Andy, Bring Back HS2 — and Don't PFI It

Rishi Sunak chose the 2023 Conservative Party conference — held, of all places, in Manchester — to stand on a stage in the city and tell it that HS2 would never arrive. The costs had doubled, he said; the facts had changed; a prudent government cuts its losses. Yet £24.7bn had already been spent, and the £36bn he claimed to be saving reappeared within days as Network North — £3.3bn for potholes, alongside a list of schemes that were, in several cases, already built or already funded. That conference was thick with pork-barrel giveaways, money promised to marginal seats. Cancelling the North's railway to help pay for them was the most brazen stroke of the lot. It was an act of self-interest, dressed as restraint.^1,2,3,4,5,6

Everything that follows turns on a single word: afford. In British politics, “we can't afford it” is treated as a reading off a dial — a fact about the world rather than a decision about it. It is a decision: about what matters enough to build, and who the building is for. The case for reversing HS2 is largely the work of stripping that decision of its disguise as arithmetic.

Months before the axe fell, Sunak had been filmed in the garden of a private members' club in Tunbridge Wells — a wealthy southern town, a friendly Tory crowd — describing how he had begun rewriting the funding formulas that decide where public money lands, steering it away from what he called “deprived urban areas” and towards places like the one he was standing in.

Britain issues its own currency. A government that creates the pound cannot run out of pounds the way a household runs out of wages, so “we can't afford it” — said of a railway the country has the workers and the materials to build — describes a choice, not a shortage. What a currency-issuing state can genuinely run short of is real resources: steel, tunnelling crews, engineering hours. That is the only affordability question worth asking, and we set out the full argument in a companion piece, Can Britain Run Out of Money?⁷

The man who now holds the pen

The man who fought the cancellation as loudly as anyone now runs the country. As mayor of Greater Manchester, Andy Burnham called it a decision of epic proportions, warning it would leave the North on Victorian rail for the rest of the century and that a government elected to level up was treating northerners as second-class citizens. He is Prime Minister now — and he needs the three things every new premiership hunts for at once: a clear signal that something has changed, the first stone of a legacy, and a policy that visibly improves people's lives. Bringing HS2 back, and committing to it without hedging, is all three. It is the kind of masterstroke a leader gets one chance to play.^6,8,9

The two tests for infrastructure

Strip the politics away and any project of this size faces two honest questions. Does it make the country richer in the aggregate? And can we afford it? The first asks whether joining the great northern cities raises national output — not whether a single line turns an operating profit. The second sounds like a question about money, but for a currency issuer it is really a question about real resources: whether the steel, the crews and the capacity exist. Run both.

The first answer is clear. Connect Manchester, Leeds and Liverpool with a fast line, tie them into the capital, and the cities begin to trade labour, ideas and custom more densely. Economists call it agglomeration, and it is about the most ordinary finding in the discipline. The North has been starved of exactly this. Transport spending runs at £1,182 a head in London and £486 in the North — £455 in the Midlands, and £355 in the East Midlands, the lowest of any region in the country. Had the North been funded like London over the last decade and a half, it would have had £140bn more.^10,11

Crossrail defied our expectations

And the return is not theoretical — we have watched it happen. Crossrail ran badly over budget: £18.8bn against a £14.8bn plan, three and a half years late, delivery the National Audit Office judged had become “unachievable.” The benefits landed anyway, and most of them landed off the balance sheet, in the value of the land the line made reachable. Office rents near the new stations rose before a single train ran — around 3% within 500m of a station, up to 8% in the ring just beyond it. House prices near the new outer stations jumped harder still: 47% around Abbey Wood, 46% around Forest Gate and West Drayton.¹²

And we no longer have to guess how a project like this ages. The Elizabeth line covered its direct running costs from its very first full year, ran a net contribution of £104m in 2024/25, and moved into a full operating surplus — after financing and renewals — by 2025/26, about three years after opening. It carried 231 million journeys in 2024/25, comfortably above both budget and its pre-opening passenger forecast, and is now the single busiest railway in Britain. The line that was three and a half years late and billions over budget is, a few years on, paying its way and carrying more people than anyone predicted.^15,16

This is the pattern every rail scheme repeats: the railway creates enormous value, and unless the state deliberately captures it, that value flows to whoever already owns the land. London captured some of it — a business-rate supplement and a dedicated levy helped fund the line from the value it created. For HS2 the question was never whether the return exists — only who collects it.^13,14

We would still benefit — so why not build it?

HS2 was cancelled with a number in hand — its benefit-cost ratio, the return per pound of public money. It was first appraised at £2.40 of benefit for every pound, then revised down to £1.80 as costs rose. Set aside whether that revision did the cancelling; even at £1.80 the project returns eighty pence of net benefit on every pound spent, which is another way of saying it clearly pays. And the government's own appraisal framework concedes that this conventional ratio “misses a very substantial proportion of the benefits provided by these projects, particularly on public transport schemes” — the agglomeration, the reliability, the wider labour-market effects we have just watched Crossrail deliver in the real world. Count those, as the Eddington study argued we should, and the case stops being marginal. It becomes a no-brainer.^17,18

Public infrastructure is not a business

In the UK we have suffered from this category error for four decades of privatisation: we judge a railway the way we judge a company, by whether the fares clear the running costs. It is a limiting habit of mind, because the return from infrastructure like this arrives in the aggregate, and often in ways no ticket office ever sees. On the World Bank's own passenger surveys, a fifth of China's high-speed journeys are entirely new — trips that simply did not happen before — and roughly a third are pulled off buses, cars and planes. New activity, less congestion, lower emissions: none of it shows up in the farebox, all of it is real.¹⁹

The obvious objection is: how do you run a railway at a permanent loss without going bankrupt? The answer is in how it is financed — and it is the whole point. About half of China's high-speed capital is equity, an ownership stake put in by central and provincial governments, not a loan: it has no maturity and no repayment schedule, and the state, as owner, simply never demands a dividend, because its dividend is the wider economy. The other half is long-term debt, serviced not by passenger fares but by a Railway Construction Fund — a surcharge on rail freight, which is vast, and which quietly cross-subsidises the passenger network. No private balance sheet could carry that. A state that issues its own currency can. And to be clear, HS2 is not even China's hard case: it is a single, busy, clearly-defined route between major cities — far closer to the profitable trunk lines like Beijing–Shanghai than to the loss-making branches built ahead of demand. The point of China's example is not that HS2 would lose money; it is to break the reflex of judging national infrastructure by its farebox at all. The structure is the strategy — and it is the same choice Britain faces on how to build.^20,21

The country can afford it, once the question is asked about real resources rather than money. What remains is how it gets built — because the instrument decides who keeps the return. And a state taking an equity position to get something built is no exotic innovation: Britain did it through the wartime and postwar nationalisations, again when it rescued the banks in 2008, and it is doing it right now — taking an equity stake to finish the Midland Metropolitan Hospital. The question was never whether the state can invest. It is whether it invests as an owner, or as a tenant.²²

No more PFIs

Which is why the instrument matters, and why Britain has a favourite way of getting it wrong. The Private Finance Initiative — launched under John Major in 1992 and made the signature tool of New Labour, which used it to build a generation of hospitals and schools — was sold as a way to build now and pay later. What it actually did was hand the ownership, and the profit, of a finished public asset to a private consortium. A private company owns the hospital, the school, the road, and the public body rents it back over twenty-five or thirty years at a mark-up that, across the life of the deal, routinely runs to multiples of the build cost. The Department of Health alone racked up some £13bn of PFI capital — more than any other department — and is still paying for it. When Carillion collapsed in 2018 it left PFI contracts half-finished across the country; the Treasury quietly abolished the model for new schools that same year, having concluded it was poor value. The fashionable successor — the National Wealth Fund — mostly exists to de-risk private capital, which is PFI wearing a cleaner suit. Build HS2 the way Crossrail was built instead: publicly owned, financed directly, and paid back in part by the value it creates. Do not rent the country its own railway.^23,24

The real-resource limits are worth conceding plainly. Build too much, too fast, beyond what the construction sector can absorb, and the result is inflation rather than growth; capacity, deliverability and the supply of skilled crews are the genuine tests a serious plan must pass. Those were always the questions. “We can't afford it” never was.

The public wants this style of politics

The case so far has been economic. There is a third argument, and Labour's own strategists are already pressing it in private. A poll of nineteen thousand voters by Persuasion UK finds the party heading for 19 per cent of the vote and 95 seats on its current course — and 34 per cent, the share that won it power in 2024, if it adopts a package of cost-of-living measures: cheaper fares, cheaper food, water returned to public hands. HS2 is not one of the policies they tested, but it is the same species — visible public investment, a deliberate break from a decade of fiscal caution. The objection will be that such a programme is unaffordable, another Truss gamble on borrowed money. That objection is the one this argument has already answered: for a currency issuer the limit is real resources, not the money to pay for them. The economics say build it. The structure says own it. And the public, it turns out, says the same.^25,26,27

Andy, bring back HS2 — publicly owned, financed directly, not rented from a consortium. Join the great cities of the North, build the East–West line the project was always meant to underpin, and end the Victorian-railway century Burnham himself warned of. Both tests pass. The northern leg failed neither of them; it failed only the dishonest version of the second — the one that asks about money instead of resources. The constraint was never what the country could afford. It was who the country's money is permitted to serve, and whether anyone in power still means it.

Notes

1. HS2: costs and controversies — instituteforgovernment.org.uk ↗
2. HS2: costs and controversies — instituteforgovernment.org.uk ↗
3. What is Network North? — placenorthwest.co.uk ↗
4. What is Network North? — placenorthwest.co.uk ↗
5. What is Network North? — placenorthwest.co.uk ↗
6. HS2: 'Government does not want to level up the North' - Manchester Mayor — YouTube ↗
7. HM Treasury and Bank of England announce temporary extension of the Ways and Means facility — gov.uk ↗
8. HS2: 'Government does not want to level up the North' - Manchester Mayor — YouTube ↗
9. HS2: 'Government does not want to level up the North' - Manchester Mayor — YouTube ↗
10. If the North had seen the same transport investment as London under the previous government, it would have received £140bn more — ippr.org ↗
11. If the North had seen the same transport investment as London under the previous government, it would have received £140bn more — ippr.org ↗
12. Transport for London — Crossrail Property Impact & Regeneration Study
13. Transport for London — Crossrail Property Impact & Regeneration Study
14. Transport for London — Crossrail Property Impact & Regeneration Study
15. TfL Quarterly Performance Report Q4 2024/25 (Elizabeth line)
16. TfL Quarterly Performance Report Q4 2024/25 (Elizabeth line)
17. HS2: costs and controversies — instituteforgovernment.org.uk ↗
18. eddington
19. China's High-Speed Rail Development
20. China's High-Speed Rail Development
21. China's High-Speed Rail Development
22. Bandit Capitalism
23. source
24. National Audit Office — PFI and PF2
25. The problem with Burnham’s ‘cost of living populism’ — spectator.com.au ↗
26. The problem with Burnham’s ‘cost of living populism’ — spectator.com.au ↗
27. The problem with Burnham’s ‘cost of living populism’ — spectator.com.au ↗

Sources

Books

• National Audit Office — PFI and PF2
• Bandit Capitalism
• China's High-Speed Rail Development
• TfL Quarterly Performance Report Q4 2024/25 (Elizabeth line)
• Transport for London — Crossrail Property Impact & Regeneration Study
• eddington

Reporting & data

• HM Treasury and Bank of England announce temporary extension of the Ways and Means facility — gov.uk
• HS2: costs and controversies — instituteforgovernment.org.uk
• If the North had seen the same transport investment as London under the previous government, it would have received £140bn more — ippr.org
• What is Network North? — placenorthwest.co.uk
• The problem with Burnham’s ‘cost of living populism’ — spectator.com.au
• HS2: 'Government does not want to level up the North' - Manchester Mayor — YouTube