Feb 2011 04

New TPA Research: High Speed Rail is a huge spending risk4

We today expose the flaws in the business case for High Speed Rail, the Government’s most expensive new project, in a research note by a respected rail expert. Proposals for the first leg of the new high speed line to the West Midlands (HS2) will cost £17 billion. The Government looks set to steam ahead with this plan despite this being a potential multi-billion pound white elephant when we can least afford it.

Click here to read the full report

Click here for the press release

The key findings of this research are:

  • The line between London and Birmingham will cost £17 billion, and is expected to reduce journey times by around 30 minutes. This means it will cost well over £500 million per minute saved.
  • Rebalancing regional economies is now cited as a major justification for HSR, however the evidence for those benefits are weak.
  • HS2 will never produce a financial return. The value of the net operating profit once it has been built only covers 42 per cent of the capital costs over a 60 year project life.
  • The project will not cut greenhouse gas emissions.  According to HS2 Ltd own proposal it will be carbon neutral.
  • Forecasts for growth in demand for HS2 are certainly overstated. The business case and benefits rely on an unrealistic forecasted 267 per cent rise in demand, to make the sums work.
  • The calculated economic benefit used to support the case for HS2 is based on flawed assumptions such as average passenger income of £70,000 and zero passenger productivity during a journey.
  • Nearly half (47 per cent) of long distance rail trips are made by high earners. HS2 is a railway for the rich, but paid for by everyone.

Matthew Sinclair, Director of the TaxPayers’ Alliance, said:

“It is incredible that while the Government are imposing higher taxes on ordinary families, and making necessary cuts in spending on services like education, they are planning on throwing billions at a new train line that will only benefit a well-off few. Passengers on the new high speed line are never expected to pay enough to cover the project’s costs in fares, and it will depend on massive subsidy at the expense of millions who never use the line. This just can’t be a priority with the massive scale of the fiscal crisis and huge pressure on family budgets. Politicians should focus on making commuter journeys more convenient and affordable, not a flashy new train set that will be a huge white elephant

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  • Dave

    High speed 2 will not cost billions until 2015 when construction starts, by which time the spending review will have been completed. Therefore, Matthew Sinclair’s argument that the “billions” are being spent whilst the spending cuts occur is void.

    The taxpayer’s alliance has a reputation for being anti-everything on public transport

    • Phdeeley

      …….is Dave suggesting that by 2015 the £trillion pound debt will have been paid or that we are just about breaking even in our spending to income ratio?
      The whole principal of HS2 is at best not proven and at worst a massive con by the politicians. No alternatives have been compared to HS2 nor has the need been justified either. It seems balmy to use an old technology to solve a 21st/22nd century problem and all the stats point to the fact that long UK journeys will decrease not increase so is the intention of HS2 to increase journeys and therfore CO2. Well the Command Paper from HS2 states that it is and that the CO2 pedigree of HS2 is at best neutral from a running point of view and at worst will increase pollution by some 26 million tons per annum. Cars are now less polluting and will within the next 10 years be almost non polluting and give the public the ability to go anywhere at their own convenience NOT just London, Birmingham, Leeds, Manchester ,Edinburgh and Glasgow. What happens to those people in the UK that will have to pay appx £1500 per family for HS2 and if living in the South West of England, Wales, East Anglia and North Scotland not to mention N Ireland what beneifts do they get? Do the likes of Sheffield or Derby, Nottingham etc lose out to Leeds that will have a station for HS2 as business moves nearer to these HS2/3 stations. Why are High Speed rail in other countries having such a hard time making money and are having to be subsidised to the point in some countries it is bankrupting them.
      All thise opposed to HS2 ask is that the whols principal of HS2 be looked at as to whether it is the best and most cost effect solution to the perceived problem. If this is done and it is proven with FACTS that it is then we will accept it, but we do not want it to be and forgive the pun , railroaded onto the public who are the ones that will have to pay for it both now and generations to come.

  • Dave

    High speed 2 will not cost billions until 2015 when construction starts, by which time the spending review will have been completed. Therefore, Matthew Sinclair’s argument that the “billions” are being spent whilst the spending cuts occur is void.

    The taxpayer’s alliance has a reputation for being anti-everything on public transport

  • musy

    The book ‘Megaprojects and Risk’ looks at the history of megaprojects and finds that average costs usually amount to a 50% increase of the original estimate, and the (economic) benefits are almost always highly optimistic.
    They do not suggest it is impossible to solve these problems, but that these figures are always manipulated by key figures to sell the projects until it is too late to do anything about them.
    This project will almost definitely be exactly the same. It will cost a lot more than the current projection, and the economic benefits will be nowhere near as much as claimed.