Feb 2011 09

Our initial report on high speed rail has had quite a reaction.  Theresa Villiers, one of the Ministers responsible for the project, was challenged about it on BBC London.  Unfortunately, the presenter only put one of our points to her, that the scheme is never expected to produce a financial return and will cost taxpayers a fortune.  She responded that there were wider economic benefits, but for our research note an expert analyst looked at that case and found that many of the benefits didn’t stack up.  The case for high speed rail hasn’t been made and it looks set to become a huge white elephant.

Our research note has started a serious debate online, with a fierce response from the taxpayer funded lobby group promoting the new line – Greengauge 21 – in particular.  Here is a round-up of the debate so far:

Now we have a new response from Greengauge21.  Bruce Weston, from the HS2 Action Alliance has written a response:

“Greengauge21′s latest response totally fails to deal with the points I made to their first response.

On comparing like with like, the issue is a simple one.  HS2 was assessed treating rolling stock costs as a capital expense not a leasing charge.  The assessment of RP2a that Greengauge21 presented treated rolling stock costs as leased.  This worsens both the costs and the benefit/cost ratio.  Treating these costs as capital makes the benefit/cost ratio 2.63 (not the 2.19 Greengauge21 quote).  2.63 is higher than the 2.4 of HS2 – and hence is better.  How can Greengauge21 possibly conclude ‘RP2a does not have as good a business case as HS2 as it stands.’?

On reliability, Greengauge21′s view that RP2 would worsen train performance is not supported by the DfT’s own documentation. DfT’s consultants suggest that even with increased train frequency the improvements to WCML should improve reliability locally.  They conclude ‘These locations may more than compensate for other areas where there will be an enhanced train frequency but no infrastructure enhancements.’

Greengauge21 make much play of HS2 potentially being more reliable than WCML, and so HS2 and RP2 cannot be compared.  But HS2 Ltd accredit HS2 with a monetarised benefit to reflect assumed improvements in reliability, so the HS2 case already takes this into account.

Although RP2a has a superior business case to HS2, it is still just a sensitivity on RP2.  RP2′s benefit/cost ratio is excluded from DfT’s White Paper, probably because it would have sunk the case for HS2!  That DfT use the figures of RP2a with rolling stock costed as leased for their ‘mid-scale rail upgrade package’ in the White Paper simply shows how far they needed to go to conceal the fact that upgrading WCML is better value for money than HS2.

Greengauge21 also question my suggestion that Network Rail’s forecasts are ‘substantially below’ those of HS2 Ltd.  Again their position is puzzling.  Every growth rate from Network Rail’s latest forecasts to 2024/25 is below that of HS2 Ltd.  And in NR’s earlier work none of the scenario growth rates were higher for the period from 2021-2036 than the period to 2021, so we should not expect NR’s forecasts to catch up by 2033.

The table below shows that NR’s forecasts are far from ‘very close’ to those of HS2 Ltd:

NR growth rates are derived from Figure 44 in the Draft WCML Route Utilisation Strategy for Consultation (Dec 2010), and applied 2008-2033. HS2 Ltd’s forecasts are from Table 10.2a page 89 of 'HS2 Demand Model Analysis’ (Feb 2010).

HS2 Ltd’s forecasts are dramatically higher than Network Rail’s, with the NR demand between 41 per cent and 80 per cent of HS2 Ltd’s figures for 2033.  When a 20 per cent shortfall in demand destroys the case for HS2, these are not minor inconsistencies.  Yet Greengauge21 claim that the NR estimates are ‘very close to (not ‘substantially below’) the forecasts that HS2 Ltd have used’!

Greengauge21 also refer to the high recent passenger growth rates on the route, as if the route modernisation and the dramatic improvements to services that have been achieved were not a factor, including the one-off modal shift from air to rail on the Manchester – London route.

Finally Greengauge21 caution that RP2 would destroy the value of the WCML franchise.  Their position is like an unscrupulous plumber, sucking his teeth before declaring that a whole new central heating system is required – when a new pump and a couple of control valves would entirely solve the problem.  Can I remind them that Virgin Trains have publicly promoted improvements to deliver better services to Birmingham International?  And that Chiltern Railways are near to completing another round of infrastructure upgrades at their own instigation and at no cost to the taxpayer?  The modern franchisee is no shrinking violet but eager to improve services – and of course their own profits!

The reality is that serious flaws have been found in the HS2 business case and that Greengauge21 have no answer to them.”

Rest assured we will keep up our side of this debate.  In the past, too many major schemes have gone ahead without anyone ever properly scrutinising the business case.  And with so much pressure on the budgets of ordinary households, this incredibly expensive project needs to be cancelled.

Matthew was the Chief Executive of the TaxPayers' Alliance, author of Let Them Eat Carbon and editor of How to Cut Public Spending (and still win an election)

  • Delta Jcn

    In respect of the Birmingham to Manchester proposed HS2 service you might like to look at the current timetable for Birmingham New St – Stafford via Wolverhampton and the HS2 route from Curzon St via Delta Jcn and Rugeley. If time is allowed to go from New St to Curzon St then the journey to Stafford is about ¼ hour longer. Based on the 2024 passenger figures from the WCML draft RUS that equates to around 2 MILLION wasted hours per year if you include return journeys.

    This is going to replace the current VXC service HS2 say not supplement it so no extra capacity

    Thus there is also approaching £0.5 Billion for the required trainsets for this diagram and at least half of the cost for the Birmingham Chords as HS2′s appendices don’t yet say anything else is going to be going North from Birmingham central

  • Drilldevil

    Salaries on hold,Cost of living rising, public sector cuts,aircraft carriers with no planes,increased tuition fees, AND YET WE CAN AFFORD AT LEAST £35 BILLION FOR A TRAIN!!! Tell me its not April 1st. The worst case scenario is that the line from London to Birmingham is built and we see it is a “successful” line like HS1 with only a third of the predicted passengers using it or like the Dutch HSR which is going bust. We have destroyed homes, countryside, for what? A white elephant and all of us in the UK are going to pay for it whether we are in Cornwall or Norfolk. Mr Hammond is meant to have a financial back ground, I would be very afraid of someone who claims this, and yet is unable to see the problems with the business plan. Let us hope he never gets offered a Treasurary post.

  • Katharine_stephenson

    A big thank you to the Tax Payers’ Alliance for pointing out the major flaws in the HS2 project. Unfortunately, those who are opposed to this scheme have been branded as NIMBYS, regardless of the rational arguments they put forward. It is therefore important for all those outside the affected areas of the scheme to voice their concerns about the wisdom of spending billions on a project very few of use will be able to use.

  • http://twitter.com/roadpricing S Wilson

    It would just be an aside, but the road generate a return to the state of around 4 times what it spends on them, an enormous net profit, yet they are left to crumble.

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