One of the issues that HS2 Ltd have its that it can’t get the benefits to be as high as they want to be to justify the costs of HS2.
Up until now, they’ve managed to claim that the benefit cost ratio (BCR) means that building HS2 will bring more benefits than HS2 will cost.
But with the latest cost increase (HS2 is expected to cost more than double the original estimate), even HS2 have given up claiming that. Baroness Vere told the House of Lords that they would ensure “that the benefits and costs are appropriate for this project”, and went onto say that if the benefits were half the costs they would cancel. Allan Cook’s Stocktake review refers to the Jubilee Line which went ahead even though the BCR was 0.95.
But proponents of HS2 have no need to worry, for Cook’s review also says that HS2 will be inventing their own methodology. Cook doesn’t quite say that the benefits will come out positive, but he does describe the process.
In august, HS2 will develop a new methodology that
considers factors currently discounted by the standard ‘WebTAG’ approach, including the long term value thatthe HS2 railway will deliver, the regeneration benefits around stations and benefits during the construction period such as jobs and skills.
In September HS2 will check that the DfT thinks it can get away with whatever they’ve invented:
Understand the provisional implications for the benefit-cost ratio (BCR) (September 2019) and test the approach with the DfT, HMT and independent reviewers.
And in December they will:
Provide a revised BCR as part of HS2’s Full Business Case for Phase One(anticipated in December 2019).
(Don’t worry about Phase 2 because they will then improve the process “to support future business cases for Phase Two of HS2″.)
Of course this is not the first time that the DfT have pulled a similar trick. A much vaunted KPMG report which showed some areas would benefit from HS2 used a methodology that economist Henry Overman said was “essentially made up”. (Then the DfT also forgot to publish the many places that would lose out.)
But this time, Cook says the methodology will look at HS2’s benefits over longer than 60 years, referring to the 150 years of railways. Of course the problem there is that it is hard enough to predict transformation over 10 or 20 years: looking back 150 years, we have gone from steam trains to diesel and now electric. Londoners were concerned about London being overwhelmed by horse manure from transport and airplanes were a fantasy.
What’s more in talking about including land use around stations, Cook shows no sign that the methodology will take any notice of the land lost to the HS2 tracks and surrounding areas.
Cook says “changes to the location and investment decisions of firms” are not included in the BCR calculations, whilst failing to acknowledge that a company deciding to build their factory in Birmingham rather than Bradford means Birmingham gains at Bradford’s loss and so of course changes to location decisions should not be included.
HS2 Ltd are clearly desperate. They know that there is no conventional methodology for appraising benefits that shows HS2 to be a sensible project to proceed and are now just grasping it straws