HS2: The evidence finally catches up with the government

by Ben Mitchell

The future of High Speed Two (HS2) hangs in the balance. Just writing this sentence seems preposterous, considering the amount of time and effort that has gone into hyping up its supposed benefits. The government’s high speed fantasy looks like it will become just that.

This is meant to be the great transport project of our age; enthusiastically backed by ministers, dreamt up by Labour. Barely six months after receiving the official go-ahead, the wheels are starting to come off. Once vaunted, yet now being mentioned in lukewarm terms at best.

According to the Spectator, it has been told that HS2 is “effectively dead,” with “momentum draining,” and only David Cameron’s personal support keeping it on “life support.” Missing from the Queen’s speech, supposedly being held back for another year, the coalition’s solitary nod to Keynes is getting the equivalent of the ministerial cold shoulder. Several cold shoulders, if reports are to be believed.

The Spectator alleges that the current transport secretary, Justine Greening, was never an unequivocal backer in the mould of her predecessor, Philip Hammond. Most significantly, the man with the purse strings, Chancellor George Osborne, has apparently turned against it, citing capacity problems at Britain’s airports as a bigger priority. At least they’ve realised the folly of one idea, only to replace it with the folly of another. We shall see.

Back in January, I wrote a lengthy piece tackling the arguments in favour of HS2. It seems the evidence has finally caught up with the government.

The cost was always going to come back to bite minsters where it hurt. With the total of the full Y-network (that’s London to Birmingham, and then on to Leeds and Manchester) nudging up from £32.7bn last year to £36.4bn this year (this is before we include rolling stock capital: £8.15bn, and operating costs: a further £21.7bn. Follow the above link and see page 37 for a complete breakdown), and wider economic benefits falling year on year, or every other month, as has been the case this year, the government’s grip appears to be loosening with every new evaluation.

Readers of last November’s transport select committee report into HS2 (of which I admit to being one such nerd), won’t be in the least bit surprised by the unravelling of the case for.

Principally, the government staked its claim on a flawed and outdated understanding of how commuters fill their time. Opponents have consistently pointed out that the government’s desire for high speed rested on the assumption that time saved travelling would mean more time at work. In the case of the London to Birmingham leg, journey times would be cut by 35 minutes, and only take 49 minutes.

However, studies conducted in 2004 and 2010 concluded that travel time is more worthwhile for passengers than ever before. Laptops, smartphones, and wifi access have meant time spent commuting can often be highly valuable.

Last weekend’s Sunday Telegraph found the business case for HS2 grossly exaggerated. An internal, unseen, department for transport (DfT) report from 2009, was basing many of its sums on a “1960s” interpretation of the behaviour of commuters, with 82% of their modern day counterparts admitting to doing some form of work on the train. DfT researchers found that:

“A reduction in journey time does not lead to much extra productive time overall…Sixty per cent [of business travellers] reported that they would do no work in the ‘saved’ time.”

Which is a bit of a problem since government forecasts predict that business users (of whom 70% of HS2’s benefits are aimed at) stand to gain the most: savings of £32bn out of a total of £47bn (at 2011 prices).

The benefit to cost ratio (BCR), the amount which is to be recouped by the taxpayer in relation to government spending, has been on a downward curve since 2010. In March of that year, the BCR for the London-Birmingham route stood at 2.7 (£2.70 benefit for every £1 spent), down to 2 in February last year, before falling twice this year: 1.7 in January, and then 1.5 in April. In other words, HS2’s benefits have been almost cut in half in just two years.

As the Select Committee commented last year:

“…[this] demonstrates the sensitivity of the economic case to changes in variables…These revisions [in November] were a result of lower GDP forecasts and consequently slower growth in rail demand.”

Rather worryingly, as Andrew Gilligan notes:

“According to the DfT itself, any scheme with a benefit-cost ratio of less than 1.5 is officially deemed “low value for money,” not to be proceeded with.”

“…the project has also been graded “red-amber” by the Government’s own Major Projects Agency, signifying “major risks or issues in a number of key areas.”

The government’s difficulties lie in the fact that most of their predictions seem based on shaky assumptions and overly-optimistic guesswork. As one analyst has pointed out, projections for revenues (£34bn) have been taken to cover a 60 year period, which most critics say is unlikely to be accurate:

“The government’s projections of the benefits are based on future ticket prices, demand, economic activity and how the railway line’s competitors are likely to respond. If any one of these variable changes significantly over the next few decades – and it seems inconceivable that none of them will – that will throw the assumptions completely out of whack.”

At its launch Philip Hammond urged Britain not to get “left behind” and invest in travel fit for the 21st century. For its supporters, HS2 will bridge the chasm that is England’s north-side divide. But again, much of the testimony given to the select committee disputes this. With a rigorous examination of all the evidence, and using examples from France and Spain, Professor John Tomaney concluded that:

“…the impacts of high speed rail investments on local and regional development are ambiguous at best and negative at worst.”

“…the weight of recent theoretical and empirical academic work emphasises that high speed rail connections between cities or regions with different levels of development may favour already strong regions at the expense of weaker regions.”

It is in fact capital cities which benefit the most. The government’s own figures show that of the 40,000 jobs expected to be created, more than half will be in London, with seven out of ten confined to the South-East.

I don’t write any of this as someone who’s gleefully rubbing their hands, feeling vindicated by their stance. I started out as a passionate supporter of HS2. It was the weight of evidence against it that swayed me, nothing else. A country this size doesn’t need high speed rail, however glamorous it may sound.

If this week’s murmurs are to be believed, HS2 is heading for the scrapheap. And this will be one u-turn the government should be proud of taking. Unless of course they are merely softening us up for “renewed discussions” about the merits of a third runway for Heathrow. After all, it seems that as far as this government is concerned, u-turns are infectious.

Ben Mitchell is deputy editor of Speaker’s Chair, a cross-party blog, and contributing editor of Shifting Grounds

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18 Responses to “HS2: The evidence finally catches up with the government”

  1. Nick says:

    Quite right.

    HS2 is a crap idea.

    Why should some poor bugger on min wage in Cornwall have to fork out lots of money for MPs to get home faster on HS2.

  2. Anon E Mouse says:

    You say:

    “Just writing this sentence seems preposterous, considering the amount of time and effort that has gone into hyping up its supposed benefits.”

    Please remind us all how much the last government’s ID Card scheme cost….

  3. Thank you.

    I have to say I was always a bit lonely arguing at Labour events that HS2 is not a good idea. My arguments – that it will be a costly white elephant – were ignored with religious zeal, by people who simply had faith in the HS2 concept.

    I would love to see some Keynesian infrastructure spending, but £32bn on *one* line that will be used by rich business people is pure bonkers. I live 20 miles from the Birmingham terminus, but it would take me 90mins to get there. Why? Because local transport – public transport and congested roads – is so dire. The £32bn would be far better spent on local transport, preferably integrated public transport.

    Since local transport is so dire, the only people who would benefit from HS2 are the business community in central Brum and central London. Yet by the time HS2 is completed, there will be new working practices. I work at home and I regularly have conference calls with people in the US and India. I am lucky to be in the UK – central, in terms of timezones – because the meetings are always scheduled to my advantage. Even with today’s technology there is no need for business meetings to be physically in one location: documents can be shared and presentations can be given, over the internet. Imagine what the technology will be like in 20 years?

    HS1 made sense to connect London to the European network – not only for business, but also for amenity. HS2 is not about joining Brum to that network since it is far quicker to fly from Birmingham International. One argument I was give was that BHX would be effectively the “London North” airport. Nonsense. HS2 goes: Brum, BHX, LHR, London. If you are in London, where would you travel to, to fly from? Do we need HS2 to get better access from Brum to BHX? No, since it will only be used by people in central Brum. Local transport is important

    Let’s hope that there is a bit more sensible thinking and more money is spent in a way that will benefit more people: local transport.

  4. swatantra says:

    HS2 should go ahead; Rail Transport is the future, particularly when it comes to travel within the UK and Europe. You don’t want to go messing around with interminable security checks which add at least another 2-3hrs to your travelling time; the point is to make travelling from a to B more pleasurable not more stressful. If they could only guarantee a seat for everybody boarding the train, especially for commuters, then that would be ideal, and that basically means doubling the number of trains running at peak times. More investment should go on Rail as opposed to Air and Road. We could also use our waterways, our rivers and canals, a bit more effeiciently as well.

  5. Cynic says:

    @Swatantra is correct that we should invest in rail transport, but incorrect that all the eggs should go into the HS2 basket. £32 billion on HS2 is the wrong priority. We need investment in affordable transport for the many, not a fast train for the few.

  6. aragon says:

    Rumors of the death of HS2 are greatly exaggerated.

    We need the capacity on the London to Birmingham route (It is not an accident that this is the first leg).

    It is easier to solve problems with the point to point network than a more dispersed (local) network. But I support solutions for local transport in addition (not instead) to HS2.

    As for transport for the few, HS2 is a normal not a premium service (extra capacity and the speed is a bonus).

    The real problem with HS2 is it is a compromise on the original proposals and lacks ambition!

    I still support HS2, even if it is another compromised solution, I want to revive elements of the original proposals and improvements to local transport.

    I have even grander plans …

  7. Scott Davies says:

    Cost-benefit analysis is a very imperfect, assumption-laden tool. So it’s easy for opponents of any given project to jump on perceived flaws and use them as proof that the project in question will be a ‘white elephant’. But uncertainties can cause errors in either direction; and there’s all sorts of highly questionable assumptions built in to HSR2 studies about, for example, the future costs and sustainability of air and road travel. It seems just as likely to me that the benefits of this project have been grossly undervalued.

    The other point I think is being missed here is that the benefits of HSR2 are not just in travel times (which its critics seem to be fixated upon), but more importantly on the extra capacity it will provide, which will ease pressure on existing local services considerably. Without HSR2, long-term, costly very disruptive works will be required on those lines just to cope with forecast extra demand, let alone actually improve rail travel in this country. HSR2 will benefit local public transport hugely, just by getting disruptive regional and long distance services onto a different line.

    It’s such a shame that this debate has been so effectively hijacked by the wealthy nimbys of the home counties, who don’t want to see a new railway going past their house, and don’t give a damn whether it’s good for the country or not.

  8. Steve says:

    Arguments about HS2 always seem to turn into a big economics chat, without really understanding the underpinning engineering arguments for High Speed rail. The point is that HS2 frees up paths on the vastly overcrowded London to Birmingham route for more trains, which can run more frequently because they are not being timetabled to allow London Birmingham non-stop services. I wrote a fairly hefty article about HS2 for people who care about why it is important for the UK rail industry as a whole: here – http://demandnothing.org/high-speed-2-white-elephant-or-national-investment/

  9. Robin Thorpe says:

    IMHO the case for HS2 is not adequate to justify the expense of the project. I do agree, however, that extra rail provision is necessary. I don’t personally think that our geography lends itself favourably towards HSR; the savings in time for HSR as compared to standard rail don’t seem to be worth the additional cost (albeit perceived cost). France, Germany, Spain, USA and China all have large open spaces between major cities. The UK doesn’t. I have only done a quick search for information on the approximate difference in cost between HSR and standard rail and there doesn’t seem to be much info. I am disappointed if this is the case, the only comparisions seem to be HSR vs. planes, there seems to be a blind devotion to super-fast technology. Maybe I am wrong and HSR is the same price per kilometre as a standard line, but surely this would only be the case if the line was an entirely new line with all new stations. The modification of the existing infrastructure to cope with high speed connections will probably be at least as costly as the new lines between cities.
    Unlike other posters I don’t agree that if built HS2 would be a white elephant, I think it will be well-used because extra capacity is required. However, any benefits that may accrue will be confined to a small proportion of individuals and unless taxation becomes more “progressive” then income equality wil rise. The majority of people will not use this line and as the article states most benefit will go to London. The UK needs policy to be less focused on London and more focused on the regions. London will be jsut fine regardless of heathrow expansion or HS2.

  10. It doesn't add up... says:

    Airbrushing the role of Lord Adonis? Perhaps he’ll get his wish, and instead of vacillation, the project will get killed off properly.

    Time instead to think of 21st century developments. Fast broadband and vehicle automation offer new technology to reduce transport demand and to optimise the use of the existing infrastructure. If we had invented the internal combustion engine before the steam engine, we probably wouldn’t have railways at all.

  11. Nick says:

    HS2 should go ahead; Rail Transport is the future, particularly when it comes to travel within the UK and Europe.


    OK. Build it. You fund it. Then you get the payback from ticket sales. How about investing your entire pension, borrowing against any assets such as your house.

    If its such a good idea, what have you got to lose?

  12. Nick says:

    DLR extension in London cost 150 million for a one off.

    From the figures above, 66 billion for HS2 or 440 DLR extensions. Too many even for London. That’s without efficiency gains.

    HS2 is bonkers.

  13. perdix says:

    Well said Scott. Here’s a bit more ammo……
    The problem is that most of the detractors here of the HS2 plan have decided they are against and have not been bothered to actually research the problem.
    The High Speed plan is part of an actual national strategy to increase capacity on our Rail Network.
    In the background is the fact that most of the rail lines heading out of London are either full or soon will be. There is plenty of background on individual lines, in Network Rails RUS (route utilisation strategy). A lot of lines can cope for the next 10 to 20 years through longer trains and some lines can still add extra trains. But that is not going to last. I urge you to read them. They look at every signalling project, platform extension to see what can get the best bang for the buck. The problem is that increasingly they are coming up with no obvious project to solve the problem ( read as requires a really expensive new line).
    People think that such large growth cannot happen, except it already has in the last 15 years and it only requires 3% growth a year for demand to near double in 20 years. Considering the timescales involved in major infrastructure projects that is no time at all.
    Looking at demand we can see that car travel has peaked, either because of full roads and/or high oil prices. This has meant more people are transferring to rail. Considering that car trips consist of over 80% of all trips over a mile, it does not take much of shift in travel for it cause a massive increase in demand for rail.
    So as things stand we can see there is plenty of growth to fill any new rail lines. Also the area of rail travel that has seen the fastest growth has been long distance rail travel. This is also the most profitable part of the rail network.
    Looking at the project directly, the West Coast Mainline will be running out of capacity between London and the West Midlands by 2021.
    The Midland main line to Sheffield is already full at it’s southern end. Network rail has declared it cannot fit anymore trains on it. The East coast mainline has a lot of problems south of Doncaster.
    You may ask why, they can’t fit more trains on the same line, like a tube line, well it’s simple. It’s because they are not tube lines. A long distance railway has trains or different weights and lengths all capable of different speeds and acceleration. In other words the fast trains keep bumping into the slow ones.
    To increase capacity for both the fast and slow lines it is better to have a line for slow trains and one for fast ones. While we have those near London they are full and we need more of them.
    Others have said why don’t we upgrade existing lines and put extra tracks next to them. It might work in a low population density country but can you imagine each town along the route where you need to demolish a couple hundred houses. Besides we have the answer for why don’t we upgrade an existing line. It was called the West Coast Upgrade project. It was only supposed to cost £3 billion and allow 140mph trains to whizz up to Glasgow. I’m sure you are aware how it turned out. £10 billion later, we end up with 125mph trains, no snazzy signalling system and some high speed flying junctions. Apart from the cost there was years of weekend closures. It’s this searing experience that finally pushed Network Rail and Dft towards a new rail line.
    So while the first stage of the new line will only go to Birmingham all other trains to the North west will also go along this route, freeing up capacity for more commuter trains at the southern end. All trains will save 20 minutes on their journeys not just those to Birmingham.
    The true benefit will only be felt once the two spurs to Manchester and Leeds are built. Not only will Manchester, Leeds, Sheffield and Nottingham see much faster trains to London and Birmingham, more capacity will be released on the East Coast, Midland and West Coast Mainline.
    The entire cost is £33 billion, £17 billion for the first stage.
    There is a good reason why the line is built for 250 mph rather than 125 mph. It will not cost that much more, but will earn a lot more money. The faster the trains the more passengers will be attracted. Also, the faster the train the cheaper it is to run. A faster train will make more trips a day with the same crew, so it will earn more ticket revenue for the same amount of capital.
    byRational Plan September 2nd, 2011 at 12:01

  14. It doesn't add up... says:

    @ Perdix:

    £33bn will buy over 1,000 miles of motorway built to M6 Toll standards. The idea that the optimal use of our railway routes is for passenger traffic on rails is hardly supported by the limitations on carrying capacity or the limited source and destination areas for which journey times are actually improved. It will make much more sense to use them increasingly to segregate road freight traffic in semi automated road trains on road surfaces replacing the rail tracks.

    Take your rail blinkers off, and think of the future, not the 19th century.

  15. eastender says:

    Seems to me the biggest problem is what happens when the efficiency-loving hi-speed commuters try to squeeze onto the heaving, sweaty, delay-prone underground system and find all the precious minutes they have saved are squandered, standing nose to armpit in a stationary tube carriage due to a signal failure.

    It wouldn’t surprise me if some simply ran screaming back up to Brum!

  16. JD says:

    Perdix said “…the West Coast Upgrade project. It was only supposed to cost £3 billion and allow 140mph trains to whizz up to Glasgow. I’m sure you are aware how it turned out. £10 billion later, we end up with 125mph trains, no snazzy signalling system and some high speed flying junctions.”

    Exactly, and based on that, and HS1, and the M6 toll etc etc etc, how do you think HS2 will turn out? Massive overspend, slower half-empty trains, taxpayer subsidies, unaffordable tickets.

  17. LS says:

    BCR (Benefit to Cost Ratio) doesn’t necessarily mean a taxpayer benefit. It could cover higher fare revenue, economic gains captured by consumers / business users that don’t materialise in tax, higher indirect tax revenue, social benefits from lower aviation fuel emissions and a host of other intangibles. HS2 will make a huge loss for the taxpayer, even if it passed a BCR test.

    The tracks are pretty full, but there are plenty of short trains, quiet trains, First Class and large kitchens on trains.

  18. Ian Brooker says:

    “However, studies conducted in 2004 and 2010 concluded that travel time is more worthwhile for passengers than ever before. Laptops, smartphones, and wifi access have meant time spent commuting can often be highly valuable.”


    1: If this was true, and travelling time on trains was so valuable, it would be possible to make a business case to make trains slower, so that business people would have more time to work.

    2: Given the choice, do business travellers choose faster journeys over slower ones? If so, why?

    3: If people can work on trains and not in cars there is a huge economic benefit in getting them out of cars. HS2 did not include this benefit in their calculations because they assumed low value to time spent on trains.

    4: Oppoenents to HS2 argue that laptops and ipads will mean people will not use HS2, they will communicate by internet. And they also claim that people on HS2 will be fully busy using laptops and ipads!

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