Tory donor threatens to pull funding if Sunak scraps northern HS2 rail line

A prominent Conservative donor has threatened to stop supporting the party if Rishi Sunak scraps the Birmingham to Manchester leg of HS2, as ministers consider pulling the plug on the multibillion-pound project.

Fears that phase 2 of the high-speed rail line could be junked were compounded on Sunday when Grant Shapps, the defence secretary, said it would be “crazy” not to review the plan in light of soaring costs.

A decision is expected to be taken by the prime minister, Rishi Sunak, and the chancellor, Jeremy Hunt, early next week with an announcement pencilled in for Friday.

However, northern Tories believe that scrapping the northern leg before the Conservative party conference in Manchester next weekend would be a huge political embarrassment. They are urging Sunak to wait until closer to the autumn statement in November while they push for a compromise solution.

A leading donor to the party, who asked to remain anonymous, said: “Generations of my family have been proud to support what was the party of business. We’ve given year in, year out for decades and been active in the party.

“But I’ve spoken to other donors, and several of them feel – possibly for the first time ever – recent events seriously call into question the ability to continue to support people who don’t do what they say they’d do.”

It follows a similar move by the billionaire Phones4U founder, John Caudwell, who said he would stop donating to the Conservatives after the “madness” of Sunak’s U-turn on climate goals.

George Osborne has also hit out at plans to curtail the project. In an article for the Times co-written with Lord Heseltine, the former chancellor said scrapping the Manchester branch would be “gross act of vandalism” and an “act of huge economic self-harm”.

Concerns have been raised by business leaders and regional mayors that any watering down of HS2 would further damage investor confidence, hinder the levelling up agenda and turn the project into a white elephant.

Critics of HS2 agree that elevated costs should be assessed, along with the structuring of HS2 Ltd and its oversight by the Department for Transport. However, the idea that the second phase – from north of Birmingham – could be scrapped has gained traction over the past 10 days.

The Birmingham to London section was initially planned to finish at Euston in central London. Sunak and Hunt are also deciding whether to terminate that leg at Old Oak Common, in the west of the capital, which originally was planned as an interchange. The Sunday Telegraph reported it was likely to end up being £8bn more than the expected £45bn price tag put on it in June 2022.

Further briefings have suggested Sunak is minded to axe the second phase of the project owing to fears it could hit £100bn. Speculation intensified after Hunt said the HS2 budget was “getting totally out of control”.

One source also said that Andrew Gilligan, a former transport adviser who called for all parts of HS2 where construction has not yet started to be cancelled, was back informally advising the government.

Shapps, who is a former transport secretary, declined to dampen down suggestions that costs could be significantly cut back over the weekend. He told the BBC’s Sunday with Laura Kuenssberg the government should ask itself: “Does this still stack up for what the country requires, in terms of where it’s spending its resources, and at what time?”

The shadow chief secretary to the Treasury, Darren Jones, said Labour “would like to see HS2 built in full” but stopped short of committing to do so until the government had laid out the full cost overruns.

Northern Tory MPs are lobbying for a compromise. They are pushing for phase 2B – from Manchester to Crewe – to be built first, to unlock further benefits under the Northern Powerhouse Rail (NPR) project. Phase 2A – Crewe to Birmingham – they say could be pushed further into the long grass.

As part of his rationale for watering down several net zero targets, Sunak said he wanted to overhaul “short-termist” decision-making in government and that he would do things for the good of the country’s future even if they were unpopular.

However, Henri Murison, chief executive of the Northern Powerhouse Partnership, said: “I met Rishi Sunak after he convinced Boris Johnson to make NPR his top domestic priority. I don’t believe a man of honour or integrity would do this. It seems strange he’s forgotten about what he believed before he became prime minister.”

The combination of Sunak’s net zero row-back and the mooted changes to HS2 were also criticised by Jürgen Maier, a former chief executive of Siemens UK. He said: “The business community is in total shock and investor confidence is as low as I have ever seen it in my long years of engaging with our government.”

A government spokesperson said: “The HS2 project is already well under way with spades in the ground, and our focus remains on delivering it.”

An HS2 spokesperson said: “We are building a railway that will level up the country and serve the needs of Britain for the next hundred years and beyond.

“Money spent on HS2 gives immediate returns, with 30,000 British jobs and thousands of British businesses already benefiting, years before the first trains run and the bulk of the benefits are realised.

“The UK has experienced sustained and much higher than expected levels of inflation, affecting all parts of the economy including HS2.

“We’re currently working with our supply chain partners to carry out a detailed assessment of genuine levels of inflation, as well as the impact of the Covid pandemic and the rephasing of parts of the project.”