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HS2 still on track, but experts agree to disagree on cost and benefits

HS2 still on track, but experts agree to disagree on cost and benefits

🕔19.Jan 2015

Construction work on HS2 begins in a little over two years, assuming the next Government gives final approval for the project. But at a cost of £50 billion Britain’s second high speed rail line continues to divide opinion sharply, writes Paul Dale.

The House of Commons High Speed Rail Bill Committee has spent months plodding through tens of thousands of petitions, most of them opposing HS2, and will have questioned hundreds of witnesses by the time its work is done.

Recently MPs were treated to the thoughts of a nine-year-old boy who told them HS2 was “stupid”. Alex Rukin, from Kenilworth, said money set aside for the new railway would be better spent on improving schools and went on to accuse HS2 promoters of fiddling statistics in an attempt to make the scheme’s cost-benefit ratio look better than it really is.

Master Rukin, it transpired, is the son of Joe Rukin, who runs the Stop HS2 Campaign.

For all his tender years, though, young Rukin’s comments drove straight to the heart of the high speed rail row – should we be spending so much money on a very fast train set, would the cash be better spent elsewhere by the Government, and isn’t it likely given the history of public sector infrastructure schemes that the figure of £50 billion will turn out to be an under-estimate?

The Government, with it would seem the support of the Labour opposition, regards HS2 as a tool to improve growth and rebalance the economy outside of London and the South-east. When completed the scheme will provide an annual economic boost of £15 billion and deliver up to 100,000 jobs in the west Midlands alone it is claimed, although these figures are widely disputed.

The line from Euston to Birmingham and on to Leeds and Manchester will also free up capacity on the existing classic rail network and improve the commute on local services.

Without HS2, it is claimed, commuter routes like the West Coast Main Line will simply grind to a halt because demand for travel will vastly exceed supply. Transport Secretary Patrick McLoughlin has spoken of how commuters to London from Birmingham will have to start queuing for a train in the early hours of the morning to be certain of getting on board.

Claims about the economic benefits and new jobs to be created by HS2 are at the centre of the high speed rail battleground, with experts sharply divided over the figures.

The House of Commons Public Accounts Committee is the latest body to throw a spanner into the works by publishing a critical report accusing the Department for Transport of lacking a strategic plan for the rail network.

MPs said they were sceptical about whether the DfT could deliver value for money on HS2.

The committee came close to accusing Ministers of subterfuge, pointing out that £5 billion out of the estimated £21.4 billion cost of HS2 phase one from Euston to Birmingham had been set aside as a “generous” contingency fund. This made it 95 per cent certain that phase one would be delivered within the £21.4 billion budget envelope.

The committee also questioned whether UK industry had the capacity to deliver HS2 and HS3.

Jim O’Neill, chair of the Cities Growth Commission, has emerged as a leading HS2 sceptic. A recent report by the Commission, Unleashing Metro Growth, challenged the Government to devolve powers and budgets to regions and combined authorities as a means to engineer growth. Mr O’Neill doesn’t believe that HS2 will deliver the economic improvement promised.

Mr O’Neill told the House of Lords Economic Affairs Committee he sympathised with the view that HS2 would merely “suck more businesses down to London”.

As an economist, Mr O’Neill said he could not see how HS2 would be as clearly beneficial to Northern cities as had been suggested by regional leaders. There were better ways of spending £50 billion to stimulate growth, he added.

Mr O’Neill stressed that the Cities Growth Commission favoured interventions in other aspects than transport to boost regional economies, such as improving local knowledge bases and devolving responsibilities on skills.

In response to a question by former Foreign Secretary Lord Carrington, Mr O’Neill claimed that HS2 would benefit more highly-skilled people and did not address challenges faced by unskilled people in regional cities.  He also felt HS2 would be a premium-price service with high ticket prices.

The case for HS2 was put to the Lords committee by HS2 executive chair Sir David Higgins.

Sir David began by hinting that the project could come in under budget because there was a determination to trim “a substantial amount of money” from the cost estimate. He pointed out that £14.4 billion of the £50 billion estimated cost was for contingencies and added “we should not assume the contingency will be spent”.

The West Coast Main Line was “a nightmare” to maintain while the Birmingham to Leeds service was “hopeless” because it could take as long as two hours to travel between the two cities.

Sir David pointed out the economic benefits of many other major transport projects had originally been underestimated. He told the committee: “The fundamental weakness of the existing network is that access is very difficult and utilisation is very poor, with all sorts of trains having to travel on the same lines. There are too many trains in the timetable. It can never run on time.”

Asked about the style of HS2 trains and ticket prices, Sir David said there were broadly two alternatives. There might be a first class dining car and conference facilities on board, or “you may say it should have everyday prices, be a turn-up-and-go railway and you won’t want to have premium fares.”

He rejected a suggestion from former Chancellor Lord Lawson that cost savings could be made by reducing the HS2 top speed to about 200mph rather than 240mph.

Sir David said sections of the line operating at 240mph had not been shown to generate substantially higher costs.  He described the need for the highest speed part of the line, saying it was important that sections of the line went faster.

The issue of cost-benefit analysis would “continually evolve”, the current approach was based on worldwide best practice and was “as good as it will get” whilst probably not capturing every benefit or cost. The £50 billion planned to be spent on HS2 was the best used for such money against other possible transport links, he insisted.

Sir David said cost-benefit analysis had compared the costs from four alternative rail schemes, including using existing lines.  He said no analysis had been done on road versus rail.

In response to a question from Lord Carrington, Sir David said he did not agree with previous evidence that suggested there were only overcrowding issues currently regarding freight, saying there was both overcrowding in long-distance commuter and freight travel.

Sir David defended the transformational impact HS2 would have on business outside of London by cutting journey times by an hour. Companies would need to reinvent their cost structures to deal with global economic forces, and cities such as Birmingham were currently “fighting with one hand behind their back”.

He stated that construction in the UK was not skilled or high-tech, with a fragmented structure and supply chain.  He said HS2 provided a chance to reduce costs by driving innovation in the UK construction industry.

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