Benefit Cost Analysis is an astonishingly powerful appraisal mechanism, whose continued use is more than justified; even its place integrated into Treasury Green Book thinking. Where it falls down however, can clearly be seen in the fumbled handling of HS2.
Whilst nominally an infrastructure project, it is more than this: it is a statement of intent. A nod to our future, our nation saying to itself, “We are one country, not an association of disparate regions. Despite the wealth of the South, it is no more important than the North” (By the way, the North doesn’t stop at Manchester…)
Benefit Cost ratios below 1 are normally a dead duck, for very simple and valid reasons. HS2 is not a simple infrastructure project, but rather one aspect of national solidarity. I, along with so many of my peers, left the North when I became an adult – essentially never to return. This is an intra-national siphoning of intellectual capital that the country simply cannot afford….Generation after Generation – nor should it wish to seek to do so. The resulting concentration of power, wealth, professional occupations and International representation, can only present a picture to our trading partners as a nation that isn’t really a nation…
Sophisticated global conglomerates can play the periphery off against the center – such as Nissan, decades ago in the Northeast – or only last week, Tata Steel, in Port Talbot. The government gives investment grants and tax relief to these behemoth companies, as if feeding a pet, in the filial relationship it conveys to its regional, poorer, cousins. It says, “Don’t worry, we’ll look after you…” Yet of course these regional geographies do not want to be looked after. They want to stand proudly – be their own tall poppy. Stopping HS2, at it’s halfway point, doesn’t indicate national fraternity. Even if the Benefit Cost ratio is below one, I don’t believe this is written in stone for all eternity, as cultural integration, and the economics of agglomeration take seed.
I should add, as more than a footnote – despite this righteous outrage, I actually felt HS2 was always a misconceived idea, given that rail journey times have reduced so drastically over the last 20 years anyway. It was a solution to a problem that no longer existed. Rather the funds would always have better been allocated to the Northern Powerhouse rail schemes, of West / East integration, so completely vital for pulling the North together.
Yet as HS2 has gone ahead – to stop it halfway, after having already cut off it’s Eastern half, from Birmingham onto Leeds, were HS2 Birmingham to Manchester to be scrapped now, surely it would be the worst of all possible outcomes?
MERCIAR BUSINESS CONSULTING 