Amid the furore over Thames Water’s collapsing finances and sewage-polluted waterways, there is a sliver of light.
With the right financing model, political will and sensible engineering, it is possible to complete imaginative public investment projects.
After eight years of tunneling, relief is near for the Bazalgette sewerage system built by our Victorian forebears to stave off London’s ‘great stench’.
The 15-mile Thames Tideway Tunnel, or super sewer, designed to reduce toxic discharges into the Thames, was completed on March 27 when the final concrete cover was secured at the Abbey Mills Pumping Station in east London.
The £5 billion project is a monument to the Regulated Asset Base (RAB) financing model, which the government also hopes will boost investment in new nuclear energy.
Completed: The 15-mile Thames Tideway Tunnel, or super sewer, designed to reduce toxic discharges into the Thames is finally ready for use
Under this model, private sector investors receive a guaranteed return during the construction and operational phases of a project.
It is controversial because dividends are paid to investors before completion.
The costs are covered by what some might consider ‘stealth’ surcharges on household and business water bills. Shielding oneself from politics can be an effective way to get the job done.
Our public investment process is flawed. Imaginative projects such as the Elizabeth Line, HS2 and Heathrow’s third runway are too tied to the political cycle and public finances.
At times, like now, when borrowing and debt are unusually high, the Treasury Department’s budget orthodoxy comes into focus.
Transformative projects such as HS2 are being curtailed. We find ourselves in the unusual position of Labour, a government in waiting, restricting a new £28bn-a-year green deal amid fears of bond market turmoil.
One message to emerge from ‘cut-and-paste’ shadow chancellor Rachel Reeves’ Mais lecture was the restoration of a familiar budget rule.
She proposes that the government should live within its means for spending on services such as the NHS and social security, but can borrow to support investment.
That could include new hospitals, greening Britain or even a revival – if there were political courage – of the Birmingham-to-Manchester branch of HS2.
It was ridiculous that the cost of HS2 was allowed to rise up to four times that of high-speed rail in France.
Canceling Birmingham-Manchester and creating confusion over a London artery linking Old Oak Common in west London to a visionary Euston terminal were politically expedient but economically illiterate.
The productivity gains that can be achieved from HS2 are clearly evident in Birmingham. Some £10 billion of additional new capital projects have been released, from residential to retail parks and logistics.
Imagine the production capacity that would have been created and the leveling up if the connections north of Birmingham were restored.
Cancellation will have a devastating impact on British train production. Manufacturer Alstom is warning that 3,000 jobs and its factory in Derby may have to be shut down due to Rishi Sunak’s decision.
Another HS2 investor, Hitachi Rail, is drawing up plans to cut jobs at Newton Aycliffe in County Durham. It is not just direct jobs that are at risk, but also confidence in Britain from foreign investors from France and Japan.
Rather than giving up, like Sunak and HS2, there are ways to make things work.
RAB funding and the use of proven technical skills (such as those on the Elizabeth Line) are examples of this.
We cannot be a nation of quitters.