HS2 chief predicts transport plan will bring private money

21 Nov 14
High Speed 2 rail chief Sir David Higgins has raised the prospect of increased private investment in the UK’s transport system, as part of a 30-year government plan to develop economically vital connectivity.

By Richard Johnstone | 21 November 2014

High Speed 2 rail chief Sir David Higgins has raised the prospect of increased private investment in the UK’s transport system, as part of a 30-year government plan to develop economically vital connectivity.

HS2_HS2 Ltd

Speaking to Public Finance, Higgins, who chairs the government-owned company developing the line, said a national transport strategy is needed to avoid the ‘stop-start’ investment in rail, road and other infrastructure of recent decades.

He pointed out that other countries have long-term plans to develop economic infrastructure, but in the UK funding is provided on an ad hoc basis for individual projects. That funding pattern extends to HS2, which will run from London to Birmingham and, later, on to Manchester and Leeds.

HS2 Limited will need to negotiate with the new government after next May’s election to secure funding from the Spending Review, expected next year, as well as working towards indicative settlements until 2025, Higgins said.

‘We don’t have a national transport strategy, we have a budgeting process – a high-level output specification which comes through to control periods [four- year funding deals with agreed projects] for Network Rail,’ he told PF. ‘The Highways Agency don’t have that, they have an annual budget.’

In his latest report for government, Rebalancing Britain: From HS2 towards a national transport strategy, Higgins called for the One North plan, developed by five northern cities to improve the connectivity of the region, to be built into a government-backed transport plan. Improved connectivity on key trans-Pennine routes would form part of a more strategic approach to transport.

‘I used the example of the highways and having had a plan from 1938 about how the highways are going to work, so it makes sense to have a plan for railways. And if you do have a plan, that means that the public can understand where everything fits together.

‘It’s actually much more efficient if you have a long-term plan. Manufacturers will base themselves here, skills will develop, when you can say this is what we’re going to do for the next 30 years,’ he told PF.

‘We can’t have the luxury of not having a proper infrastructure plan – we don’t want insufficient broadband or energy generation capacity or distribution or transport to hold the country back.’

Asked how this could work within Whitehall’s budget plans, and if there is potential for greater private finance, he said that in his native Australia, many transport developments are sold to private operators as concessions.

‘They use public money to take development risk on major projects, be it motorways or power lines. They build it with public funds and then they sell it as a concession or toll road once they’ve taken the risk out of the construction phase. It’s an interesting way.’

The government has already done this for HS1, which was sold for £2.1bn as a 30-year concession to Canadian pension funds Borealis Infrastructure and Ontario Teachers’ Pension Plan in November 2010.

Higgins said he could see HS2 being run as a concession. ‘The broader issue the government needs to consider is how they want to fund the railways,’ he added.

Responding to the comments, Stephen Joseph, chief executive of the Campaign for Better Transport, said there is some promise in the idea of raising funds to re-invest in other schemes.

‘It’s not possible to get the private sector to invest in construction, but once construction has happened and there is a revenue steam, there is long-term and low-risk finance that transport brings [for private sector investors]. I think there’s something there.’

However, he said, any national transport strategy needs to be planned on the basis of partnerships with local authorities and regional bodies, as there is a limit to the number of genuinely national transport projects as more powers are devolved to local authorities.

‘I do think a national transport strategy is a good idea, but I think it needs to be slightly more multifaceted and joined-up than just a simple national plan.

‘The number of genuine national schemes on transport is diminishing, and probably should diminish, given that a lot of transport is local. There are a number of things that are genuinely national, but they’re probably quite small in number.’


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