The HS2 high-speed rail line will provide a £15 billion a year boost to the UK economy, the Government will claim today as ministers attempted to bolster support for the scheme.
Transport Secretary Patrick McLoughlin will claim new analysis shows that the proposed link between London and cities in the Midlands and northern England will drive growth in the regions.
He will also claim the network’s main benefit will be the increased capacity on offer, rather than the speed of services along the route, and insist that the project will be completed within its £42.6 billion budget.
MPs on the Commons spending watchdog issued a scathing report on the scheme this week, which said the apparent benefits were dwindling as the costs spiralled.
Ministers’ case for the massive project was based on “fragile numbers, out-of-date data and assumptions which do not reflect real life” with no evidence that it would aid regional economies rather than sucking even more activity into London, said the Public Accounts Committee report.
But Mr McLoughlin will point to a new analysis by KPMG commissioned by HS2 Ltd which shows that the boost to Birmingham’s economy will be equivalent to 2.1% to 4.2% of the city region’s GDP, there will be a 0.8% to 1.7% benefit to Manchester, 1.6% for Leeds and 0.5% for Greater London.
He will say: “It addresses that vital question: will HS2 create jobs and growth in the North and Midlands, where they are needed most? The answer is absolutely clear. Yes.
“High Speed Two will make Liverpool stronger. Manchester stronger. Leeds stronger. Britain stronger. A £15 billion annual boost to the economy.
“With the North and Midlands gaining at least double the benefit of the south.”
The Exchequer could benefit from £5 billion a year in extra tax receipts as a result of the boost to the economy, KPMG said.
The Transport Secretary’s speech forms part of a campaign announced by David Cameron to make the case for HS2 in the face of what he called an “unholy alliance” of sceptics.
Recent critics have included Labour’s Alistair Darling who first approved it as chancellor, and the Institute of Directors which dismissed it as “a grand folly”.
It is also fiercely opposed by some Tory MPs - many representing communities which will be disrupted by construction work and train noise along the route.
Mr McLoughlin will say that without the new line, the UK’s transport network will become “clogged”.
He will say: “The reason we need HS2 isn’t for its speed, though speed is obviously a benefit. HS2 will allow you to get from Birmingham to Leeds in 57 minutes and from Manchester to London in 68.
“The benefits of faster journeys are easy to explain. But speed is not the main reason for building the new railway.
“The main reason we need HS2 is as a heart bypass for the clogged arteries of our transport system.”
Addressing the cost of the scheme Mr McLoughlin will state that the £42.6 billion budget includes a £14.4 billion reserve “which we are determined to bear down on”, with work being done by project managers at Oxford University’s Said Business School to examine the scope for reducing the contingency fund.
Richard Threlfall, KPMG’s head for infrastructure, building and construction said the firm’s analysis “shows beyond reasonable doubt that HS2 brings net benefits to the country of many times the scheme’s cost”.
He said: “It shows the UK will be £15 billion a year better off with HS2, recovering the cost of the scheme within just a few years.
“Our analysis also shows that HS2 will significantly help counter the corrosive effects on our country of the widening north-south divide. There has been a long-running debate about ‘who wins’ from HS2, the north or the south? The answer is both.”
The British Chambers of Commerce have written an open letter to the Prime Minister urging him not to abandon the scheme.
The letter said: “Imagine our country today without the M25, the Jubilee Line, or the Channel Tunnel - all investments that were fiercely opposed and contested before their construction. HS2 is no different.”