Lords ask about costs, fares, BCRs and capacity

Yesterday, the House of Lords Economic Affairs Committee continued their inquiry into HS2, with appearances from Paul Plummer, Rupert Walker and Chris Nash, followed by Lord Adonis.

The questions focused on capacity, fares and fare pricing policies and the costs of HS2.

The session started with questioning of Paul Plummer, (Rail Delivery Group and Network Rail),  Rupert Walker (Network Rail) and Professor Chris Nash, Institute for Transport Studies, University of Leeds.

The opening questions were about capacity. Lord Hollick, the chair said that they had asked for passenger demand figures from the Department for Transport and had not been given them. He asked whether the capacity problems were from commuters or long distance.  Paul Plummer, who diid most of the talking in the early session, claimed that it was impossible to separate out the two types, but that commuter overcrowding would continue to get worse.

Lord Lawson compared airline pricing strategies, which mean many planes are filled up  with current train pricing policies.  These mean a number of services have plenty of spare capacity, and he asked whether a more sophisticated pricing policy would change that.  Plummer effectively said it would be too difficult.

There was acknowledgement that fare pricing policies are politically sensitive, and that there are regulatory constraints for intercity trains with off-peak walk-on fares subject to controls, and requirements about times of day at which it is available.  Prof Nash said that these regulations contribute to Friday evening passenger numbers, and that franchisees would not make that fare available on a Friday evening, if they had the choice.

Like almost everyone who supports HS2, both Plummer and Nash claimed that the roll-out of super fast broadband will actually increase the demand for travel.  They acknowledged that there had been changes with some people working from home for two or three days a week, but their view was that that these people still travelled to meetings and were inclined to live further from their workplaces.

Lord Skidelsky pointed out that they were  “extrapolating from the increasing volumes last twenty years to the next twenty years, but surely its reasonable to look at big changes in work practises. For example working becoming more staggered with flexible homes, working from home, videoconferencing. Are you saying that these things which are predicted and to some extent have already taken place are too negligible to factor in to your estimates of traffic demand?”

Although Plummer said that they had been using models based on their experience, these models did not incorporate changes to working practises like these.

Lord Carrington said that they were “trying to get our head round what HS2 is for, ” and went onto ask whether  the effect of HS2 to transfer trains from WCML to HS2 so that more commuter traffic can be sent into Euston,  not actually to do with an increased traffic to Birmingham itself?

He also asked “How will you get people to move from slower cheaper trains to faster expensive #hs2 trains?

It was clear in both this session and the later session with Andrew Adonis that none of the proponents of HS2 was willing to express an opinion on HS2 hares, with Plummer claiming it was a matter of government policy.  They hadn’t actually modelled the fares, because it did not effect the business case.  Lord Shipley said that a lot of leisure passengers were sensitive to fares and would determine mode of travel on price not speed.

Chris Nash siad he thought HS2 had done some work on fares, but that HS2 was about yield management

Lord Griffiths asked ”to what extent is the modelling done through the mindset of engineers rather than economists”, acknowledging that rail fares are a sensitive issue politically, so ministers might not be willing to explore pricing in a ‘liberal’ way. He pointed out that in 1989 it was said the London Underground could never increase capacity, but 20 years later, it was up 20%!.  There was “a confusing picture, a sort of mist” he said.

Lord Skidelsky said that forecasts on capacity can’t be much use without knowing what the price of HS2 seats would be. You can’t separate them.

Lord Adonis was questioned in the second part of the session.

The opening question from Lord Hollick: “what is the exam question that hs2 answers?”

Adonis said that this was in the 2010 command paper, and it was firstly about capacity between Greater London, West Midlands and the North West and also East Midlands and Yorkshire. He said some “people say that we were fixated by fast trains. it was actually a hardheaded analysis of likely capacity requirements.”  Although they had compared upgrades to a new line, they had just been through a 10 year modernisation project on the West Coast Main Line.  Adonis said he couldn’t say which would have been cheaper.

Lord Hollick said the committee had asked the Dft for capacity figures, which they had not got and asked Adonis why there was a reluctance.  Adonis claimed that during his time at the department they had been very open.

Hollick asked about the roll-out of super fast broadband, but Adonis said that although broadband lead to more home working it didn’t reduce the demand for rail travel. Adonis subsequently said that capacity at peak times was the relevant factor for HS2.

When asked about building a conventional speed railway which would cost 10% less, Adonis was incredibly dismissive, claiming that it was “crazy to build a 21st century railway to 19th century technology.” He went onto say that he hoped they “will be buying, internationally competitive rolling stock and not seeking to customise any more than we need to run some trains beyond HS2.”  Then he claimed it might not cost less, because a slower speed railway would follow transport corridors with the risk of disruption to existing communities.

On being asked whether HS2 would lead to economic growth, Adonis admited “I hope so, but I can’t be certain”  and that “the future may not be like the past”.

Lord Carrington said that one of the things that justifies HS2 is the amount that business people willing to pay to shorten journey times. But as they probed those numbers its been suggested to them that they are hard to justify, other than being directional along the lines of  “We assume that businesses will value a quicker journey and put a number of that and multiply it up and that produces 75-80%… suggests the numbers are pretty hard to rely on.”

In a long-winded answer, Adonis claimed that he’s always been sceptical if BCRs: “an aid to policy making but not a substitute for judgement.  My personal view is that aggregating small journey time savers is debatable and may be not a fruitful endeavour… Even if take the assumption that the journey time savings has been overestimated, there are other things in the model that are frankly crazy,” citing that in the model growth in journeys stops in 20 years.  Although he admitted that “The further out you go the more uncertainly increases” he claimed it was the  equivalent to Brunel being told to build canals not trains.  Adonis admitted that you could put different assumptions in and get different results.

Lord Carrington saw through the rhetoric, and pointed out that the conclusion would be “that all the modelling that the dft does and academics do us is a waste of time.  What we ought to be doing is saying that we think this is a good thing therefore it is a good thing.”

Adonis back-pedalled and said that the BCRs were an important aid but not the only factor.  He gave examples of a number of infrastructure projects and said that only two under performed projections, of which one was HS1.  He blamed that on the fact there was not already substantial travel to Paris and Brussels from London.

In an extraordinary turnaround, Adonis said that his view was that “if you could rerun the history, is that we built the wrong high speed line first.  We should have built the line between our major connurbations in England first before we started building a line out to the continent”.  It is not clear how he expected travellers to get to the Channel Tunnel if HS1 had not been built.

Lord Carrington said that’s not the argument they’d been hearing.  The argument they’d been hearing was the pressure wasn’t the traffic between London Birmingham and so on, the pressure is the commuter traffic to London.

Adonis claimed they were the same thing.

Lord Lawson asked at length about the costs of building HS2 and whether Adonis would support it any cost.  Adonis dismissed whether increasing costs of construction were relevant and said that costs going up because of increased tunnelling would “weigh” on him. He was highly critical of the cost increase to £42 billion blaming the Treasury for increasing the contingency and basically said that construction managers would spend it.  He also said that he had had disagreements with the Treasury and his advisors over including contingencies.

Adonis said he took the view that pricing decisions should be made at a later date.

The full session can be viewed here.

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One comment on “Lords ask about costs, fares, BCRs and capacity
  1. Will the House of Lords report be next Spring to provide the justification for replanning HS2 Phase 1 due to too little value for the money and failure to consider regeneration benefits for each alternative route

    The House of Lords presents one opportunity to report factually from the direct questioning on the shortcomings in the early and later phase 1 stages. It would be worthwhile for the Lords and Baroness to question Sir David Higgins on why each route has not had the same depth of assessment of the regeneration benefits. Nearer to the M40 or the M1 and nearer to the populated areas and the jobs seems to offer more potential than through the middle of Buckinghamshire and the edge of West Northamptonshire and Warwickshire. Lord Adonis’s judgment did not consider all the issues according to his admission. Hammond and Greening followed the 2010 Command Paper and at that time regeneration was not being used as the additional factor. Time for a fresh start taking into account all the factors now argued on all sides including the use of tunneling to reduce surface impacts on roads and communities please.

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