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.