THE ECONOMIC CASE AGAINST HS2
HS2 Ltd argues that the UK needs a step-change increase in additional railway capacity, estimating that by 2033 the demand for rail transport into London will have increased by 267%. HS2 argues that in connecting Birmingham with London in 16 years time, it will reduce journey times by 30 minutes, and create a £2 benefit for every £1 spent.
Ministers claim that only a High Speed Rail network can provide this level of new capacity, and replace the need for internal short-haul air travel, offering a “green and sustainable” new transport infrastructure.
Realistic Forecast?
The forecast increase in demand is not reflected over the last 15 years, during which period total demand for long distance travel has remained broadly static. There is considerable evidence that domestic flights into London have not increased while rail travel has prospered only at the expense of coach journeys.
It is the forecast demand for long-distance travel within the UK that drives the argument for HS2. However, the projected 267% increase in demand by 2033 is based on trends up to the mid 1980's, which showed growth in demand for long-distance transport based on growth in GDP. With the use of increasingly sophisticated technology, this association appears to have been broken. The HS2 Action Alliance Economics Group can see little evidence to support even half the level of growth forecast.
Governments record in estimating demand does not inspire confidence. They failed completely with the Channel Tunnel Railway, ignoring the competition from low cost airlines and the ferry companies. The House of Commons Committee of Public Accounts was perhaps surprised at these optimistic figures and reported in May 2006:
“In bidding for the project in 1996, LCR forecast that passenger numbers using Eurostar would reach 21.4 million in 2004 but actual passenger numbers were only 7.3 million.”
No wonder the committee urged “it is crucial that realistic forecasts are prepared from the start. Downside risks need to be given due weight, drawing on both UK and international experience, in considering future projects”.
This obvious warning seems to have escaped the notice of HS2, who have completely ignored the experience of HS1
Only £8 Billion!
Capital investment for HS2 is estimated at a massive £18,900,000,000; almost certainly this will prove to be a substantial underestimate as it was for HS1. The expected construction cost is twice the figure per km of HS1 and about 10 times the cost of high-speed rail in France. Governments usually seek confirmation that investment will demonstrate a rate of return so that society benefits from using taxpayers money.
This project, even at the outset, falls well below that expectation, offering a “negative return” or loss to the taxpayer of about £8 billion. That is even if we accept the inflated estimates of future demand.
The loss is ONLY £8 Billion if demand for long-distance travel does actually increase by 267% and DESPITE the assumed increase in ticket prices: 35% higher in real terms than they are now (see below)
Kyn Aizlewood, Economics Group
HS2 investment [Phase 1 only] over 75 years: £ 25 Billion, Net Present Value.
Additional forecast revenues from ticket sales: £ 13 Billion, Net Present Value
Wider economic benefits: £ 4 Billion, Net Present Value
Net loss to the taxpayer / subsidy: £ 8 Billion, Net Present Value
Another Pet Project?
Why should the general public pay extra taxes to subsidise travel in ultra fast trains between Birmingham and London? The Government offers two reasons:
1. 90% of the benefit is for rail passengers, who will save 30 minutes on their journey time.
2. The business case is largely based on the benefits to business travellers and includes a number of false assumptions e.g. train journeys are entirely unproductive [so every minute saved adds value] and average salaries are £70,000.
If travel on the train really carries no value to passengers, it is surely better to avoid the need to travel at all by using video-conferencing technology that will be standard within the next decade. Limited location of HS2 terminus will mean that the supposed 30 minutes saved will be neutralised in getting to and from these locations.
So, as with earlier government “pet projects”;
1. Forecasts of demand appear substantially inflated,
2. Estimates of cost contain omissions, and
3. Risks that the project will not deliver value for money have been overlooked, despite warnings from the Public Accounts Committee.
Crucially, if the demand forecast does not materialise or the costs escalate, the deficit widens and the on-going loss to taxpayers will grow further; a classic White Elephant in the making. For a Coalition Government committed to the elimination of waste, the HS2 Project cannot be justified.
UNDER REVIEW?
The Autumn Spending Review will be a critical moment in the history of British transport. The Transport Department will be one of the worst affected, securing budgetary savings of up to 40%.
Even without the spectre of cuts, passengers face a dismal future. The historic benchmark for rail fares is RPI +1% but with Julys inflation figure of 4.8%, the Government is considering relaxing the formula to allow rail companies, almost certainly to be hit by Octobers impending cuts, to raise prices to achieve more investment.
This will mean rail passengers having to pay hundreds of pounds more for their season tickets and off-peak travel. Passenger groups fear that regulated fares will rise by 10%, while unregulated fares including walk-on tickets and peak time travel, will increase even higher.
London Underground faces even greater problems. At present, with up to four million passengers a day, it carries more than the entire national rail network put together. However, it still relies on antiquated wiring, signals and points, as the recent near miss in August on the Northern Line highlights. A £4bn upgrade has been introduced but is now endangered by cuts of up to 25%. This can only lead to disruption and possibly tragedy.
Major roadwork programmes will be slashed with rural communities particularly affected. Contracts with coach companies are also likely to be ended, leaving those without cars isolated.
Against this background of doom and gloom, Philip Hammond, Transport Secretary declared „it would be irresponsible when investment in the railway is under pressure to rule anything out until the spending review is concluded’.
Could this mean HS2 is under review? Could it be that this loss making enterprise will be shelved or does the Coalitions White Elephant go proudly forward?
Only time will tell but hopefully the Ministers past reputation for economic soundness will enable him to make the right decision and end this elephantine folly.
MEETING WITH HS2 - THE RESULTS
Burton Green sent its representatives, Kyn Aizlewood and Dave Railey along with other representatives from South Warwickshire Action Group (SWAG) to meet HS2 Ltd on 17 August. Discussions on the business case and engineering issues took place. A number of questions were asked of HS2 Ltd and on many of these, HS2 Ltd promised they would reply. On the route option, HS2 Ltd stated that they would only enter into discussions provided participants signed a Confidentiality agreement. However, despite revisions being done, on 17 August HS2 Ltd, without prior notice, provided their own substantially altered text. The majority of SWAG representatives, including Burton Green, refused to sign since disclosure of any discussions would be prohibited.
Southam News has printed the minutes of business and engineering meetings,
which can be accessed on: http://bit.ly/cyvW5T
Good luck Liz!
Liz Williams set off from Lichfield on 1 September to walk the proposed
HS2 route to London in order to highlight its path of destruction.