What to Do With HS2?

For the last ten days, the BBC has been obsessed by the prospect of HS2 from Birmingham to Manchester being either on or off. This is classic lazy hack news, as there are (to quote John Major) other ways of skinning this particular cat.

Why is the taxpayer directly funding a railway in the first place, let alone one that only a tiny proportion of the population will ever use? Why have we got to a situation whereby large-scale infrastructure doesn’t just happen, without the taxpayer paying for it?

We hear all sorts of pundits telling us that we are bad at infrastructure, and that this is all due to nimbyism. In fact, new infrastructure is being built the whole time – much of it is done on schedule, coming in on budget, and sometimes below. However, most of it is quietly performed by the private sector, for the private sector possesses no bottomless pit of money. This is part of the problem: everyone working on HS2 is spending other people’s money, and it is therefore not in their interest to minimise costs.

Having recently spent 12 hours making an 8-hour journey on the M5 and M6, I am all too aware that there is a need for much better public transport connections between our towns and cities. In the long term, there is almost certainly a need for extra capacity between London, Birmingham and Manchester, and on to even Glasgow, Edinburgh and Aberdeen – however, not at the cost of hundreds of millions per mile.

The solution to me seems simple: make it worthwhile for the private sector to undertake the project. To achieve this, it would be sold to the bidder who could complete it and run it for fifty years with the lowest reductions in taxation. So, at one extreme for say the resurrected part between Manchester and Leeds, it might require zero corporation tax, employers NI, business rates, insurance premium tax, aggregate levy, and a waiver on income or capital gains tax for investors buying shares or bonds. On the other hand, a company bidding for the London to Birmingham section might pay nothing for the work done so far, but only enjoy zero corporation tax for the 50 years in addition to their investors paying no tax on the shares or bonds held in the project.

The railway electrification programme is another that seems to stop and start, suffering similar problems. The same method could be adopted to encourage businesses selling electricity to the railway companies to electrify railway lines, and make a profit by charging for the electricity used by the trains; making it worthwhile via the tax system.

In both of the above examples, the taxpayer gets new infrastructure built at no upfront cost. I appreciate that many would take exception to “tax breaks” being given to “big companies”, but I would suggest that they look at the big picture: we as a nation are getting new infrastructure and more economic activity, without draining the wallets of the nation’s tax slaves.

Virtually all Victorian railway infrastructure was built with private capital, and there is no reason given the right conditions that this can’t be done now. At that time, taxes payable by those running the projects and investing in them were virtually non-existent. Nimbyism was already alive and kicking, though not in the form of pressure groups using tools like judicial review to push their case – but that can be dealt with if Parliament really wants to encourage the private sector to take on the risk.

Alastair MacMillan runs White House Products Ltd, a manufacturer, distributor and exporter of hydraulic components to over 100 countries. He is a supporter of the Jobs Foundation.

If you enjoy The New Conservative and would like to support our work, please consider buying us a coffee – it would really help to keep us going. Thank you!