China and HS2

 

One of the main reasons I voted against HS2 was the business case. From the figures before me I could not see how they will be able to sell enough tickets at  sensible fares to make any return on this large investment. I did not wish to see UK taxpayers stranded with large losses and half empty trains.

News recently  filtered out that maybe the Chinese will invest in HS2, though there has been no follow up with details of agreements. If the Chinese or any other potential investors out there will take over paying for the line and the trains in the belief that they know how to make a profit out of it, the taxpayer should welcome that and expedite a deal. It may well  be the Chinese could cut the costs of the investment and boost ticket sales. If they took over the project that would be up to them and the UK taxpayer would be spared the risk. Alternatively the Chinese may study the economics further and conclude it is a not so easy to do, as they are canny business people.

What we do not want is any kind of government guarantee or underwriting of possible  losses to be part of any sale to a foreign or private sector investor. The cheapest way of paying for the UK state investment will be for the UK state to borrow the money itself on its own balance sheet. Offering other investors guaranteed higher rates than the cost of the UK government capital would be a bad deal for taxpayers. Offering them shares in the venture whilst underwriting losses would be a  bad deal for taxpayers.

There are many other infrastructure projects which could make a profit where private capital can be attracted in and where the private sector could be made to take all the risk. There should be fewer subsidised rewards for private investors than at present, not more.

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81 Comments

  1. Lifelogic
    Posted July 5, 2014 at 5:28 am | Permalink

    This is all obvious to anyone numerate after about 30 minutes thought. The government will clearly have to underwrite it all as the project is miles away from making any economic sense (or even environmental sense). Unlike the Coalition the Chinese are not daft and will not be picking up liabilities, these will be left with taxpayers, under-compensated landowners, tenants and the many people hugely disrupted pointlessly.

    So what is really driving it all – corruption, well paid jobs for friends & mates, property development opportunities, the Libdems, the EU, the need to be seen to be doing something however daft or just the usual government stupidity……..? Perhaps the absurd “BBC think” that seems to think HS trains are “environmental” contrary to all the facts, science, logic and engineering.

    If they really must have an HS train we need Heathwick 5 runways and a 15 min HS train link please, a proper hub airport that would make economic sense and fund itself.

    • Hope
      Posted July 5, 2014 at 8:56 am | Permalink

      Better still why not invest in the capture and distribution of water or make energy cheaper instead of half baked ideas from the two posh boys? Infrastructure to support their mass immigration policy could also be a better use of our money.

    • Bazman
      Posted July 5, 2014 at 11:03 am | Permalink

      Your logic here also applies to nuclear and the Chinese involvements in it which is only viable due to taxpayers underwriting the costs by future guaranteed prices and insurance without which nuclear could not exist.
      The problem is that throughout the world high speed train links are being invested in in particular Europe whether you like it or not. Britain is seriously lagging behind in this important infrastructure as just cursory 30 minute look at the internet would show you.
      Maybe marvellous steam trains with fine wines and internet links are the answer not for you of course, who no doubt eats a quality, but not extravagant, sandwich in his car and thinks everyone else can do this too?

  2. ian wragg
    Posted July 5, 2014 at 6:04 am | Permalink

    HS2 will become the same as nuclear power stations. The government will give an inflation proof guarantee as to the financial returns on the project. The taxpayer will fund this in addition to funding green crap, overseas aid and a myriad of other stupid projects as we decimate our armed forces.
    What’s the use of the new carriers when no NATO aircraft can utilise them? Then again I suppose they come under a shared facility for the ERRF fully funded by the UK taxpayer.
    Was that the deal between David and Angela that we could keep a small measure of shipbuilding if Germany could take over the rest of UK industry.

    • Denis Cooper
      Posted July 5, 2014 at 11:26 am | Permalink

      You forget that there is no ERRF; we have been categorically assured of that by at least one government minister, and she wouldn’t have been lying to Parliament, would she? That is quite unthinkable …

      http://www.publications.parliament.uk/pa/ld200809/ldhansrd/text/90203-0001.htm#09020313000490

      “Turning to the Question, the Answer is none, because there is no European rapid reaction force.”

      “My Lords, I can be consistent and give an assurance that there is no European rapid reaction force. Of course we have troops on standby, and at that significant reception in the Royal Gallery we were all able to talk to our soldiers, who have embarked on a variety of missions, some with NATO and some, indeed, with the EU on occasion.

      The simple fact of the matter is that we have only one set of forces. We in Britain decide how to deploy them. There is no permanent standing army waiting for Europe to instruct it, and there is no European rapid reaction force.”

      That would be apart from this one:

      http://www.eurocorps.org/

      “EUROCORPS: A Force for NATO and the European Union”

      Being one of our unelected legislators-for-life, that woman is still around:

      http://www.parliament.uk/biographies/lords/baroness-taylor-of-bolton/407

      and there is nothing we can do to get rid of her.

  3. Mark B
    Posted July 5, 2014 at 6:13 am | Permalink

    I am so glad that you have chosen to write about this, as it provides me the opportunity to mention one of my hero’s, John James Cowperthwaite.

    Who is he may we ask ? And what has this got to do with HS2 and the Chinese ? Well, a lot !

    John James Cowperthwaite was a Scotsman and a Civil Servant. He was also the Financial Secretary of Hong Kong. He is adored by the Hong Kong Chinese and is credited as being the man largely responsible for their success.

    I will leave both our kind host and others to do their own research on this great man. But I would like to leave you with a link to an article and will extract a paragraph from it for others to read an comment, if they so wish.

    “When a firm lobbied the government to fund the building of a tunnel across the Hong Kong harbour, Cowperthwaite bluntly refused to dole out tax money. If a project offered benefits to businesses they would build it themselves, he remarked, and the tunnel eventually did get built on private money.

    http://budget.livemint.com/Opinion/jytmfnRUk90Ue0g9LuNE4O/India-needs-a-Cowperthwaite-rather-than-a-Reagan.html

    And now you understand why I do not like BIG Government.

    • Lifelogic
      Posted July 5, 2014 at 10:07 am | Permalink

      Indeed, where are the Cowperthwaite’s now, all we get is tax, borrow, over regulate and piss down the drain for LibLabCon.

  4. Gina Dean
    Posted July 5, 2014 at 6:16 am | Permalink

    Another white elephant in the making. When ever the goverment get involved in large projects and contracts they get screwed. They end up with paying triple from the original start price, delays of years, contracts which are in favour of suppliers to the detriment of taxpayers.

    • Bazman
      Posted July 5, 2014 at 11:38 am | Permalink

      See the Cambridge guided busway for a prime example of this.

  5. Mike Stallard
    Posted July 5, 2014 at 6:45 am | Permalink

    This is simply madness.
    The Chinese are rich, yes. The Chinese need to spend their money, yes.
    HS2 was an idea of the EU – DG MOVE.

    Are we completely mad? HS2 is completely beyond our means and I certainly could not even afford a down payment on a ticket.

    • acorn
      Posted July 5, 2014 at 10:32 am | Permalink

      I read that China is currently holding US$4,000 billion equivalent in foreign currency reserves. At a rough guess, most of that will be in actual US Dollars but a decent lump of it is probably in Pounds Stirling.

      In the last ten years, the UK has run a trade deficit with China, totaling a nominal guess at £170 billion. How much of that is in Sterling cash; Gilts or Chelsea mansions I don’t know. They may have sold some Pounds and bought Yuan to take home and pay the guys that made all those 60 inch Plasmas we bought.

      Anyway, I reckon China could buy three HS2; but, as JR says, the sort of percentage dividends they would get is very iffy and likely to be nowhere near the returns they could get on UK real estate.

      We could always raise a Bond for the Private sector to invest in; Households and Corporates. Or the government could pay for it all, a bit each year to prevent the cost of steel rails, and other commodities, including labour, going through the roof. And, it actually wouldn’t cost the government anything if it paid with its “super-platinum credit card” (HT 3spoken).

      • Denis Cooper
        Posted July 6, 2014 at 8:20 am | Permalink

        “And, it actually wouldn’t cost the government anything if it paid with its “super-platinum credit card” (HT 3spoken).”

        I presume you mean the government could just get the Bank of England to create as much new money as it wanted to waste, on top of the equivalent of four Olympic size swimming pools full of crisp new £50 notes already created and used to help fund excessive public spending; but as we know from George Osborne, “Printing money is the last resort of desperate governments when all other policies have failed”, and the government is not so desperate at the moment because of the success of its “long term economic plan”, whatever that may be.

        • Posted July 7, 2014 at 9:33 am | Permalink

          “Printing money is the last resort of desperate governments when all other policies have failed”

          You’re a little behind the times. Its been 40 years or more that the last vestiges of any monetary link to gold was removed. All currency is either printed or created in a computer. There isn’t any other kind any more.

  6. APL
    Posted July 5, 2014 at 7:02 am | Permalink

    So, the ‘tory’ government is now hell bent on reversing the Thatcher privatisation reforms, except it’s a totalitarian foreign government that will own the commanding heights of the economy instead of a British government.

    We could have saved ourselves an awful lot of time and prosperity if you’d just never bothered to select Margaret T all those years ago.

    • Jerry
      Posted July 5, 2014 at 5:36 pm | Permalink

      @APL: “We could have saved ourselves an awful lot of time and prosperity if you’d just never bothered to select Margaret T all those years ago.”

      Cough, I don’t think you quite meant that the way it can be read, many like Bazman will likely be in full agreement with you! Never mind that it was John Major who privatised British Rail, doing so in probably the worst possible way, choosing a method of operating the railways that had been all but discredited by 1023, hence why Parliament forced many separate railway companies (often operating over shared tracks) into the big four pre nationalised companies.

      As for HS2 and HS3, both are white elephants, lines that we don’t need even if we could afford them, the idea that people are going to pay a premium just to save an hour or so – time that they would likely use to to their advantage either to work or rest on a cheaper, slower train anyway. What we do need is a dedicated, slower speed freight railway network, perhaps with some being (re)built to the European or even North American loading gauge to increase train load capacity.

      As Mike Stallard said, these HS rail links are more about what the EU want, the idea that (eventually) someone can get on a train in Málaga and get off in Glasgow, Stockholm or what ever points east, west, north without having to change at points between.

      • stred
        Posted July 6, 2014 at 12:16 pm | Permalink

        What will the EU masterplanners think now we have abandoned the link from St Pancras to Euston and lugging suitcases will be necessary on the way. By the time passengers get off and on again, with the delay in waiting for the next train, the TGV might as well have been getting up to 100mph instaead of 180 in France or 250 in the Cotswolds. A truly British coque up.

  7. Margaret
    Posted July 5, 2014 at 7:18 am | Permalink

    Yes .Any interest in HS2 by the Chinese is a tester of perceived success. If it is another way that a Country gets control over our basic physical communication it is slightly worrying . From Manchester China town to the rich Chinese investor quarters in London ; yes it would be convenient for this group, yet if it didn’t quite work out , by that failure we again would again be at the mercy of non British.
    It sounds good letting someone else pay for it ;let not that appeal mask the reality of financial control by others. As we all know situations are created which are posited as success or failure , partly by the media looking at smaller complaints and sensationalising , and sometimes because the situation is real. A certain sector rubbishing an up and going project which is doing well can change fortunes with all the spite they can muster. This is the reality.

  8. Douglas Carter
    Posted July 5, 2014 at 7:19 am | Permalink

    It might concentrate the minds of the taxpayer on this project if example projected fares for all types might be properly publicised? Being the profits made on the line are already similarly given example projections, presumably the individual season, and walk-on ticket prices have already been considered in some form of detail?

  9. Lifelogic
    Posted July 5, 2014 at 7:28 am | Permalink

    On the subject of transport I read that a sixteen year old boy has beaten a record by taking four days to travel by bus from Land’s End to John O’Groats. Spending four days and £170 on fares (plus 4 nights in hotels one assumes).

    By car 7 people, just 16 hours cost say £105 in total and no hotel bills. One wonders what the average occupancy of the buses were – about six perhaps? So by bus with hotels perhaps £270 each and 4 days, by car £15 each and under one day.

    Why do the government and “BBC thinkers” keep saying public transport is efficient and environmental, it is neither?

    One slow, often empty, red bus is nearly always far, far worse than the equivalent in cars – contrary to what the poster adverts all over London used to say.

    • StevenL
      Posted July 5, 2014 at 11:05 am | Permalink

      The bus fare might be deemed as including depreciation. If a fuel efficient 7 seater car depreciates about £25k over 100,000 miles (for a cheap make) then should you be factoring in about £225 depreciation for the car too? Another £50 for tyres and servicing? £25 for insurance? I’d make that £300 plus fuel costs and I’d be surprised if anything big enough for 7 people actually achieves more than 40mpg on such a journey.

      • Bazman
        Posted July 6, 2014 at 8:43 am | Permalink

        Indeedy! How scientific is that lifelogic?! Prince Charles minority opinions and views such as on herbal medicine and alternative treatments should not be treated as if they are on an equal footing with solid scientific medical consensus you argue, but in the cases of transport and climate you are firmly in his camp even though you disagree. You you think your deluded and bias views should be given the same sober consideration as evidence based conclusions. In short you believe you own the facts like many a religious zealots you so despise envious of anyone with a PPE. LOL!

      • lifelogic
        Posted July 6, 2014 at 11:56 am | Permalink

        I did not say a new car. You can get a perfectly good seven seater with years left in it for under £1000 and you can rent a 5 seater car for less then £30 a day with unlimited mileage.

        The £105 is enough to cover depreciation on a second hand car driven frugally.

        • StevenL
          Posted July 6, 2014 at 9:42 pm | Permalink

          You can get a perfectly good seven seater with years left in it for under £1000

          In John O’Groats?

        • Bazman
          Posted July 7, 2014 at 5:42 pm | Permalink

          Have think why a 20k costs 1k when it is ten years old. Years left in it? You can keep any car on the road forever if you chuck enough money at it? Not real and certainly not for long distances on a regular basis.

    • Bazman
      Posted July 5, 2014 at 11:15 am | Permalink

      Depends if you can afford a car or drive. What if you cannot? Council taxis undercutting the taxi companies In Russia it is common to just put your hand out and stop a car paying for the journey at the drivers discretion. Maybe we should have this instead of buses? How would a large multi cylinder car such as a v12 or v16 2 seater car use only £105 of petrol compared to a bus or train full of people? Deluded nonsense.

      • Edward2
        Posted July 6, 2014 at 8:21 am | Permalink

        Considering HS2 will inevitably be even more expensive than current first class ticket prices, I’m very surprised you are in favour of this train which will be an elitist service affordable only for the rich Baz.
        Were you also a champion of Concorde as a travel method for the poor?

        • Bazman
          Posted July 6, 2014 at 9:30 am | Permalink

          Its a good point as rail is already a middle class transport system, unlike the rest of Europe where fares are in some cases cheap and often more affordable and convenient than the car. I wonder why!? Concord was conceived before the oil crisis and may well be resurrected as technology moves forward. Difficult to find a none elitist way of travel these days. 5 to a small car? Certainly not the bus.

    • Anonymous
      Posted July 5, 2014 at 11:09 pm | Permalink

      Yes, Lifelogic.

      Scrap public transport.

      • Bazman
        Posted July 6, 2014 at 2:08 pm | Permalink

        Making Britain third world in its infrastructure.

  10. Anonymous
    Posted July 5, 2014 at 7:29 am | Permalink

    Could the Chinese perhaps put something towards our aircraft carriers ? Maybe sponsor a few fighter planes for us ?

    • Lifelogic
      Posted July 5, 2014 at 10:09 am | Permalink

      It is perhaps a bit of a misnomer to call them aircraft carriers – as no aircraft for 5(?) more years.

      • Anonymous
        Posted July 5, 2014 at 11:10 pm | Permalink

        OK then, Lifelogic

        Air carriers it is then.

  11. Leslie Singleton
    Posted July 5, 2014 at 7:30 am | Permalink

    Anyone thinking that HS2 could be run at a profit should reconsider, taking account of the advent of the car.

    Matters not helped by the brainless decision not to join HS2 to HS1. No Manchester to Madrid, which is what such an HS line should be for, viz to eat up long distances.

    Staying with the last point, is the mooted trans Pennines HS3 a joke? The journey would be so short (almost by definition the route would have to be straight) that again almost by definition any time saving is going to be measured in mere minutes.

    Besides, what use is one straight line from A to B? There was an excellent letter in the Torygraph a few days ago making it unarguable that a good rail network could be obtained in the North of England by judicious relaying of abandoned line with only a modicum of new track: apparently there are two unconnected stations in Bradford within sight of each other for instance.

    It’s a bit like not reviving the Great Central Railway, which is just sitting there waiting to be cheaply and uncontentiously relayed, wide Continental loading gauge and all.

    There is no reason why HS2 should go in to London. Forget the poor businessmen and their laptops, it should be freight that counts, making the case for a join unanswerable. The only people supposedly benefitting from HS2 are those (very very few) living within walking distance of Euston–if there were a join with HS1 at something like Watford, businessmen could get there easily enough by car, taxi, tube, bus or on foot, as they would to Euston, and freight could just whizz through giving mighty support to the North.

    • BobE
      Posted July 5, 2014 at 11:21 am | Permalink

      Fright on trains doesn’t work. You have to ship it to the train, load it. then at the other end unload it and ship it to the buyer. A single truck is one load and direct to the buyer. Trains do not make sense.

      • Leslie Singleton
        Posted July 5, 2014 at 11:52 pm | Permalink

        BobE–They make a lot more sense for long transcontinental journeys especially since the advent of the container and, ideal or not, they definitely do take stuff off the roads where heavy and especially articulated trucks are dangerous and wear out the road surface more quickly. I suggest trains do make sense, just not as much as you might like. As the length of journey increases the pain involved at each end becomes less significant.

      • Bazman
        Posted July 6, 2014 at 6:20 am | Permalink

        Depends on what is being carried and the distance, but dont let annoying things like facts get in the way bob. Lol.

    • Anonymous
      Posted July 5, 2014 at 12:43 pm | Permalink

      Great comment, Leslie.

    • Leslie Singleton
      Posted July 5, 2014 at 3:01 pm | Permalink

      Postscript–I say Watford above but another thought is that if HS1 were extended to somewhere suitable on the Great Central, and HS2 were to begin there, it would be duck soup to re-lay a few miles of Great Central in to London so that the poor London businessmen and their laptops could still get to HS2 easily, and so could many others but without having to go in to London, which in case anybody had not noticed is crowded enough anyway. Anything not involving a joining up of HS1 and 2 of course remains bonkers.

  12. Andyvan
    Posted July 5, 2014 at 7:37 am | Permalink

    Given that China owns a large part of our enormous public debt they might be thinking of converting it into hard assets. Probably because they know that the Bank of England is doing it’s level best to destroy sterling. At least Carney couldn’t inflate a railway away unlike our paper debts. If that is the case they might not require quite the same return and/or guarantees that ordinary investors would want. Whatever the truth is I think we can be confident that our bureaucrats (with their long record of total failure in negotiating) will do the worst possible deal for Britain.

  13. Alan Wheatley
    Posted July 5, 2014 at 7:45 am | Permalink

    Agreed.

    A second reason to vote against HS2 is that are better ways of spending investment money that will be more beneficial for the UK as a whole.

    A third reason is that it is a “London centric” development which runs counter to the policy of “rebalancing the economy”.

    A third reason is the limited benefit for a few and the detrimental effect on the many. For instance, the priority use of the Chilterns as a rail corridor, and the loss of ancient woodlands.

    • Lifelogic
      Posted July 5, 2014 at 10:12 am | Permalink

      Nearly any investment would be a better way to spend the money.

  14. Richard1
    Posted July 5, 2014 at 7:53 am | Permalink

    Absolutely we should be very careful of this. We often hear how there is free money available from munificent foreigners. Look at the absurd nuclear power station to be financed by ‘the French’. This has required a guaranteed sale price of electricity at 2x the current market rate, probably rising to 3x or more as the market rate falls (rather than rises as forecast by the inept dept of global warming).

    If Chinese investors want to finance hs2 great. But let’s make sure there are no subsidies, underwriting of losses, guaranteed prices etc.

    The evidence for hs2 being a bad idea is precisely that there isn’t money available for it in the markets. If it was such a good idea there should be. (Leftists who believe M Pikettys tosh should accept this as they believe the world is full of rich people with far too much money able to get even richer by investing it in projects where r>g).

  15. Bryan
    Posted July 5, 2014 at 8:02 am | Permalink

    Political smoke and mirrors will apply.

    Guarantees will be given but clothed in the small print. The taxpayer will be told it is a great deal for the UK.

    A bit like PFI and its value to to the economy but the huge longterm extra costs to the taxpayer are hidden. Why, for example, are we not told how much PFI is contributing to the reported NHS black holes?

    The Government seems to give with one hand but takes away in trumps with the other.

  16. John E
    Posted July 5, 2014 at 8:11 am | Permalink

    The Chinese do know a bit about high speed rail having built about 10,000 miles of it. I expect they find our dithering over a line from London to Birmingham laughable. They managed to copy and then improve the French technology far more quickly than the French ever thought possible when they entered into their joint venture. And their planning systems are rather more state driven and less concerned with individual rights or rare species of wildlife.
    The trains I have taken between Suzhou and Shanghai were fully booked, on time, fast, and comfortable.
    But their projects are funded by an economic stimulus programme rather than being market driven so the familiar concerns over high fares and low utilisation still apply there as well as some concerns about the quality and safety of the rapid construction and the usual (governance ed) issues. Perhaps they need some export success to boost their prestige.

    They do know how to build the railway – whether they can make it pay is the same question there as here.

    • Bazman
      Posted July 5, 2014 at 11:35 am | Permalink

      Like the Russian Tsar the party leaders pointed to the direction the railway must go and said you either help build it or become part of it. No silly planning or green wildlife investigations there. Thats how it should be done should it not in many of the authoritarian admiring minds on this site? A sort of Russia on sea.

      • Edward2
        Posted July 6, 2014 at 8:32 am | Permalink

        A very odd twist of logic Baz
        The opinions I see on here call for less authoritarian and more democratic methods of Government.
        From calls for less regulation, an EU referendum, to more free competitive markets with less dominance by huge companies etc

        It is you and the left in general who have the authoritarian streak. Calling for more EU powers, more laws to stop people doing things, more tax, more State inteference in people’s lives, as well a desire to clamp down on dissent by anyone who has different opinion to their own.

        • Bazman
          Posted July 6, 2014 at 2:07 pm | Permalink

          In some areas such as food the EU wants to deregulate to the same standards as the US allowing such things a chlorine washed chicken hormone treated meat and various GM foodstuffs to be allowed here. In some cases such as internet companies more regulation is required along with tax deals that undercut competitors as they do not get the same deal.
          What you really want is a Russian ‘free market’ and tax system. Which many believe is ‘sensible’ by being authoritarian in allowing companies to do what they like with no restrictions or tax burdens. Good for the few is the effect.

          • Edward2
            Posted July 6, 2014 at 7:43 pm | Permalink

            No I dont want a raw free market Russian style.
            I want a more efficient mixed economy with more power for small businesses to compete against huge PLC’s and a good low tax, smaller sized State that really looks after those who need help, instead of looking after itself.

  17. oldtimer
    Posted July 5, 2014 at 8:14 am | Permalink

    The examples of UK taxpayer subsidised energy schemes will not have escaped the attention of potential Chinese investors. The idea that they will actually risk their own money, when they know that UK taxpayer funded subsidies can and will be extracted as the price of a deal, is fanciful.

  18. Ex-expat Colin
    Posted July 5, 2014 at 8:18 am | Permalink

    I recall the BBC (or similar) looking into some China financed projects in Africa some time ago. You know…the business of we want your resources and here’s a few railway tracks and roads. Not much else though.

    I also noted that the Chinese company management did not take to kindly to questions. Quite a few nervous looks, all very stiff? In fact it rather verged on the dangerous side I thought.

    I then attempt to apply the thought of Chinese backers here. I keep thinking of all the problems that may arise when an attempt is made to execute the project. And then I think of tax payers waiting in the wings for the inevitable fall out from a contract that will definitely be wrong from the outset. Chinese won’t loose will they!

  19. Iain Moore
    Posted July 5, 2014 at 8:23 am | Permalink

    The Harrogate audience of Any Questions showed their displeasure at the HS2 project , applauding the suggestion that it would just be a pipeline to suck more wealth to London.

    Apart from those who reside in the Palace of Westminster is there anybody in favour of this project?

    • APL
      Posted July 5, 2014 at 8:41 am | Permalink

      Ian Moore: “Apart from those who reside in the Palace of Westminster is there anybody in favour of this project?”

      Never underestimate the power of graft and corruption.

      Neil Craig on his web site has an article comparing the costs of boring a tunnel in Scandinavia ( Norway, I think ) and a similar tunnel under the Forth, against the projected cost of the second Forth road bridge.

    • Lifelogic
      Posted July 5, 2014 at 10:16 am | Permalink

      No, only those few who travel on business at taxpayers or others’ expense one imagines. If we had consulted the public rather more we would have had no Bliar’s wars, no millennium dome, no EU, no ERM ……. we are led by Donkeys.

  20. Bert Young
    Posted July 5, 2014 at 8:33 am | Permalink

    HS2 is an economic and geographic huge mistake . Whether the Chinese are idiotic enough to want to finance it does not mean it should be encouraged in any way ; better that they should be directed to other more sensible and worthwhile projects . The Chinese ” trillions ” of surplus would be better directed into our education and research programmes – they , and other countries of the world , would be the beneficiaries .

  21. alan jutson,
    Posted July 5, 2014 at 8:37 am | Permalink

    NO
    Too many variables which have yet to be decided, including the route details, construction details (tunnels or no tunnels) rolling stock, fare prices, compensation, etc etc. means that no real cost can yet be attributed to this project.

    Thus how could anyone really be interested, other than in theory.

    Unless of course it was all to be underwritten by taxpayers, with guarantees given with regards to revenue. !!!!
    Ah the secret is out.

    No, No, No.

  22. Iain Moore
    Posted July 5, 2014 at 9:03 am | Permalink

    On a similar vein , I noted the Toshiba is going to partner building a nuclear reactor here. When you think the political classes appalling decisions couldn’t be any more damaging to our nation, you find you are wrong, there is no end to the cost of our political classes bad decisions.

    We owned Westinghouse, a leading nuclear power station engineering and design company. Gordon Brown flogged it off to Toshiba for the knock down price of $2.7 billion. They subsequently landed $60 billion orders from China.

    Months after Gordon Brown flogged off Westinghouse they suddenly woke up to the idea we might need to replace our nuclear power stations, so went cap in hand to the French Government owned EDF. The price EDF screwed out of us was the sale of the assets they wanted from British Energy. Even though EDF is majority French Government owned so not short of access to finance, they had the RBS (British tax payer owned) line up the loan to buy British assets from us. This RBS listed in their accounts as loans to British industry, to fulfil their undertaking to the British tax payer that they are supporting the British economy having bailed them out with our money. EDF then ensured a diamond encrusted solid gold contract to build a new nuclear power station here, a cost that many future generations will be paying with over priced energy.

    We now find that Toshiba, a company we furnished with nuclear technology for a knock down price is going to build a nuclear power station here, no doubt with generous guarantees for the British energy consumer.

    Are the British establishment on our side or are the fifth columnists, at times it is very difficult to tell.

  23. Lindsay McDougall
    Posted July 5, 2014 at 9:34 am | Permalink

    Spot on. I endorse this without any caveats at all.

  24. matthu
    Posted July 5, 2014 at 9:38 am | Permalink

    The government is highly proficient at concealing subsidies. For example, wh else would energy companies be forbidden from breaking down the cost of your energy supply on your bill?

    So it is entirely forseeable that the government is even now linking Chinese support for HS2 to Chinese support for building nuclear power stations across the UK. One will subsidise the other (guess which one will be subsidised) and the subsidy can be hidden on your power bill or the power bills of businesses across the UK.

    The reason they are going ahead with HS2 is purely political: there is no economic benefit. But building HS2 will probably support jobs (elsewhere in the EU) all subsidised by hidden charges on your power bill.

    Meanwhile there will be no money for the infrastructure we really do need.

  25. Mark
    Posted July 5, 2014 at 9:50 am | Permalink

    The back of an envelope will allow you to calculate that the Chinese have been guaranteed a return of over 10% in real terms on their investment in the Hinkley Point nuclear power station – complete with a government guarantee. (£16bn cost for 3.2 GW producing 25TWh/year at 90% at an inflation linked price of £92.50/MWh less ongoing fuel and maintenance of £15/MWh). I’m sure that has encouraged the Chinese to think the the British government is a very soft touch – and it’s so much better than investing in inflation linked gilts with a negative real return.

    Mortgaging the country at these extravagant returns is inexcusable – and that applies to HS2 equally. The project can be expected to destroy value, which would add to the sums doled out in hidden guarantees.

    Besides, it appears that HS2 now really is the Gravy Train, given the salaries they want to pay. It should be cancelled forthwith.

  26. Atlas
    Posted July 5, 2014 at 10:52 am | Permalink

    Agreed John, no taxpayer guarantees for this dubious project.

  27. BobE
    Posted July 5, 2014 at 11:23 am | Permalink

    I read that the chineese were only interested in building the stations. Then they lease them back to us. Bit like Browns hospitals wheeze.

  28. BobE
    Posted July 5, 2014 at 11:24 am | Permalink

    Double the width of the M40. Or lay a new London to Brum to Manch motorway. Road transport is far more efficient than trains.

  29. Bazman
    Posted July 5, 2014 at 11:29 am | Permalink

    Make up you own power distribution methods according to the ability to pay. It’s easy and fair applies already to transport, housing and food. What next subsidised clothing allowing Savile Row suits for the poor?
    The energy shortage can easily be solved by rolling out smart meters allowing each customer to choose how much they will pay for their energy or just switch off everything. Like their choice of foods are regulated with some willing to pay for fine wines and salmon and others for bread and cheap cheese. The market would decide and remove the need for expensive polluting power station to be built with some choosing self generation as a method including companies who might choose more economical DC systems. Massive cuts and deregulation of the energy markets would allow this. The same logic applied to helicopters and trains, as it already does to cars, toll roads being a further improvement, the transport problems would be solved.

    • Edward2
      Posted July 6, 2014 at 8:39 am | Permalink

      The obsession with renewables and the Climate Change Act effect and our need to rely on imported energy is already pricing many poorer people out of the energy market in Europe so in a sense you are right Baz.
      In USA gas prices are now approx half of Europe due to recent large scale investment in oil and gas exploration.

      • Bazman
        Posted July 8, 2014 at 6:44 am | Permalink

        Massive rise in the amount of sustainable energy too you will be aggrieved to hear.

  30. Denis Cooper
    Posted July 5, 2014 at 11:41 am | Permalink

    Off-topic, JR, I hope you will be writing about this anti-federalist government’s plan to give away more power to the EU by opting back into the EU Arrest Warrant and other measures, and the debate planned for this coming week:

    http://www.telegraph.co.uk/news/politics/10947132/Rightwing-Tory-MPs-to-defy-David-Cameron-over-EU-power-grab.html

    as well as this anti-federalist government’s plan to allow police forces across the EU access to all the DNA data assiduously harvested by the British police:

    http://www.thetimes.co.uk/tto/news/politics/article4139569.ece

  31. Aatif Ahmad
    Posted July 5, 2014 at 11:59 am | Permalink

    The Chinese are essential for funding the UK’s imbalances, including the soaring current account deficit of 4.4% of GDP, at a time when the UK has nothing to sell except accountancy and brokerage services, with North Sea production expected to collapse, China and other BRICs capturing export markets such as arms, heavy machinery and even aerospace equipment due to lower costs, and Britain’s shake likely to remain trapped for another decade once Labour takes over.

  32. bluedog
    Posted July 5, 2014 at 12:09 pm | Permalink

    Excellent comment, Dr JR. One fears that DC has been totally sucked in by the Chinese at precisely the same moment that China’s neighbours are starting to see a very different side to the Middle Kingdom at home.

    But that apart, your observations about public-private business partnerships are astute and apposite. Democratically elected governments are driven by the electoral cycle. Thus a private business in any form of commercial partnership with government knows in advance exactly at what time the government needs a favourable announcement. Any reasonably competent business can deliver on cue to the benefit of its shareholders, at a price.

    If the British government strikes a deal with the Chinese Communist Party, the dynamic will be slightly different but essentially the same – the Chinese will understand the cyclical weakness of their partner and ruthlessly exploit it. The difference lies in the perpetual nature of the CCP and its own political imperatives. As the British government needs Chinese business more than the Chinese government needs British business, any relationship is inherently unbalanced. Does Cameron understand that?

    What was that about ‘unequal treaties’?

  33. ian
    Posted July 5, 2014 at 12:24 pm | Permalink

    If chinese come they bring their own workers with them, They will buy houses and flats, this is how they will get afoot hold in the country. You see someone has to take over the property ladder or it will end and crash. The chinese can print the money to do the job, That what the meeting have been about wet % mad trying to keep the system afloat . If the chinese do not get there own way they will not come. He thinks it better than taking private pensions and savings to bail themselves out but for how long because they will be the last buys. Take GSK that”s how the chinese a ply pressure by starting with your biggest company. The government is playing with fire and out of it depth.

  34. Gary
    Posted July 5, 2014 at 1:30 pm | Permalink

    ” One of the main reasons I voted
    against HS2 was the business case.
    From the figures before me I could not
    see how they will be able to sell enough
    tickets at sensible fares to make any
    return on this large investment. I did
    not wish to see UK taxpayers stranded
    with large losses and half empty trains.”

    There is no business case. People using their own money and assuming the consequences of the risk would and do walk away from such a bad business case. Govt, on the other hand, has no such qualms. Govt must be abolished. Govt is an abomination. There will literally be suffering as a result of this boondoggle.

  35. Terry
    Posted July 5, 2014 at 3:07 pm | Permalink

    Why would any person want to travel to Manchester on HS2?

    I’ve just checked the RETURN Airfare from Any London Airport to Manchester = £96.
    Train Fare Euston to Man. Piccadilly £137 ONE WAY.

    So how would HS2 compete with that? So why do we need it? Why not develop a high speed line from Airports to City Centers instead? WE know it make sense.

    • stred
      Posted July 6, 2014 at 1:44 pm | Permalink

      Just been visiting Stockholm. The airport shuttle train runs up to 120mph over 30 miles and is almost full. Journey time 20 mins. Ticket price is £14. It has a track running alongside commuter trains. No advance tickets, just a ticket office and machines. All the tubes stations run on time and half the price of London tube,s all to the same station. It works, unsubsidised, and it would be surprising if they needed years of public enquiries and consultants costing millions or mega salaries to build it.

  36. Martin
    Posted July 5, 2014 at 4:51 pm | Permalink

    Will you be the first Sino-sceptic?

  37. Iain Gill
    Posted July 5, 2014 at 4:53 pm | Permalink

    HS2 as currently envisaged is a grand waste.

    Allowing China (and India) to own ever bigger chunks of this country is a mistake.

    Where oh where is the common sense?

  38. REPay
    Posted July 5, 2014 at 6:15 pm | Permalink

    Re the motivation for Chinese investment, as I have repeatedly experienced, the outlook of the Chinese is very strategic and long term. There is is a great of infrastructure investment world wide being undertaken by Chinese businesses, some with state involvement. Immediate cash return is not the only driver but becoming a stakeholder in the country where the money has been made.

  39. Robert Taggart
    Posted July 5, 2014 at 7:21 pm | Permalink

    NO2 HS2+3 ! – please take it away !

  40. Bob
    Posted July 5, 2014 at 7:40 pm | Permalink

    If government can’t make a compelling case for HS2 then the idea should be mothballed before we waste one more brass farthing on it.

  41. Matt
    Posted July 5, 2014 at 8:02 pm | Permalink

    And yet the business case has been presented very coherently and thoroughly by “skilled” economists. As someone who has a great deal of faith in the science of economics I’m not sure why you would disagree with this.

  42. cosmic
    Posted July 6, 2014 at 12:24 am | Permalink

    The Chinese do things for their reasons, not for ours. They are not fools.

    HS2 appears to make no sense from a UK perspective, not economically or politically, and you have made these points very well.

    For some reason your leader soldiers on with this piece of nonsense, shedding local support in droves, but making no convincing case as to why it’s worth it, economically or politically.

    You must have doubts about this creep which has somehow come to be heading the outfit.

  43. Posted July 6, 2014 at 10:39 pm | Permalink

    There are many other infrastructure projects which could make a profit where private capital can be attracted in and where the private sector could be made to take all the risk.

    The risk for a private investor is that they will lose all their money if the commercial viability of a project is not what investors anticipated.

    The risk for the public sector isn’t quite the same. The allocation of too many resources to a project may take real resources away from more desirable projects. But if there aren’t any more desirable projects and those resources are lying idle then the risk is zero, or even less!

    It makes no sense whatsoever to not use, in some way, all the resources which are available to us.

  44. nigel
    Posted July 18, 2014 at 7:42 am | Permalink

    My daughter is travelling to Manchester on business this morning. I asked her to check how full the train was. I have just received an email from her: “about 10 people in my carriage”.

    Need I say more?

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  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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