Labour thought private capital would pay for HS2. As if | Private finance initiative (2024)

Lord Adonis, transport secretary at the time, gave a very different account to this newspaper – the cost/benefit analysis was "robust and thorough", he said. But Mandelson's other revelation deserves to sound the death-knell for the HS2 high-speed railway in its current form: Labour assumed the project would attract private capital.

That being so, the numbers matter, and the National Audit Office's comprehensive shredding of the Department for Transport's assumptions – highlighted here at the time – should be read by every taxpayer.

The headline-grabber was the bogus notion that business folk do no work on trains, but the list is long.

For example: HS2's models used the same average fares for high speed and conventional rail to forecast passenger demand. The same fares? When the DfT applies realism, it will probably discover that most travellers from Birmingham would not choose to pay twice the price to arrive in London half an hour earlier. The experience of the underused M6 toll road supports that point.

The traditional way for political parties to climb down from entrenched positions on big infrastructure projects is to call for an external review, as happened with runway capacity in the south-east. That is what should happen now. It's not the visionary way, but we've had our fill of expensive visions. As the true cost of HS2 is revealed, there may even be votes for the first main political party to call for a rethink.

• As the Co-operative Group commissions an independent postmortem on its banking catastrophe, the questions keep coming.

Here's one: why did regulators let the Co-op Bank's talks with Lloyds to buy 632 branches run for so long?

Indeed, Bailey, then at the Financial Services Authority, told the Co-op to warn Lloyds that the branch talks could be a waste of time: "I was very insistent that Lloyds were told … there was a reasonable probability that [the deal] was not going to happen."

Lloyds – or, at least, its chairman, Sir Win Bischoff – claims it was in the dark until December 2012, three months before the transaction finally collapsed, but that's merely an intriguing sub-plot. The key question is why the regulators, having spotted the Co-op Bank's capital problems in 2011, didn't press the organisation harder to get its house in order.

Some suspect the regulator was swept up by the political cheerleading for the transaction. That would be a disgrace, and the regulators would deny any such notion.

But contrast the treatment of Co-op Bank with the PRA's current approach to Barclays and Nationwide, two stronger and better-managed organisations. They have been told (quite rightly) to get their leverage ratios up to scratch in a hurry. Yet the Co-op was allowed to bumble along for 18 months.

Andrew Tyrie's Treasury committee should keep pressing.

• Mark Carney may find the "forward guidance" lark is harder than it looks. On Thursday, the new governor of Bank of England snapped his fingers, announced that the market's implied view of interest rates was "not warranted" and saw a spectacular reaction. Sterling fell, share prices soared and, critically, bond yields came down, which is the element that Carney's crew on the monetary policy committee care about most, since it's far from clear that the UK recovery is strong enough to stand higher borrowing costs.

At the end of a week of uber-doveish medium-term pronouncements in Europe, the yield on two-year gilts was actually higher than at the start. In the pursuit of "escape velocity" for the UK economy, that's not helpful.

There's a long way to go, of course, but after one week in the job, it's clear that it is easier for the new governor to talk down the pound than lower gilt yields. One out of two ain't bad, one might say. Carney would surely have hoped for both.