Over the years the anti Hs2 campaign grasped straw after straw. One of the most common ones being binary choices. We could either have flood defences or HS2, or fix potholes in the roads, or build Hs2 or – you name it. As the years went on the list got longer and more stupid.
But there was one they always kept coming back to. Whatever figure they’d invented for the cost of Hs2 that week – it should be spent on the NHS instead. Because everyone (well, except UKIP, Brexiters and various Tories) love the NHS.
Such ‘logic’ is the epitome of intellectual bankruptcy because it fails to understand a fundamental financial fact. The different between capital expenditure (Capex) and operational expenditure (Opex). Let me explain.
Capital expenditure is an expense incurred to create future benefit, such as buying new assets for a business – like buildings, machinery or equipment. Doing so generates profits for the future over several tax years. Hs2 is simply a very large example of the principle. It will generate jobs (which generate tax revenue), kick-start regeneration in some of our major cities and make the UK a more attractive place for businesses (which generate corporation tax). Capital investment on decent infrastructure is well understood as bringing economic benefits. This BBC article sums up the situation. As capital expenditure will generate tax revenue year after year. It’s not just a one off. That income stream would enable the Treasury to spend money on many different things. Including the NHS if it chose to…
Operating expenditure covers the day to day functioning of a business, like wages, utilities, maintenance and repairs. It also covers depreciation. It’s money needed every year.
The cost of building Hs2 is £55.7bn. For that we get all the benefits I mentioned. In contrast, planned expenditure for the NHS in 2016/17 is £120.611bn. That means if we diverted the money for Hs2 to the NHS it would run the NHS for less than 6 months. Then it would be gone, never to return. It wouldn’t solve any problems, because the NHS would need that money every year. Instead, you’d be left with rail gridlock (which would cost money, not save it) and you wouldn’t have a catalyst for regeneration in cities like Leeds, Manchester and Birmingham, so you’re not helping rebalance the economy either.
This (in a nutshell) is why the stophs2 campaigns calls to divert money from HS2 to the NHS is both daft, and ignorant. Even Labour’s Shadow Chancellor, John McDonnell has pointed this out in an interview with the Yorkshire Post.