At the Transport Select Committee part 2 – who bears the risks?

One question that the Transport Select Committee wanted an answer for on Tuesday was about the uncertainties around the HS2 business case. Who was going to bear the entrepreneurial risks?  If it went wrong, who would bear the costs?

These questions were addressed to Alison Munro, from HS2 Ltd.

The answers were clear.  The business case was dependent on future demand, and the costs of the scheme.

Ms Munro said that HS2 thought that the public sector – that’s the taxpayer – should pay for the construction.  It was possible some of the risk could be transferred to the private sector, but no-one had thought about the details.  So, the taxpayer bears the risks, and will lose money if it all goes wrong.

Later in the session, Ms Munro said they had tested to see what happened to the business case if passenger demand was 20% lower then HS2’s forecasts.  It drops the cost benefit ratio of HS2 to below the threshold for Department for Transport support.  In other words if the growth in demand for travel to London is a bit less then HS2’s estimates, the Department for Transport will not fund the railway that HS2 propose.

However as Christ Stokes said on the Lobby Day, HS2’s passenger demand forecasts are significantly higher then other reputable forecasts: they are nearly double Network Rail’s.  If Network Rail’s figures are correct, the business case for HS2 collapses.

HS2 assume that a quarter of the passengers on the proposed trains are simply travelling because there’s a new railway.  If they don’t materialise, then the business case collapses.

So, you and me will bear the costs if Hs2’s figures are wrong – and HS2’s figures are being particularly optimistic.

Edit: for those who like to check for themselves, the uncorrected transcript of the session can be found on the Parliament website here.

15 comments to “At the Transport Select Committee part 2 – who bears the risks?”
  1. Pingback: STOP HS2 | Who are Stop HS2?

  2. At least the Victorian railways had stations and gave benefit to the local community.

    In an era when commuters are crammed in like sardines all over the country, how can it make sense to spend billions of pounds on a flagship project that does not solve the transport problems that most people face on a day to day basis? As someone said already, when what you need is a family car you don’t go out and buy a Ferrari!

    NIMBY? This should not be in anyone’s back yard. It won’t solve the problems that exist, it will suck up money and leave other much needed transport investment without funds. As such it is not democratic. But I don’t think it’s a political risk because by the time everyone realises this, the political incumbents that made the decisions will be long gone.

  3. Reply button for the correct thread seems to have mysteriously dissapeared, but anyway…

    Hi Penny,

    You’re right – we aren’t going to agree. We can post URLs at each other until the cows come home. Bottom line is
    this. I, along with all the major political parties, believe 100% that the UK needs HS2 to build a better transport infrastructure for the future. We need a bit of vision and not a “make do and mend” attitude which has turned our railways into a continental laughing stock over the past fourty years. I am also 100% sceptical of your fundamental reasons for running this campaign. Most people who see news of econmonic decisions taken by governments that they disagree with, may tut, or write an angry letter to the press. When someone takes it to the extent you and other campaigners have, it’s a cast iron certainty that they have an ulterior motive, hence the cartoon angry trains, kids being roped into protests etc. It’s simply good old fashioned nimbyism. The campaigners dont’want it built in their area, and all the guff about whether it’s “green” or what the business case is just a cover for that. I’m just staggered that some people have the brass neck to announce to millions of their fellow citizens that the government have got it wrong, they don’t need better rail links, and you’re going to try and get it stopped in *their* interests. I look at some of the magnificient things the Victorians built in this country which made the UK the economic powerhouse it once was, and I’m astonished how they managed to do it all without someone, somewhere demanding it be stopped becuase they don’t like how it looks or sounds.

    I’ll leave this now and wish you a Merry Christmans and a Happy New Year.

  4. HS2 will not encourage businesses to move away from London. Execs want to be close to their biggest markets and London is one of the biggest in Europe for many goods and services.
    What will happen is that residents of Birmingham will become commuters to jobs in London adding massively to congestion around Euston.
    As to home working there seems to be some misunderstanding. People seem to think it is either the odd day or all the time! In truth it will average between 2 and 4 days per week. This saves people time, fares, fuel and increases productivity while still ensuring team working and visibility. The trend for home working is rising constantly and new technology is making it easier and easier.
    The UK government is looking to enable civil servants to work from home (the US government has just done this too!).
    Commuters are high value buyers of rail services. As they spend more time at home, rail revenues and the business case for HS2 will suffer.

    • 1. Indeed there is some misunderstanding about the effect of more people working from home. As has been mentioned in just about every debate about this on the internet, the ease of working from home and the rise in people doing so has taken place alongside an increase in rail passenger numbers. One of the stated aims of HS2 is to ease congestion, because more and more people are using the railways. This is fact, not a prediction. So working from home is not the
      panacea for rail travel that you and others seem to want to hope it is. The hard stats say otherwise. It’d be nice if it worked like that, but it doesn’t.

      2. Google for the expected population growth in the UK over the next few decades. What does that tell you? We won’t need any more jobs created? No need for more business premises? Sorry, but there most certainly will be, and it should *not* all be in the south east.

      If you honestly believe that with a rising population and more and more people using the railways that the answer is hoping more people will work from home – well, good luck with that.

  5. Hi Penny,

    Have you actually read that link about Ashford that I posted? This isn’t speculation – it’s not government sponsored reports or academic predictions – this is what’s *actually* happening. Whether or not businesses that create employment are attracted to areas with HSR is not up for debate – it is is a *proven* fact. Ashford now
    enjoys a major advantage over everywhere else in the UK as a place to site a business because of HSR, and your whole campaign is for the rest of the UK to be put at a disadvantage. Up to sometime in the late twentieth century, the logistics of getting goods to market may well have been the main concern for a business, but in the world-wide knowledge economy that we rely on today for the bulk of this country’s prosperity, I’m afraid it is mostly the ease of access that counts. Hence the success of Ashford. And even if the tranportaion of goods were the priority, HS2 will free up capacity for freight on other lines, so it’s a winner either way.

    Regarding the Federation of Small Businesses – I’m confused as to why you’re quoting their desire to spend money on roads instead of railways:

    “their members would prioritise spending on roads before spending on rail.”

    Did you not just post the following in your latest website article headed “Carbon Concerns and HS2”?

    “The proposed HS2 is a stand alone railway line, with no intermediate stations which will actually encourage more car journeys in order for people to get on it.”

    Do you want more railway journeys or less? Which one is it? Your latest entry is attacking HS2’s green credentials, so why on earth are you supporting a viewpoint
    which argues for yet more traffic on the road, with it’s associated pollution and annual death toll? I had rather hoped that the UK had shaken off the ghost of Ernest Marples, but sadly, it appears not.

    And the piece regarding the “Northern way”. All I see here is a piece saying “Rail investment=good”. How is this a counter-argument to HS2?

    It’d be great to think that everyone is going to shift to tele-working, but humans being humans, there’s no chance of wanting to meet face to face to conduct business going away any time soon. I have my own company and work in London because of a lack of opportunity in the Midlands – all the knowlegde economy on which this country depends is in the south-east. I want HSR to attract more business here so I don’t have to travel – I’m what politician Joe would call a “fat cat”, getting on the WCML every day. I actually don’t want to use HS2 – I want it to move businesses here.

    HS2 isn’t just about the immediate benefits. The whole of Europe is shifting to HSR and future generations will curse us if we refuse to let vast swathes of the UK be a part of it. This is also about a long-term need for future generations. If our forebearers didn’t have the vision to buld the WCML, ECML and all the rest of the UK’s railways, where would we be now? Your whole campaign is unbelievably irresponsible and I have serious doubts as to whether you genuinely realise the long-term implications to hundreds of thousands of people of what you are trying to achieve.

    Regards.

    • Nobody denies that Ashford has benefited from HS1. However just because a specific new railway line benefited some people, does not mean that all other railway lines should be given the go-ahead without scrutiny. In addition, you have to look at the costs of the railway line versus the benefits gained.

      We have a neutral stance other transport projects: however, other organisations are prioritising these projects over HS2. We are not opposed to railways in all their forms, we have looked closely at one specific railway project, and concluded that it is not in the nation’s best interest to build that specific project.

      It is not just our idea to suggest tele-working. Norman Baker, Transport Minister, has been given a ‘non-travel’ remit, to encourage digital working. The Public Accounts Committee (see article here http://stophs2.org/news/197-overcrowding-on-trains-part-2/ ) recently concluded that the rail industry should be “restraining the tendency to seek solutions through growth.”

      So, when you talk about ‘vision’ why are you suggesting that we copy what people did in the past, rather then using 21st century solutions to 21st century problems?

      • we have looked closely at one specific railway project, and concluded that it is not in the nation’s best interest to build that specific project.

        Well that’s nice, but I don’t think it’s in the nation’s best interest to have un-elected people who do not have the same study resources as the government dictate the UK’s transport policy. This is the will of a democratically elected government. It’s one of the reasons I voted for them, and I expect it to be seen through, as is right in a democracy.

        Tele-working as a total alternative to HSR would be great. Sadly, as you well know, it would require reams of government legislation to force businesses to do something which they simply do not want to do. Most companies allow workers to tele-work for the odd day or to, but must of them expect regular attendance in the office. Forcing them to allow employees to stay at home would probably drive them away as they would be concerned that productivity would plummet. There is no realistic way to implement this to the required degree that would render HS2 useless, and there is not one other country in the entire world which is attempting this as a complete alternative to transport spending. It requires a fundamental shift in attitudes towards working practices which is imply not going to happen. Suggesting HS2 should not be built because of a wholly impractical alternative will not wash.

        The point about Ashford is that it now enjoys a major competitive advantage over the UK. Your “No Business Case” claim is demonstrably not true as far as the rest of the UK is concerned. When European based firms look for a suitable UK location, Ashford is attractive because of it’s HSR link, so yet more firms are in the south and not in the north. Take a look at this map to see the problem:

        http://www.railteam.co.uk/

        • The question about Ashford is whether or not there is a net benefit to the country, not to Ashford! If HS1 was paid for entirely by Ashford town council then you could look at the benefits locally. But in fact the cost is paid by the nation, and thus the evaluation must include assessment of all the jobs and businesses that move to Ashford from somewhere else in the UK – these effectively count for nothing towards the billions spent. Similarly it is quite likely that if high speed rail gets to Birmingham that some parts of that town will see significant growth – but the question is how much of that will be genuinely ‘new’, and how much just represents a equal loss to cities such as Coventry and Lichfield, or even from the ‘wrong’ half of Birmingham?

          • The question about Ashford is whether or not there is a net benefit to the country, not to Ashford!

            No, it isn’t!!! As I said in my last paragraph:

            “When European based firms look for a suitable UK location, Ashford is attractive because of it’s HSR link, so yet more firms are in the south and not in the north.”

            HS2 is about being part of an integrated European wide HSR network. If “growth” in the UK simply means UK-based companies shuffling about from one location to the next, then we may as well all give up now. I’m no big fan of politicians but at least the current coaliton government seems to appreciate the importance of making the UK an attractive place to do business. (This is a bit of an insomia cure but you get the drift):

            http://www.hm-treasury.gov.uk/d/nationalinfrastructureplan251010.pdf

            All the basic reasons for HS2 are in that report. The UK has to compete globally, not just encourage small businesses to move around, and to do so, a transport infrastructure has to be in place which gives the rest of the country a fighting chance, not just the already overloaded south-east. It is simply not fair to have the rest of the country at a disadvantage when it comes to attracting new business because it gets held to ransom by some people who think a railway line will spoil the view from their house. Here are the opinions of some people at the sharp-end of actually generating business in the UK, rather than people who simply don’t like the idea of the way a railway looks:

            http://www.highspeedrailuk.com/?page_id=7

            • Hi Richard, it’s clear we’re going to disagree about whether HS2 will bring the benefits that you claim it will to places north of London.

              Stop HS2 are not the only people who are sceptical about whether HS2 will bring benefits to these areas of the country. If you want to read other people’s views, you could look at an earlier Transport Select Committee – http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtran/uc473-i/uc47301.htm – where academics from the LSE, Birmingham City University and Newcastle University express their doubts about HS2.

              For what it’s worth, the campaign at http://www.highspeedrailuk.com is no longer being run (confirmed by ringing up the number on the media page). The most recent update is from March 2010.

  6. This is a spurious argument, much like when Philip Hammond said that having to travel three hours to a potential factory site for someone who had just flown in from Japan was a massive disincentive. The car plant in Washington must not exist according to him.

    The argument that ‘everyone else is doing it’ is quite frankly not a good enough argument, especially when you look at the cost and start to imagine what it will cost to subsidise the running of this fast train for fat cats.

    This won’t benefit anywhere except London, a position backed up by all the academic studies. It may solve some of the housing issues in the SE, why else would there be 40,000 car parking spaces planned for the Birmingham Interchange station?

    • It’s really not a spurious argument at all, and one car plant in Washington does not make a case for or against HSR. That car plant was built back in the eighties, and would the Japanese, who truly understand the benefits of HSR, have built something like that there today when they could have built it in a continental European city with HSR links? I doubt it somehow.

      Read this:

      http://www.insidermedia.com/insider/south-east/43368-/

      What more evidence do you require exactly that HSR brings investment into an area? “No Business case?” – I think not. With a European wide HSR network, why would anyone want to establish a business location anywhere north of London? Although I can see that as far as you’re concerned, the people people who have bought jobs to Ashford are all “fat cats” whom you clearly don’t like anyway. If they renamed HS2 to “The People’s Railway” would that make you any happier? I agree with the potential that it could relieve the pressure on housing in the south with 40,000 car parking spaces – it would just be an additional benefit and you neglected to say why you think it’s a bad thing. And don’t just claim “I’m right because all the academic research says so”. Post up some links that are backed up by solid research and not someone’s guesswork. All I’ve read is some very credible analysis from various sources detailing why it should be built, all of which are freely available on the internet. When mass transit by car first came along and then by plane, thank goodness the UK wasn’t full of politicians who said “the argument everyone else is doing it isn’t good enough”, or we’d all still be riding round in horse-drawn carriages. It most certainly is good enough – they are doing it for a good reason.

      It’s beyond dispute that there’s going to be a major shift to HSR across the world, and the north will more than likely suffer as a result of not being part of it, all thanks to some rather hysterical home-counties residents who seem to think one railway line is the end of the world. It’s self-centered nimbyism at it’s worst. You talked in the press about it being a “gamble”. Denying the rest of the country the chance to take part in HSR is a far bigger gamble. And drop the “fat cat” nonsense please. The UK needs to earn a living somehow and silly name calling at anyone who shows a bit of initiative won’t do any of us any good. Here’s a group of 11 major cities, with the reasons why they disagree with you:

      http://www.highspeedrailuk.com/?page_id=95

      • Hi Richard,

        The question for an executive deciding where to build his or her factory is not “how easy is it for me to get there?”, rather it is “how easy is it to get the goods from the factory to the market”. As the Federation of Small Businesses testifed at the Transport Select Committee on Tuesday, their members would prioritise spending on roads before spending on rail.

        In addition, the Northern Way, http://www.thenorthernway.co.uk in their evidence to the Transport Select Committee, highlighted the benefits of the Northern Hub rail plan. This would give the region a similar level of economic benefit as they might get from HS2, but at a cost to the country of £4 billion, and a significantly higher cost benefit ratio. Ports are also important to the economic prosperity of an area.

        All of this is before you take into account the possibility of investing in digital technologies. Why worry about a time saving on part of the journey, when with videoconferencing, you can avoid travelling at all?

  7. I have a question for you. Given that the whole of Europe is creating a pan-European rail network, and given that we are seeing a major shift to high speed rail across the world, and given that HSR without question brings economic prosperity to an area, why exactly have you taken it on yourself to be responsible for trying to deny the Midlands, the north of England, and the whole of Scotland a part in the new European rail network and the oportunities it brings? Upgrading the WCML does not cut the mustard – it will never be an integrated part of a European HSR network, and it would do nothing for the whole eastern side of the country. If the rest of the country is not connected to a Europe-wide HSR network, no-one will want to set-up shop there – they will establish a base in the already over-crowded south of England and anywhere north, including my home city, will become an economic backwater, so what gives you the right to try and do this?

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