Labour faces a £500m decision on what to do with HS2 land which was not sold despite promises by Rishi Sunak, as Sir Keir Starmer braces for new calls to resurrect the cancelled Birmingham to Manchester line.
The £50bn rail line is likely to cause the new Labour government a headache as supporters push for the party to support the project which was initially launched by former Prime Minister Gordon Brown in 2009.
Within Whitehall, civil servants are currently thought to be calculating the value for money of Mr Sunak’s HS2 plan in comparison to the previous HS2 plan to Manchester, with the result expected to favour the longer route.
The Department for Transport had already acknowledged to the Public Accounts Committee that Mr Sunak’s HS2 plan, and a future business case decision could put further pressure on Labour to revive the longer route.
The appointment of Lord Peter Hendy as rail minister has been received positively by many supporters of the high speed rail line, given his previous work around the project and Euston’s redevelopment, where he pushed for a more ambitious project. One industry source told i that Lord Hendy was “one of the most respected figures in the UK rail industry”, and a “definite supporter of HS2 to Manchester”.
Meanwhile, Labour’s elected mayors across the North and Midlands are pushing to secure their own rail line via private finance, and are already campaigning in favour of a plan to support a high speed line to Manchester.
However, budget constraints, a lack of key appointees and urgent deadlines elsewhere in Government are expected to cause consternation among Labour’s decision makers.
Why has the surplus HS2 land not been sold?
As part of the cancellation of the Birmingham to Manchester leg, the previous Government had announced land that had been bought and was no longer needed would be sold, with the process slated to begin within weeks of Mr Sunak’s initial announcement.
He and the DfT had planned to immediately begin land sales on the project in order to prevent any future Labour government from resurrecting the policy.
Pro-HS2 campaigners described the decision to sell the land as “spiteful”. Liverpool Mayor and HS2 supporter Steve Rotherham said the move had “killed [HS2] stone dead”.
i understands that the land sales never actually began. HS2 sceptics in the DfT had attempted to begin the sales process earlier this year, but had yet to begin when the election was called.
The initial phase of land sales would have seen small amounts of agricultural land sold back to farmers. But it has not happened and it is unclear if the sales will begin under Labour.
It means that one obstacle to reviving HS2 does not exist, with the £564m of land that was purchased for phase 2 still owned by the Government.
Outside of the land issue, questions over the state of the budget and ability to deliver the necessary changes to Euston station remain, and will prove a challenge regardless of whether Labour heed calls to reinstate phase 2 of the rail network.
Will northern mayors and MPs push for the full route to Manchester?
With an agenda for growth, a focus on reducing carbon emissions and plans to improve national infrastructure, Starmer’s Government is likely to come under pressure to revive the leg to Manchester.
Regional mayors Andy Burnham and Steve Rotherham have advocated for alternatives to the HS2 route put forward by former HS2 chair Dave Higgins, which included running the line to Manchester but with lower speeds, therefore reducing costs.
Mr Burnham and Mr Rotherham’s Northern Powerhouse Rail project was originally reliant upon HS2 running to Manchester, and could lead the mayors to become outspoken if the line ends at Birmingham as under Sunak’s plan.
Backbench MPs could also push to resurrect HS2 in some form, with many having been vocally supportive of the policy before Labour decided not to reinstate the route to Manchester.
There may even be trouble from some of Labour’s newly appointed ministers on the issue. Lord Hendy, has been vocally supportive of HS2 to Manchester, and was closely involved in the project before being appointed.
Lord Hendy chaired the Euston partnership board, which helped manage the HS2 redevelopment, and had pushed for a large-scale redevelopment of Euston which was ultimately rejected by the previous Conservative government. He has also chaired Network Rail.
Euston, do we have a problem?
In terms of the existing HS2 project, the redevelopment of Euston is expected to cause problems.
Plans to build 2,500 new homes, redevelop the new tube station and add six platforms to the station to serve high speed rail trains is already underway, but were paused following Mr Sunak’s announcement and is troubled by wider cost issues.
A more ambitious plan, including the redevelopment of Euston station has also been mooted, but would likely run into cost issues.
One industry source told i: “Euston will be the tricky part. No one quote knows what’s happening, it’s very complicated and very expensive”
A development corporation to manage much of the redevelopment is yet to be appointed, with another source telling i they had “no expectation of speed” addressing the issues. Design specifications are still being debated, with renovations of Euston’s underground and the number of platforms under dispute.
In positive news for Starmer, a local Labour council and a Labour mayor may be easier for him to deal with than his predecessor during negotiations.
Another problem is around Euston’s housing plans. The company responsible for Euston’s housing redevelopment is Lendlease, a major Australian developer which also operates in the UK. However, Lendlease announced in May that it would be exiting the UK by the end of 2025, in order to focus on its Australian business.
The DfT told i that Lendlease was still committed to the Euston project, however the time scale for its commitment and whether the project would be taken on by its new owner or the existing Australian arm is unclear, with the project set to complete in 2040.
When approached by i, a Lendlease spokesperson said that the redevelopment of Euston was a “once in a generation” opportunity, but did not say whether the company would be committed post-2025.
What about the existing capacity issues?
One issue that is likely to remain is the capacity issues on the West Coast Main Line. According to documents seen by i, much of the route between London and Birmingham is over capacity currently, as well as chunks between Birmingham and Manchester.
If HS2 was only built to Birmingham, it is expected that capacity issues would worsen in the Midlands, and ticket fares would likely rise in order to reduce the amount of people trying to board the train.
Former rail minister Norman Baker told i in June that the documents proved a “desperate need” to reconsider the Birmingham to Manchester cancellation.
Crucially, can Labour’s tight budget manage the costs?
Costs have been repeatedly contentious throughout HS2 with overspends being a repeated topic of contention between the Government and management body.
Labour’s tight fiscal programme will leave little room for overspending and additional costs, with the Treasury expected to rule a tight ship over departments and quangos.
However, a new business case, estimating the benefits and costs of Mr Sunak’s shortened HS2 plans is thought to currently be underway within the DfT.
If continued and published, industry insiders expect the plan to vindicate the original HS2 route as providing better value for money than Mr Sunak’s alternative, which could add pressure on the new Labour government.
However, money to pursue the existing project is in short supply, never mind a more ambitious option, according to Whitehall insiders.
Some working on the project hope that Labour’s new National Wealth Fund could potentially support HS2, but would likely be dependent on the progress of other priorities.
HS2 Limited and the Department for Transport were approached for comment.