s intervention.

“Lord Wolfson is of course absolutely right. Best to stop all work on this massive vanity project wasting taxpayers’ money,” he said.

“With the expected higher inflation, in energy, materials and labour costs, and the likely reduction in demand for high cost intercity travel, now is the time to cancel [phases beyond Birmingham] saving £100bn and build a proper East-West line instead at a much lower cost.”

Sir John Armitt, chairman of the Government’s National Infrastructure Commission, disagreed.

He said: “As the government’s growth plan recognises, major infrastructure projects help stimulate growth and are crucial for boosting productivity across the country. Last year’s integrated rail plan set out a realistic programme to speed up much needed connectivity benefits for the north and midlands. That includes delivering HS2 between London, Birmingham and Manchester, in which significant investment has already been made.”

But Lord Wolfson concluded: “I think they [the Government] might be surprised at how little support there is for HS2 generally.”

“You have a small and very vocal minority that stands to gain from whatever expenditure is under question. And a huge silent majority, who'd rather not get involved in the arguments, and have got better things to do

“I think the more this is discussed, the more that silent majority will come to the fore."