HS2 and Barnett - the story so far

Since High-Speed 2 (HS2), the UK’s ambitious rail project, was announced back in 2009, the UK Government has managed to a) extend the budget by over £40 million, b) axe the eastern leg of its service to Leeds, and perhaps most impressively, c) alienate the entire nation of Wales. With the project estimated to now cost over £100 billion, many are calling for Wales to receive £5 billion from the UK Government. This blog will try to explain the intricacies of the controversy, where the £5 billion figure comes from, and how a Labour Government in Westminster could change the situation for Wales.

To understand the complexities of this classification, it is important to return to the initial devolution acts of 1998, which ensured most transport powers remained with Westminster. The passing of the Railways Act 2005 granted significant rail powers to the Welsh Government by making them ‘co-signatories’ of the Wales and Border franchise, and joint owners of the network, however, did not devolve powers on investment and infrastructure. Critics in the Senedd grilled the Welsh Government at the time, with one member branding it ‘the worst decision in the history of devolution’. It has led the UK Government to argue:

“because national rail infrastructure in England and Wales is reserved to the UK Government …. HM Treasury has assessed HS2 as a ‘national project’ which benefits both countries.”

 

Despite this argument being promoted by Welsh Secretary David TC Davies and Levelling Up Secretary Michael Gove, there remains a degree of scepticism over the indirect benefits of the project, as no track is set to be laid in Wales. Instead, it is argued that North Wales will benefit from greater connectivity to London and the midlands (if they can make it to the North of England, that is).

Furthermore, the ‘benefits’ from an England-run rail network remain difficult territory for Wales. A recent report by Cardiff University found that Wales received the lowest funding for rail enhancements out of the four UK nations in the past decade; potentially worth £514 million of investment that would have been received under a fully-devolved system.

Currently, all Senedd groups have reached a consensus, backing a Plaid Cymru motion calling for HS2’s reclassification as an England-only project (and for Wales to receive £5 billion as a result). The Welsh Conservatives have argued this funding should go to Network Rail, not the Welsh Government, yet it remains one of the only times the party is at direct odds with their Westminster counterparts.  

The often-quoted figure of £5 billion would come from Barnett Consequentials, a policy that ensures 5% of England-only project funds are provided to Scotland, Northern Ireland, and Wales, due to the estimated spend of the project now at over £100 billion. Wales is the only nation not to receive funding from this project due to its classification as a joint project. Of course, this figure is spread over the estimated 40-year completion of the project, rather than an immediate one-off payment. For now, Prime Minister Rishi Sunak has ruled out changing the funding rules of HS2, again citing the benefits it will bring mid and north Wales indirectly.

This has been a (mostly stagnant) debate for the past few years, with no indication that the UK will change tact. Come this time next year, however, could a Labour Government in Westminster change the situation? (probably not, is the short answer).

At the Welsh Labour conference in Llandudno in March, Keir Starmer refused to commit to any rule changes that would see HS2 reclassified, at least until a general election campaign is officially launched. It seems unlikely that any future UK Government (Labour or Conservative) are likely to provide the £5 billion requested with no strings attached. A potential solution is the full devolution of rail powers to Wales, as already seen with the Valleys Lines. That way, Wales will be on its own when it comes to rail maintenance and enhancements, but also in a position to deny any excuses that HS2 is a ‘national’ project. Research from Cardiff University also highlights the benefits of aligning devolved bus and active travel with rail in support of an integrated transport policy (where different forms of transport work seamlessly with each other).

Again, it remains unlikely that Westminster will provide the funding up-front. Perhaps more important is the future of rail policy, and where the power lies. That remains in Westminster’s hands, and for that reason, HS2 remains a waiting game