This is a guest article by Vincent Nolan.
The collapse of the Spanish Banking system, which has triggered the 100 billion euro bailout by the Eurozone countries, is generally attributed to a property development bubble, compounded by greed and corruption on the part of the banks. But unwise investment in transport infrastructure, particularly High Speed Rail and airport expansion, has also been part of the problem, according to Professor Germà Bel, an economics professor at Barcelona University.
Projects costing €45bn (£36bn) have been completed or are going ahead in Spain despite a collapse in the government’s finances. “Spain’s investment in high speed rail and airport expansion is threatening its economic recovery”, says Professor Bel, “Spain is wedded to vanity projects it cannot afford. It costs much more money to build and maintain high speed rail systems than standard systems – money Spain does not have.”
Funds have consistently been directed away from upgrades to local and commuter lines, which Bel says are “falling apart”.
Passenger numbers have been lower than expected on the high speed line between Madrid and Barcelona as many people still choose to fly rather than take the train. Rail passengers take little more than 50% of this market. In July 2011, Spain axed the high speed train running between Toledo, Cuenca and Albacete. This high speed service was opened in December 2010; however only 9 passengers (on average) used this route per day. The failed route was costing 18,000€ per day to operate.
What are the implications for the UK where the government is proposing to spend a similar amount of money (£33 billion) on HS2? There is a similar danger that the existing rail network will is be starved of investment to provide the resources (and enhance the case) for HS2. The Treasury Select Committee asked the DfT to demonstrate that HS2 was affordable alongside the necessary enhancements to the existing rail network. The DfT have conspicuously refused to do so.
Professor Bel points out that “In France they are committed to high speed rail, but only when there is a strong business case”.
In the UK, the business case for HS2 has been eroded by no fewer than four downgrades to the Benefit/Cost Ratio, which for Phase 1 has been halved from 2.4 to 1.2 (just above break-even) which the Treasury regards a poor value for money.
Even this figure depends on the assumption that all time saved from faster journey times can be valued realistically at the equivalent cost to an employer at an average rate of £70,000 a year. The DfT’s own study (recently released under FOI) shows that travellers increasingly work during train journeys, as digital technology makes the train an extension to the office. For this reason The Transport Select Committee recommended that the DfT should recalculate the Business Case with a lower value for time savings. Again, the DfT has ignored the recommendation.
Politicians of our three main parties like to claim that the UK is “way behind” the rest of the world in investing in High Speed Rail. The Spanish experience suggest that we are fortunate in this respect: we have the opportunity to pause and examine whether the project is necessary, affordable and beneficial to the country’s transport infrastructure – rather than join the Gadarene rush to construction advocated by Lord Adonis and his backers in the rail construction contractors and train operators.