Government admit value for money of building HS2 was inflated.

For the fourth time since initial plans published in March 2010, the benefit-cost ratio (BCR) for HS2 has been revised downwards, the nearest official figures have come to admitting that the project will never make money. When the plans for the London to Birmingham section were first announced two years ago, the official BCR was 2.4, meaning that for every pound spent there would be £2.40 worth of benefits. When Transport Secretary Justine Greening announced the plans to go ahead with HS2 on January 10th 2012, this figure had dropped to 1.6, but she still said the project represented ‘good value for money’. Within a month, the figure had dropped to 1.4 and now thanks to the discovery of a ‘modelling error’, this figure dropped to 1.2.

However, following the National Audit Office report into HS1 shows that the actual benefit cost ratio is likely to be much lower than this, as lessons from HS1 have not been learned. HS1 is only operating at one-third of the original passenger forecasts, which prompted the NAO to say that in future the DfT “should ensure that demand forecasts are subject to rigorous scrutiny and scepticism”, which was clearly not the case. This revelation prompted the Institute for Engineering and Technology to say “The original HS1 business case was based on journey time-saving benefits and increased rail capacity. The total value of these benefits is not known; the DfT has not yet developed a method to evaluate HS1 project costs against benefits, despite this forming part of the HS2 justification.”

Stop HS2 Campaign Coordinator Joe Rukin said;

“The value for money measure for HS2 has kept dropping and dropping since the outset and the fact it has come down twice in just two months is no surprise. We have said since the outset that there is no business case for HS2 and to hear the DfT dismiss wasting at least £36.4bn of our money as simply just ‘narrow transport economics’ is disgusting. There is simply no sense in this project, but the Government are pig headed and do not care.”

“You would really hope that in these times of global financial doom that the Government would be responsible enough to listen to the likes of the National Audit Office. Their report last week showed that HS1 has only managed one-third of the original passenger forecast and the supposed benefits of HS1, and therefore HS2, have never been quantified. If the passenger forecasts for HS2, which have not been subject to the ‘rigorous scrutiny and scepticism’ the NAO suggest are out, the value for money figure of HS2 will drop further, and the whole idea of benefits relying on putting a figure on ‘time is money’ is totally spurious. The economic case is founded on the fact that everyone on HS2 will earn £70,000 p.a., that no-one at all works on trains and that people faced with a shorter journey time won’t simply spend longer in bed. All that is then multiplied by a grossly inflated passenger forecast and even then you only now get a BCR of 1.2. It is clear the whole thing is a work of fantasy and that the figures can only get worse. It is simply irresponsible for the Government to proceed with HS2.”

Related articles

http://www.ft.com/cms/s/0/2c780fc4-8402-11e1-9d54-00144feab49a.html#axzz1rojaMl9z

http://www.railnews.co.uk/news/2012/04/12-government-discounts-claims-of-rising.html

http://www.guardian.co.uk/uk/2012/apr/11/railways-hs2-fewer-economic-benefits?newsfeed=true

http://www.51m.co.uk/news/business-case-hs2-receives-another-setback

http://stophs2.org/news/5003-hs2-failure-dwarf-hs1-stop-hs2-campaign-group

http://www.bbc.co.uk/news/uk-17525872

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14 comments on “Government admit value for money of building HS2 was inflated.
  1. At the consultation roadshow in Kenilworth, I was explicitly assured by the sound engineer that the level of mitigation proposed at that stage was a minimum, and was likely to increase. Subsequent announcements about finding savings elsewhere on the line to fund a tunnel through the Chilterns suggest that that statement, and presumably countless others of a similar ilk, were almost certainly untrue – hopefully unwitting naively so on the part of HS2′s representatives so or else we would be in the realms of fraud. The Planning Consultation system as it stood may have many flaws, but that does not justify a government-sponsored attempt to offer biased and false information, in effect propaganda, in the run-up to a consultation review that appears to have only ever been intended to be treated as a box-ticking exercise – taking no subsequent account of views expressed in the consultation itself, or indeed of so many other stated objectives of this government itself.

    This has been a very depressing exercise in the unthinking wielding of political clout to force through a (terribly flawed) pre-determined course of action. Let’s hope that judicial reviews and other challenges do earn time for some sort of sanity to prevail.

  2. Pingback: STOP HS2 | The 51M ‘Optimised Alternative’

  3. At greatworth road show( sorry consultation) I was treated with contempt because I said I couldn’t see how that financial return they were using was correct. Er. Whose stupid now!

  4. reading in sunday times this morning that in twenty yrs time we will have flying areas for flying our cars about the country what will that do for hs2 the goverment just do not no what is going to happen in the yrs to come so why spend all this money on this venture they should be doing things now to improve peoples lives and jobs prospects not digging up the dead and countryside to knock twenty mins off journey time to birmingham

  5. If govt only contribute 0.5bn per annum to crossrail where will the other 1.5 bn pa come from for hs2?

    Yet another deception that the 2bn pa spend on hs2 will be that currently spent on crossrail

  6. Just been reading commentary from a local MP; David Lidington, who whilst still maintaining a public facade of outright opposition, is now gradually beginning the process of softening up public opinion in areas directly impacted by HS2, due to proximity.

    Those placing faith in Parliamentary process are effectively wasting their time and effort. The Hybrid Bill, scheduled to enter Parliament on 25th Oct 2013 (a fact confirmed by this site) will sail effortlessly through the legislative programme and receive Royal Assent early 2015, my guess being 1st week of February or 3 months before the next General Election – given the overwhelming cross-party support for HS2, the actual outcome of the General Election, ie. which party (or coalition of parties) holds power after the election, is irrelevant, unless of course the Green Party somehow manage to get 300 MPs elected – this is a long shot to say the least? To quote Mr. Liddington from the Bucks Herald Article

    Mr Lidington said that while there is still a ‘long way to go’ before HS2 is approved, he believes there is little chance of the scheme being defeated in parliament.

    “I have to say to you that if there were a completely free vote in the Commons now, with no guidance from party leaders, HS2 would be supported by a very large majority.”

    Isn’t it time for pragmatic and constructive engagement with HS2 Ltd?

    • At a local meeting Tony Baldry, MP for North Oxfordshire, on the question of will HS2 ever be built, said the scheme faces 3 challenges.

      1 – The courts. Three judicial reviews. As a barrister, Mr Baldry said it is likely that the court will rule that the government has acted unlawfully in respect of environmental legislation and order them to start again.

      2 – Hybrid Bill Committee. The first cross-rail proposals were voted down by a hybrid bill committee. It is entirely possible that HS2 could fail here too.

      3 – The treasury. Latest assessments of the cost benefit of HS2 shows that the benefit-cost ratio has dropped from a gain of £1.60 for every £1 invested when it was calculated in February 2011 to £1.20 now. ‘The Treasury would not normally get out of bed for that’.

      In Mr Baldry’s opinion, if the progress of the scheme is delayed beyond the life of this parliament, political will will wilt, especially if the economy remains in the doldrums. The Achilles heel of HS2 is the business case.

      • @Finmere

        You’re indulging in wishful thinking again on all three fronts

        1.The judicial reviews will fail (and you know that already). They are delaying tactics, pure and simple.
        2. The Hybrid Bill boasts strong (in fact overwhelming) political support (you know that as well). Yes, around the periphery, some will play games to try and secure a more advantageous outcome for their particular locality – that is par for the course – but the Bill will receive Royal Assent in early 2015, before the next General Election.
        3. The Treasury – strange that George Osborne is very strongly supportive of the project. The recent BCR announcements are all part of a game, anticipating the rather predictable (but futile) legal challenges by stripping out benefits potentially open to question. In short adopting an ultra-cautious, absolute worst case scenario, enabling the lawyers to present a more roubst defence in court.

        Mr. Baldry is also engaging in a charade, specifically for the benefit of his constituents, in order to shore up his own position when HS2 goes through.

        • You always sound terribly certain, Peter, about precisely what will happen with the hybrid bill and all the judicial reviews etc.

          Even if the hybrid bill is presented to Parliament, there is no guarantee that it will get as far as being voted on. Both the original Channel Tunnel Rail Link hybrid bill and an early Crossrail hybrid bill were cancelled at committee stage.

    • Well Peter it is like this…….HS2 Ltd and their supporters (including you) just do not seem to listen to anything other their own opinions or worse still are downright rude and dismissive.
      The consultations are merely a “this is how it is” tick box exercise and so trying to engage in any way with these people is impossible.

      The only thing that you have said that I agree with is that the government and a majority of MPs (mostly those who do not have constituencies near the proposed route) will vote it through. Sadly they are so out of touch with the people of this country on so many things HS2 is just one more on the list.

  7. Tends to add weight to the fact that the public is being hoodwinked on this by the government all the way down the Hs2 line. And if they’ve genuinely miscalculated, doesn’t say much for their competence.

  8. I hope all MPs/London mayor candidates have seen this and that they will be pressing for an independent enquiry
    How much more of our money will be wasted

  9. It is so frustrating. We can see it why can’t the DfT and the Treasury? HS2 would be totally irresponsible. People are losing useful jobs across the country. The government are offering jobs in shops at 2 stations, but nobody will have money to spenf in them. Give us our buses back and our fire station etc etc.

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