George Osborne’s proposal for a high speed rail line across the north of England makes a lot of sense. It will come far too late to resolve our present economic worries, but better train links are crucial to correct the UK’s great economic imbalance.

Such an idea has been around for a while. When plans for high speed rail throughout the UK were first being talked of, extending the London-Birmingham-Manchester line on to Leeds was one of the options under consideration. However, that would have meant a longer Leeds-London journey and Sheffield and Nottingham would have missed out on what became HS2.

So a choice was made favouring a Y-shaped network centred on Birmingham, with a direct link from there to Leeds. Now Osborne has resurrected the idea of a Manchester-Leeds high speed link and has dubbed it HS3.

There is a strong political motive behind the Chancellor’s announcement and the accompanying rhetoric, with George Osborne describing the aim of HS3 to create a “northern global powerhouse” to rival that of London.

The cities of northern England are individually very strong, but they are collectively not powerful enough to compete vigorously against the mega-cities that have emerged globally during the past few decades. This is important because, in the current economic context, city size matters a great deal. One broad manifestation of this is that the largest 600 cities across the world contain 20% of global population but are responsible for as much as 60% of global GDP.

The unbalanced economic recovery concentrated on London and the south-east is a major problem for the government. This reflects the fact that London has one of the greatest networks of public transport services anywhere in the world. It sits at the centre of a massive system of commuter services, and benefits from an extensive network of intercity rail, all operated at high frequencies, on radial routes in and out of its main rail stations. London is well linked to the entire country. Even Shropshire, which used to lay claim to being the only county in England without a direct rail service to London, recently saw its direct service resumed.

The sheer scale of transport links in, out and around London means in turn that public spending per capita on transport infrastructure is much higher there than in other parts of the country. The Institute for Public Policy Research (IPPR) North analysed public spending on transport in the government’s National Infrastructure Plan and found that 84% of it benefited only London and the south east. Transport spending per head is far greater in London and the south-east than in other parts of the country.

This is partly down to basic microeconomics. Transport projects are subject to a cost-benefit analysis before they get the go-ahead, and these tend to be skewed heavily in favour of areas with the highest population density as they provide the “easy wins”.

This process reinforces itself. Major investments in Crossrail and Thameslink will improve London’s transport infrastructure, enabling the city to take on more people. As the population density increases, so will its need for further transport options, and so on. Any attempt to re-balance the nation’s economic geography must take take these broader external effects into account.

At this stage it is not at all clear what HS3 would require in terms of infrastructure investment. But upgrades to existing lines, such as those used by the current TransPennine Express, should help save costs as fewer new tunnels will be needed. The line is scheduled for electrification anyway and so spending on HS3 should be looked upon in incremental terms.

Re-balancing the economy is a major long-term undertaking and we shouldn’t expect rail lines to fix things overnight, however fast they are. But while investments in HS2 and HS3 may not by themselves solve problems that have built up over past decades, both could represent big steps in the right direction.

This article appears on 'The Conversation'; an independent source of news and views, sourced from the academic and research community and delivered direct to the public. View the article here.

Pat Hanlon is a Senior Lecturer in Transport Economics at University of Birmingham.