The government reportedly plans to reverse some of the cuts to the HS2 railway from the previous government, and the railway will run from Euston to Crewe.
Citing government sources, LBC reported this morning that the “Prime Minister held private discussions on the matter at last month’s Labour Party conference and that the government had been planning to make a formal announcement in the new year.”
Not making the announcement during the October budget, which is due in a couple of weeks, would have raised concerns about the government’s intent, but making the announcement at the same time as the budget is expected to raise taxes may have been politically difficult.
However, with so much investment already sunk into building the Old Oak Common to Birmingham section, it’s actually making the unbuilt sections look far more viable. Each section is individually only a modest additional cost, but they add cumulatively significantly greater value to the whole project.
The London Euston section is already pretty much assured, even if the specifics of how and when it will be built have yet to be announced.
The extension north of Birmingham to Crewe is known as Phase 2a in the HS2 planning, and the legal powers already exist for it to be built.
The report suggests though that this part of the line would be built by a private sector consortium invited to complete the railway. The details about how and why a private group would build the railway are not yet known.
It could be based on a Build-Operate-Transfer model, where a company builds and runs the infrastructure for a set number of years in exchange for revenue from access charges, or a concession model similar to HS1, where a company builds the line on behalf of the government, which retains ownership — and then they sell a concession to run the line for a number of years.
For example, the government sold a 30-year concession to operate the HS1 line for £2.1 billion in 2010.
A recent report from the rail lobby, High Speed Rail Group (HSRG), suggested that a similar model used for HS2 could earn the government as much as £20 billion — but only if the line ran from Euston to Crewe. A cutback line to Birmingham could be worth as little as £5 billion to the concession operator.
A potential £15 billion of revenue from a likely cost of £12 billion for the railway extensions may well have been the tipping point for the government to give the project the go-ahead.
After all it would be hard to turn down £3 billion of profit while also building a better railway.
That would leave what is known as Phase 2b – from Crewe to Manchester to be dealt with later, if at all, and the bill to enable it got half way through Parliament before the previous government canceled it.