Source: Financial Times
Boris Johnson has been urged by Conservative MPs representing the ‘red wall’ of former Labour heartland seats not to cut back major rail infrastructure projects as the UK prime minister comes under pressure from chancellor Rishi Sunak to rein in ambitious plans for public spending.
The National Infrastructure Commission, which advises the government, recently said plans to extend the High Speed 2 rail project to Leeds should be scrapped to save £32bn from its expected budget of over £100bn. Earlier this week the FT revealed that costs on HS2 have risen by £1.7bn in the past year — partly because of the pandemic — although this was covered by the project’s contingency budget.
Meanwhile the Treasury has not yet given the sign-off to the Northern Powerhouse rail project, which is supposed to link the north’s big cities from Liverpool, Hull and Newcastle via Manchester, Sheffield and Leeds, and which could cost a further £39bn.
The uncertainty over the multibillion pound transport schemes underline the tensions between Johnson and Sunak in recent weeks over a number of spending projects, with the Treasury eager to dampen Downing Street’s appetite for spending. Number 10 has clashed with other Whitehall ministries over social care reform and a new “royal yacht”.
Johnson is seen by his party as the most pro-spending Conservative leader since Harold Macmillan’s time in Downing Street from 1957 to 1963. Since Margaret Thatcher took over the party in 1975, it has shunned stimulating demand through spending, opting instead for tax cuts.
One senior Treasury insider said that Sunak’s view was “there are choices that have to be made” and it was important to stabilise the public finances as the UK emerged from the worst of the coronavirus pandemic. The chancellor announced two tax changes in his March budget — freezes in the personal income tax thresholdand a rise in corporation tax.
“What he did at the Budget was to put us back on to a more stable trajectory, get debt falling and get our public finances on to a stable footing. He made it very clear that the two tax changes are things he wanted to do to achieve that. But he’s not necessarily keen on raising any more taxes on people, particularly personal taxation,” the official said.
Their hearts are with Johnson but their heads are with Sunak.” Paul Goodman, editor Conservative Home, on the current crop of Tory MPs
HS2 is designed to run from London to Manchester via Birmingham and Crewe. But the “eastern leg of HS2 2b” — extending from the West Midlands to Leeds — has been criticised by many Tory MPs in its traditional southern strongholds, who believe it should be scrapped.
Tories elected for the first time in the 2019 election have privately warned that it would be a mistake to cancel it. “Our first time voters are watching and waiting for the government to prove they’re delivering on the promises we made them in 2019,” one newly elected MP said.
Other Tories insist the Northern Powerhouse Rail, sometimes referred to as HS3, is even more important. “It’s absolutely crucial that ‘Northern Powerhouse Rail’ is built. I wasn’t a big fan of HS2 but this is exactly what we have to build to deliver on the trust that was put on us,” another MP said.
Following a report carried by the Huffington Post on Tuesday that said the Treasury and Downing Street were at odds over when to publish the long-awaited integrated rail plan (IRP), which will set out the details of Britain’s future rail system including the new Leeds-Manchester route, a Downing Street spokesman said the government was “still committed” to the new rail line.
“We are getting on top of our priorities and investing in northern transport,” he said. “The integrated rail plan will set out how major rail projects including HS2 phase 2b and Northern Powerhouse Rail will work together to deliver reliable rail services that passengers deserve.”
One Treasury figure said that Downing Street, the Treasury and the Department for Transport all broadly accepted the need to push ahead with the project — but the details were still up in the air.
“There needs to be a package of investment and needs to be agreement on what that looks like. Work is ongoing,” the person said. “But this is more an issue of bandwidth than any serious differences, it has been a while since the relevant cabinet ministers all met.”
Any disagreements on funding the new railway line are not about scale but are instead likely to be about the timeline and how soon spades can go in the ground.
Many newly elected Tory MPs favour more spending, to make up for decades of under investment in their areas. One MP representing a northern constituency said that most of the newly elected Tories backed “sensible measures that allow us to deliver on our manifesto commitments”.
“Very few people are going around saying we have to do everything, colleagues know that we need to have clear blue water with Labour. We’re in a dangerous position if it looks like we’re going to outspend them,” they said.
Paul Goodman, editor of the ConservativeHome website and a former Tory MP, said the current parliamentary party has a similar tension to the one at the top of government. “Their hearts are with Johnson but their heads are with Sunak,” he said.
“Most Tories are in parliament because they are Conservatives and that’s true of the red wall intake too. They believe in a smaller state and lower taxes. But these beliefs run up against their constituencies demanding more and more spending.”