Planning a city break?

I would not recommend anyone to take a short city break in Damascus right now. However, it did appear from the oral evidence that he gave to the Treasury Select Committee on 9th July 2013, that John Cridland, Director-General of the Confederation of British Industry (CBI), may be at least contemplating a trip along the road to that ancient city, even if he hasn’t exactly packed his bag. I am speaking metaphorically of course, and also somewhat enigmatically, although if you think that I am being obscure you should have heard what Mr Cridland had to say to the Committee and has said since.

The Treasury Committee questioned Mr Cridland on HS2 at approximately 54 mins into the video of the session and from Q72 in the transcript.

It appeared, if only for a moment, that we may have been witnessing a Damascene conversion by Mr Cridland. As he stated in his evidence:

“… the CBI has supported the investment in HS2 on the previous costings. We had to face the choices as to whether that money could be spent on other infrastructure or other public priorities, and we felt it was an appropriate scheme following on from other major infrastructure developments.” (Q73)

What I think this means is that the CBI was of the opinion that the civil and heavy engineering sectors needed a juicy project to keep them ticking along nicely in the coming couple of decades.

But the CBI has a broader remit than protecting just these interests and its faith in HS2 has clearly been shaken by recent events. As Mr Cridland put it:

“… on the same day as the Government had to announce £11.5 billion of spending reductions in one financial year, the Department for Transport had to increase the upper end of High Speed 2’s budget by £10 billion.” (Q75)

He said that he thought that, “The increased costs of HS2 are a matter of concern” and that, “For High Speed 2 to go ahead, it has to wash its face”. He added that he was, “quite convinced that the value for money test needs properly applying”.

Notwithstanding this concern, he stopped short of announcing any change in CBI policy on HS2, and was unable to answer Andrea Leadsom’s question of his view on “at what point HS2 ceases to be value for money” on the grounds that “It is a question that has only very recently come into sharp contrast” (Q72).

Despite this response, Ms Leadsom pressed the point:

“If you had £50 billion to spend on infrastructure, would HS2 be your priority, or what would your priorities be for the economic development of this country?” (Q73)

But she progressed no further really:

“The extra capacity is vital, but what has, in a sense, raised the questions we are now asking in the last two weeks is the extra cost, and we need to model what the implications of that extra cost will be on other infrastructure projects. I am afraid I can’t answer that question, because it is a new issue for the CBI to face.”

Finally, she resorted to answering the question for him (Q74):

“Essentially, you are saying that the merits of the project need to be reviewed in light of the increased contingency that has been applied to it.”

He agreed.

After all that, I think that we are justified in wondering just where the CBI stands on HS2 now that the cost has gone up. No CBI press release followed Mr Cridland’s session of heart searching, so no clarification was available. However, just about a week after his appearance before the Treasury Committee Mr Cridland was interviewed on BBC 5 Live by Sean Farrington.

Sean Farrington: John, in the Commons today we heard an MP say that the CBI has withdrawn its support for High Speed Two, [and there have been] reports in the media saying something similar; do you back the Government’s plans for High Speed Two?

John Cridland: I support High Speed Two in principle, as does most of British business, so those reports overstate the position. The reality is, as you have just said, that when the costs of a project like this go up, it needs careful scrutiny. The extra £9 billion to £10 billion is a lot of money. We need extra capacity, and I think the capacity – for commuters, for rail freight – is the more important issue than speed between cities, but this money can only be spent once, and it must be value for money.

Sean Farrington: Do you think that the money could be spent better elsewhere – on the West Coast Main Line perhaps, boosting the infrastructure that we already have?

John Cridland: I think the West Coast Main Line is getting close to full, so I’m entirely persuaded of the case for extra capacity, and extra capacity has to have investment and long-term investment always has mouth-watering sums (sic), but it has to be value for money, because of the other things that it could be spent on. There simply isn’t enough funding for UK national infrastructure, business wants more. We are supportive of HS2, in principle, but if the costs are going up, then it has to be looked at carefully.

It looks to me that the CBI is trying to have its cake and eat it where HS2 is concerned, and that we are unlikely to get any further clarification before the Government publishes its new sums in the autumn. However, whilst Mr Cridland is looking at things carefully, he may wish to reflect on the results of an opinion poll carried out recently by FRP Advisory. The firm carried out a survey of more than two hundred Midlands-based business owners, advisors and financiers during the first week of July 2013, just days after the Government announced the cost hike for HS2. A fairly-significant 62% of those responding said that they “do not think the £42.6 billion earmarked for HS2 as a good use of public funds”.

Important Note: The quotes from the Treasury Committee oral evidence session that are reproduced in this blog are taken from an uncorrected transcript of evidence, which is not yet an approved formal record of the proceedings of the Committee. Neither witnesses nor Members have had the opportunity to correct the record, and it may therefore be subject to changes being made in the light of any such corrections being requested.

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One response to this post.

  1. Posted by chriseaglen on August 24, 2013 at 7:24 am

    many business sectors would wish the investement was in their area. Cbi is wrong on the statement. The sst needs to speak clearly with numbers of how the continfency is produced.

    Reply

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