(Bloomberg) -- Prime Minister Rishi Sunak canceled the northern leg of the UK’s HS2 high-speed rail project, betting that re-investing funds in alternative transport links across the country would be more popular with voters.
“We’ve ended the HS2 drama and in its place will embark on a full-scale national re-investment,” Sunak said in an hour-long keynote speech at his Conservative Party’s annual conference in Manchester on Wednesday, his first as leader. “Today we went beyond ideology and put the people first.”
Anticipation of Sunak’s decision to scrap the Birmingham-to-Manchester spur of HS2 had dominated the conference and triggered a huge backlash from businesses and across the political spectrum. The project was backed by Sunak’s five predecessors in 10 Downing Street as a cornerstone of efforts to redevelop northern regions of the country.
Former Prime Minister Boris Johnson put the project at the heart of his “levelling up” pledge in the 2019 general election, when the Tories persuaded large numbers of traditional Labour Party voters to switch sides. Their support will be crucial if Sunak, who was Johnson’s chancellor, is to win the next UK vote expected in 2024.
The decision “sends a damaging signal about the UK’s status as global destination for investment,” Rain Newton-Smith, chief executive of the Confederation of British Industry, said in a statement.
Read More: Sunak Faces Backlash as He Prepares to Trim High-Speed Rail Plan
That makes Sunak’s announcement a major political gamble. His calculation is that diverting funds to more local projects, some of which may be delivered faster than the almost two decades HS2 could take to complete, will pay dividends. He cited better links across northern cities in a £48 billion ($58 billion) package of investment, including a potential high-speed link between Manchester and Liverpool, and electrifying rail lines in Wales.
“We will re-invest every single penny,” Sunak said. “That will make a real difference across our nation.”
Sunak, 43, is trying to position himself and his party as the “change” option in British politics, even though his Conservatives have been in power for over 13 years. He talked about taking the “tough decisions” that previous administrations had shirked.
He also announced plans to:
- Raise the legal smoking age over time to phase out cigarettes and restrict the availability of vapes for children
- Introduce the “Advanced British Standard”, a new single qualification for school-leavers that would bring “parity of esteem” between technical and academic education
- Give bonuses to new teachers to attract more into the workforce
Making a direct challenge to Keir Starmer’s poll-leading Labour Party, Sunak said it would be for his opponents to say whether they’d cancel the transport projects funded by the HS2 re-investment. It was a similar tack to his recent watering down of Britain’s green agenda, trying to draw a dividing line with Labour and painting himself as better aligned with the wishes of voters.
Reflecting on his premiership so far, Sunak said he had made progress on his priorities to halve inflation, restore growth, cut net debt, reduce National Health Service waiting lists and stop immigrants crossing the English Channel from France. Sunak inherited a party that had sunk to historic lows in the polls under the disastrous premiership of Liz Truss.
He’s repaired some of the Tories’ standing, largely by reversing most of Truss’s economic policies to stabilize financial markets unnerved by a raft of unfunded tax cuts. But the poll deficit to Labour has remained at about 20 points for months, putting pressure on Sunak to find bold policies to woo voters.
That has led to a growing chorus within the party calling for tax cuts to attract voters. But Chancellor of the Exchequer Jeremy Hunt said he doesn’t have the fiscal power to deliver them at present, and even if he did, it would risk stoking the inflation that the government is trying to bring down.
“I know you want tax cuts, I want them too,” Sunak said. “But the best tax cut we can give people right now is to halve inflation and ease the cost of living.”
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Speeches this week have underscored the party’s move to the right under Sunak, as the Conservatives try to excite activists ahead of the election campaign. Much of Sunak’s speech will also likely have gone down well the Tory base, including his pledge to do “whatever it takes” to tackle what the government regards as illegal immigration.
The bigger question is how the broader electorate reacts, and whether the prime minister can persuade voters he represents the change he’s promising. His conference slogan — Long-Term Decisions for a Brighter Future - jars with scrapping a long-term rail project, construction of which has already disrupted the lives of thousands of Britons.
Sunak has repeatedly denied that his decisions are driven by political considerations, but his U-turn on key green policies included rhetoric that has inspired people on the right of politics, while angering more centrist members of his own party.
“We will be bold, we will be radical, we will face resistance and we will meet it,” Sunak said in his closing remarks. “It is time for change and we are it.”
--With assistance from Ellen Milligan and Kitty Donaldson.
(Updates with Sunak comment from second paragraph.)
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