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The next six months are make or break time for HS2

The next six months are make or break time for HS2

🕔16.Sep 2013

It is sadly true that Government attempts to sell the benefits of high speed rail in a country where costly infrastructure projects are generally greeted with scepticism have been poor or non-existent.

In the space of three years we have moved from broad cross-party agreement on HS2 to an atmosphere of suspicion and doubt on all sides, with the possibility that the £50 billion project could be scaled down, delayed, or even abandoned after the 2015 General Election.

A recent YouGov poll for the Sunday Times suggests that for the first time a majority of people, 55 per cent, oppose HS2, up by nine per cent from July. In January 2012, YouGov polling showed opposition to HS2 at just 37 per cent. Support for HS2 has dropped by five points between July and September this year and now stands at 29 per cent.

So, how did it come to this?

Efforts to make the case for a high speed network linking London to Birmingham and northwards to Leeds and Manchester have all too often hit the buffers before even leaving the station. The Department for Transport, which should be shouting from the rooftops about HS2, has been sleepwalking to disaster.

Too much time was spent talking about speed and not enough attention paid to explaining the capacity issue. For one of HS2’s most important achievements will be to increase capacity on an overcrowded West Coast Main Line. Without HS2, WCML peak-hour trains will be full to bursting within a decade.

But capacity is a difficult concept to explain. So HS2 Ltd and the Department for Transport stuck rigidly to the faster journey times that would flow from the high speed route between Birmingham and London, which of course prompted questions about ‘why are we paying so much money to shave 20 minutes off an already pretty quick journey time?’

It was certainly known two years ago that the HS2 business case was flawed, not just as a result of underestimating the capital cost, but also because the Department for Transport failed to recognise that commuters already work on laptops and mobile phones when travelling by train. It could not, therefore, be shown that HS2 would provide additional economic benefits as a 225mph office space.

This error is one of many flaws referred to in the House of Commons Public Accounts Committee (CPAC) report of September 9,. MPs didn’t reject the scheme out of hand, but concluded that the DfT is yet to make a convincing case for HS2.

The CPAC report is the latest in a line of highly critical analyses of HS2. At the end of August the Institute of Directors called on the Government to abandon the project, describing HS2 as a “grand folly”. This stance appears to have been informed by a poll of IoD members who expressed doubt that high speed rail would do anything for the economy or their businesses.

The Thatcherite thinktank the Institute for Economic Affairs weighed in with a report claiming that the Government had failed to make the financial case for HS2 and warned that the scheme could eventually cost £80 billion, almost double current estimates.

Picking up on a growing trend among HS2 critics “that the money could be better spent on other transport projects”, the IEA claimed: “Ministers appear to have disregarded the economic evidence and have chosen to proceed with the project for political reasons.

“An analysis of the incentives facing transport policymakers provides plausible explanations for their tendency to favour a low-return, high-risk project over high-return, low-risk alternatives.”

Members of the CPAC also sounded an ominous warning note about the Government’s attempts to rush through legislation to allow work on HS2 to begin.

A timetable envisaging Royal Assent by the end of March 2015 “appears to be unrealistic”, the MPs noted. Any delay would mean that a final decision on HS2 could not be taken until after the General Election, leaving the project with an uncertain future in the hands of a newly constituted House of Commons, and possibly a different Government.

On a slightly brighter note, the CPAC did not reject HS2 out of hand and held open the possibility that MPs could be convinced of the business case, but only if the DfT can come forward with more robust figures.

There are signs at last that the Government is mounting a belated fightback.

David Cameron reportedly told Ministers that they had to “step up and make a really powerful argument” to promote the economic benefits of HS2. He wants the case for high speed rail to focus on reducing the north-south economic divide, making the point that this is much more than a train service designed to move passengers very quickly between two points.

Transport Secretary Patrick McLoughlin announced the findings of a new KPMG survey of HS2 which estimates the project could deliver a £15 billion annual boost to the UK economy. This includes 50,000 jobs across the West Midlands and £4 billion of economic growth per year for the region.

Mr McLoughlin described HS2 as “vitally important to Britain’s economic future” and added that the railway would act as a “heart bypass for the clogged arteries of our transport system”.

The HS2 company’s job creation figures, criticised as unrealistic by opponents of high speed rail, suggest that phase one from London to Birmingham will create 9,000 construction jobs and 30,000 jobs in station redevelopment areas. Phase two, from Birmingham to Manchester and Leeds, will create 10,000 construction jobs and between 49,000 and 70,000 other jobs.

One area of vital importance for Birmingham and the West Midlands concerns HS2’s ability to cut journey times between Birmingham Airport /NEC and London, cutting in half travel times between the airport and Heathrow. This, it is suggested, will significantly boost job creation in and around the M42 Growth Corridor, an initiative set out in the Greater Birmingham and Solihull LEP’s bid to the Government’s single pot growth fund.

The debate about HS2 has until now focused quite narrowly on two areas. For a year or so after the scheme was first launched argument raged over the environmental impact of the new line through Buckinghamshire, Oxfordshire and Warwickshire. This was given additional spice by the fact that the route would pass through the rural constituencies of prominent Conservative MPs.

When the second phase of HS2 from Birmingham on to Manchester and Leeds was announced, discussions moved on to the cost and whether investment on such a scale could be afforded in the current economic climate. It seems clear that concerns about cost, with phase one of HS2 to be paid for out of the public purse, will dominate future arguments.

A research paper by consultants Volterra, published on behalf of HS2 Ltd, sets out clearly the way in which the public relations argument for high speed rail must change, and change quickly.

Volterra makes the point that large scale transport projects are always expensive, carry a risk and that the economic benefits flowing from improving connectivity can take many years to flow through. In other words, the usual Treasury methods of analysing cost-benefit rations are not necessarily helpful with a project of the size and complexity of HS2.

Bridget Roswell, one of Volterra’s researchers, explains: “For many years, public investment decisions have been based on an assumption that all profitable investments will be made by others, and that investments in, for example, transport will not make any difference to the economy, merely to consumers’ welfare.

“Even though this assumption is palpably untrue, especially in periods of structural change, the procedures based on it are routinely described as tried and tested.  The welfare analysis that results is able to assume the future economy as a given, with no uncertainty about its delivery.

“In the real world, this is of course nonsense.  The consequences of an investment are always unknown, and decisions require a balance of judgment of risk.  This applied to early investors in the railways, many of whom lost their shirts when passenger numbers were not as forecasted.  Their loss was however the economy’s gain in the longer run as railways made possible the industrial economy.

“This brings to mind the Channel Tunnel and High Speed 1, making possible investments which generate longer term benefits than investors expected, but not on a time scale that helped them much.  My analysis of HS1 shows that if as little as 10 per cent of the jobs developed around its stations owe their existence to the railways, it has paid for itself in output terms.”

We can expect to hear much more over the coming weeks and months about the following:

– Tackling the north-south divide. HS2 will improve connectivity between London and the great cities of the north, stimulating economic demand and creating jobs.

– Creating additional capacity on existing rail lines. HS2 will free capacity on the West Coast Main Line, which is already close to maximum occupancy. HS2 will double rail capacity between Birmingham and London.

– Failure to build HS2 would require hugely expensive investment in an improved or new WCML, a complex project that would take many years to complete.

One of the consequences of this new PR campaign is likely to be that we may hear rather less about Birmingham in the context of HS2.

The Government appears to have accepted that the best way to convince the public and MPs about the benefits of high speed rail is to focus on how the route will bring the north of England and the south-east closer together. Birmingham, after all, is not very far from London and will merely be a staging point on the HS2 route, which in fact bypasses the city. Some HS2 trains will run into Curzon Street on a spur, but the main line will split off northwards at Birmingham International.

It’s even being whispered that HS2 may have a new name if Labour wins the 2015 General Election – the North-South Railway. After a few jitters from Shadow Chancellor Ed Balls, it would appear that Labour is broadly still backing high speed rail, although HS2 Ltd would probably be wound up with the project being placed solely under the control of the Department for Transport.

One way or another, the next six months are likely to be make it or break it time for HS2. The case for high speed rail simply has to be put with greater clarity, and urgency, if the scheme is not to unravel in front of us.


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