Patrick McLoughlin – 2014 Speech on HS2

Below is the text of the speech made by Patrick McLoughlin, the Secretary of State for Transport, on 16th June 2014.

Good morning.

I’m delighted to have been invited to the Institute of Directors this morning (18 June 2014).

You might have noticed that the World Cup has started.

We are just a short distance from where the foundations of the global game were laid. The FA was formed in 1863.

At the time British entrepreneurs and engineers crossed the world. Building railways and bringing the beautiful game wherever they went.

For decades, England and Scotland, were the preeminent footballing nations. But the FA’s focus was on its own committees not keeping up with the competition.

Instead of investing in training coaches and improving pitches we relied on the legacy that had been left by previous generations.

So when the time came to compete on the global stage in 1950 we fell at the first hurdle.

I’m sure you can see what I mean.

To compete internationally, we can’t rest on our laurels, we need to keep innovating and pushing forward.

And we need to invest in the infrastructure that’s needed for that to happen.

Long Term Economic Plan

Thanks to our long term economic plan the economy is recovering from the years of borrowing beyond our means.

Our growth rate has been the fastest in the G7 over the last year.

You have created a record number of jobs.

And we are on course to cut the huge deficit we inherited by half.

But as the tide of the financial crisis recedes the sands of the global economy have shifted.

Brazil, Russia, India and China more than tripled their share of world trade over the first decade of this century. While the European Union’s declined by around 10% over the same period.

That rapid growth of emerging markets is set to continue. Over the next two decades, the global middle class is expected to expand by another 3 billion.

I believe that presents a fantastic opportunity. Britain has enormous entrepreneurial spirit and energy. And I think British businesses can compete in those new markets.

Just yesterday we signed a Memorandum of Understanding with the Chinese to promote further co-operation on rail projects in both countries.

This will ensure British firms have a fair opportunity to compete for business in the massive development of High Speed Rail in China.

To help you succeed, we need a competitive domestic business environment.

First, we need lower taxes and to cut unnecessary regulation. That’s why we have already cut corporation tax from 28% to 21%.

And from next year it will be just 20% – the joint lowest in the G20.

Building better infrastructure

The second thing we need to do is improve Britain’s essential transport infrastructure.

Two-thirds of IoD members say that transport is poor value for money.

That is the result of years of short term thinking.

Investment was lower than in 1998 in every year until 2011.

So it is no surprise that our roads and railways are among the most congested in Europe.

That’s why we are prioritising improving our national infrastructure.

In total, £24 billion will be invested in the strategic road network in this Parliament and the next. That’s enough to resurface 80% of the strategic road network. And by 2021 we will be spending £3 billion each year on improvements and maintenance.

This is the most significant upgrade of our roads ever.

We have also reformed the CAA to deliver better airport facilities and cut costs.

We are improving land access to our airports – including major investments at Gatwick and Manchester.

And we have established the independent Airports Commission to look at what capacity is required in the south-east over the short, medium and long term.

The Office of Rail Regulation confirmed recently that more passengers are using our railways that at any point in history.

That’s why we will also be investing £38 billion to improve and expand our railways.

Improvements include an extra 140,000 seats on peak services by the end of the decade, a major electrification programme, Crossrail, Thameslink, the Northern Hub and a multi-billion pound deal to replace intercity rolling stock.

But even that investment will not be sufficient to meet the projected demand.

That is why we need High Speed 2.

HS2

HS2 will be the first north-south railway for a century.

It will be the most significant upgrade in the links between London, Birmingham, Manchester and Leeds since the construction of the motorways and it will return over £2 worth of benefit for every £1 invested.

As I travel around the country, people’s questions about HS2 fall into three broad areas.

The first is whether it is actually needed.

The second is whether HS2 will simply suck more economic activity into London and the South East.

And the third is whether, when budgets are tight, we can afford to build it.

Let me take each in turn.

Everyone agrees that Britain’s railways are reaching capacity but people quite rightly ask whether the money we are spending on HS2 would be better spent elsewhere.

The first thing to remember is, as I have said, we will be spending £38 billion upgrading Britain’s railways over the next 5 years.

So this isn’t an either or question.

But even that record investment will not provide the capacity needed.

The West Coast mainline is one of the busiest stretches of mixed use railway in the world.

We’ve spent £9 billion upgrading it over recent years. But it still twists and turns too much to be efficient because it was never a dedicated north-south railway. It was the result of stitching together a patchwork of Victorian tracks in the 1920s. And as well as high speed intercity services, it carries stopping commuter services and huge amounts of slow moving freight.

That’s why even on moderate forecasts it will be full by the mid-2020s.

Adding further capacity would be difficult, expensive and result in years of disruption. So instead of spending more money upgrading the existing railway and getting diminishing returns, we are better off building a new dedicated north-south link.

As well as faster, more frequent high speed connections between our major cities, HS2 also frees up the existing railway for new uses.

We can run far more commuter services to fast growing towns like Milton Keynes or between Birmingham and the Trent Valley.

It means we can run more services across the Pennines.

It means that towns that don’t currently have direct links could do so with the capital.

And it means we can carry much more freight than is possible today.

The next question I’m asked is whether building HS2 instead of helping rebalance the economy will simply increase the dominance of London and the South-East.

It was William Cobbett who first described London as the Great Wen in the 1820s. Some still see the capital as a scar on the landscape.

I don’t.

We’re lucky London is one of the true global cities. McKinsey estimate that, by 2025, London will be one of the four largest city economies in the world.

So while some argue we need to restrict London’s growth to rebalance the economy between north and south, I think that would be a grave error.

When we talk about rebalancing the economy the aim shouldn’t be to make London and the South East worse off.

It should be to harness the potential of London as a motor for Britain’s economy. At the moment businesses locate in the capital because they want to be closer to their competitors and markets. That supports a thriving economy. But it also means that London and the south east are also increasingly full up. They are caught in a circle of rising house prices, some of the most expensive commercial rents in the world and transport congestion.

Transport infrastructure is among the most important things overseas business leaders look for when deciding where to invest. Great cities like Birmingham, Manchester, Sheffield, Leeds, Liverpool want to grow. So we can help by improving their connections with the capital and, perhaps more importantly, their connections with one another.

Finally, there is the question as to whether HS2 is affordable. Taxpayers want to know that we will be spending their money wisely.

Over two decades, the cost of HS2 works out at around £2 billion a year – around the same amount we are spending on Crossrail.

Crossrail is already demonstrating that we can build major infrastructure on time and on budget.

Thanks to Sir David Higgins’ leadership, I am confident the same will be true of HS2.

David has made clear that the best way to help him do so is to reduce any remaining uncertainty surrounding the project. That is why I am pleased there was a consensus on all sides of the House at Second Reading and we are on track for the Bill to be in Committee shortly.

So to sum up, I think we have a choice to make.

Our economy is growing again. But the world we live in is changing.

We could choose gentle, but steady, relative decline.

Or we can have the confidence to go for growth.

Personally, I am an optimist.

Britain has the incredible ideas, entrepreneurs and engineers and the world class businesses we need to compete.

We want to back you by providing the infrastructure you need.

That includes HS2.

I look forward to working with you to help that to happen.

Thank you for listening.