Response to HS2 Ltd on the business case for the new high speed line6

Bruce Weston, from the HS2 Action Alliance, has been taking a look at the arguments made by HS2 Ltd on the Spectator Coffee House in response to my article about the business case for the new high speed rail line.  Here are his responses to the two key arguments that Alison Munro, their Chief Executive, has made:

Demand

The Department of Transport’s rail demand model assumes that for every 1 per cent more income, people will spend 2.8 per cent more on trips to London (economists would say it has fixed demand elasticities).  Clearly that can’t go on for ever!  The DfT’s previous approach of stopping such escalations at 2026 recognised that people will not keep spending an ever larger proportion of their earnings this way.  Sir Rod Eddingon in his review of transport priorities expressed concern about using this very same model for making forecasts over 10 years.  Last year DfT pushed this to 25 years (to 2033).  Now they are using it to make forecasts for 35 years (to 2043)!

We may need to make decisions about long lead time and long life projects, but we cannot sanely make them using forecasts based on stretching the period over which demand grows compared to people’s income to be ever longer until we get the answer we want.

Value of time

Recognising that people can, do, and increasingly will work on trains simply sinks the case for HS2.  The supposed productivity gain from reducing long distance train journey times is the largest benefit DfT attribute to HS2.  Without it the business case collapses.

But what of crowding?  Alison Munro is right, crowding can prevent both business and leisure travellers using their time productivily.  But on DfT’s projections (both in the consultation material, and in last March’s documentation), HS2 actually has more crowding than the alternative of upgading the WCML – for example they expect to double London – Manchester volumes, but their plans for Phase 1 of HS2 (between 2026 and 2033) provide no increase in capacity on the route!  And improvements to the existing services can be made incrementally and relatively quickly, so preventing crowding from ever becoming severe.  So another strike against HS2.

And people switching from cars and planes?  Yes they may get some productivity benefit, but DfT think that they will only be 13 per cent of passengers – the other 87 per cent come from transfer from conventional rail services and entirely new journeys.  And those travelling on planes will be able to use mobile technologies and be as productive as people on trains many years before HS2 could be built.

Matthew Sinclair

Matthew is 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)

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