Despite disruption, full construction work on HS2 is yet to begin. Nonetheless, the costs of HS2 have already started racking up, with an estimated £4 billion already spent on the biggest infrastructure project in British history.

This, it has been argued, means that it is too late to cancel, with too much precious taxpayers’ money poured into the project to turn around now that the true cost – of over £100 billion – has become apparent.

It’s a tempting argument, but it’s one that any economist would see through in a heartbeat. As I told 2016 Conservative Party Conference, this is an example of a sunk cost fallacy.

A sunk cost is a cost that has already been incurred and cannot be recovered. Most of the £4bn is in that category (some, such as purchased land, may well be able to be recovered). This money has gone and it ain’t coming back.

Psychologically, it’s understandable that people are averse to realising losses: whether reselling something at a loss after you spent too much on it or cancelling an project whose costs are spiralling out of control. But it’s not rational and will only lead to digging us deeper and deeper into an ever less affordable hole.

Let’s assume for simplicity that the total project cost is £104bn. From where we are, there are two options:

  1. Cancel the project. You don’t get the £4bn back, you don’t get your railway, but you also don’t have to spend £100bn more on completing it; or
  2. Complete the project. You don’t get your £4bn back, you do get your railway, but you have to spend £100bn completing it.

You don’t get the £4bn back either way, so except for the purpose of preserving politicians’ pride, it simply does not matter. The question is: if you have the option of building HS2 from scratch for the remaining £100bn, would you do it?

In 2013, the Department for Transport optimistically gave the upper limit of the total benefits of HS2 at £71bn. Let’s put aside whether that’s true (it absolutely is not – £51bn of the ‘benefit’ is from time savings, with the DfT valuing time spent on a train at almost £0, despite that time being perfectly usable to work, read, sleep, watch Netflix, or anything else). The answer to the previous question is clearly no – it is not worth spending £100bn to get a maximum of £71bn of benefits.

Committing the fallacy of crying over sunk costs does not change the arithmetic. But the sooner you make the decision, the sooner you can stop pouring money into it. It’s not too late to realise that and it’s not too late to scrap HS2.

For more about my campaign against HS2, click here.