HS2, paid for by everyone, for the benefit of the rich

The Taxpayers’ Alliance has joined in the debate on HS2.  They have issued a report on the business case for HS2, written by the rail expert, Chris Stokes.

Chris was one of the speakers at Lobby Day arranged by Stop HS2 in October.  In this report he has developed his ideas and added new research on the assumptions made by HS2 Ltd when preparing the case for the proposed route.

One key assumption HS2 Ltd make is about the incomes of the people who will benefit:

“The calculated economic benefit used to support the case for HS2 is based on flawed assumptions such as average passenger income of £70,000 and zero passenger productivity during a journey.”

But the report also gives information about the financial returns:

“HS2 will never produce a financial return. The value of the net operating profit once it has been built only covers 42 per cent of the capital costs over a 60 year project life.”

Put those together and the result is:

“Nearly half (47 per cent) of long distance rail trips are made by high earners. HS2 is a railway for the rich, but paid for by everyone.”

As Chris says

“The business case for HS2 hasn’t been made and relies on a number of assumptions that are optimistic, in some cases to an incredible degree.  We just can’t assume every passenger does nothing of any value with their time on the train, for example.  And the Department for Transport have promised before that they wouldn’t justify major new capital investment on the basis of overly optimistic projections for demand, but they have done exactly that in this case. “

21 comments to “HS2, paid for by everyone, for the benefit of the rich”
  1. andrew it is the rural and regional areas outside london that require the most subsidy ! are you arguing that all these people are rich ? no they arent and as you say there are social reasons for providing subsidy in rural areas where roads are narrow and twisty and unemployment is higher. and as you also say subsidy to allow people to get to work and generate economic activity is also important. reducing car travel and hence pollution is another reason to subsidise.

    it the railways were only used by the well off (which above is admitted is only about half anyway) then they wouldnt need any subsidy.


    • Don’t forget Concorde, intended for supersonic intercontinental travel. Only 14 planes were ever built, though it was planed that the development costs would be recovered over hundreds of units. The British and French governments incurred large losses as no Concorde could be sold on commercial terms. The world’s airlines wanted jumbo jets, so we built the Concorde. It did make an operating profit for British Airways, flying fat cats across the Atlantic, but then BA didn’t pay the true economic cost for the aircraft. Another example where high speed travel was paid for by everyone but only benefited the rich.

      • but nobody else built a concorde did they. if it hadnt been for the oil crisis and the fact that it wasnt an american product it could have been successful. i dont see why you are comparing hs2 with concorde anyway as unlike concorde high speed trains are successful, are found in many countries and are not full of rich people.

    • the proposed terminal in birmingham is near moor street and less then a mile from moor street. it will be connected by the west midlands metro tram line and there will be buses also. in addition there will be a new station at the nec for easy connection. Through trains will bypass the city centre and reduce congestion at new street.

      There is no suggestion that people will be pushed onto other services by hs2. Indeed, the city council is in favour of hs2 which will nearly halve the london-birmingham travel time and the regeneration it will bring to a depressed area. finally there is no evidence that only the well off will use hs2.

  3. Greenguage are not impartial – the two directors are independent transport consultants who work for the government.
    The normal working person will not benefit from this train. They can hardly afford the 12% rise on fares on the existing network which hinders people getting to work now. People need jobs now, they need affordable, sustainable transport now and HS2 will and is already proving to suck investment away from existing infrastructure. Brng back the strategic rail authority who will take a more holistic view.

    • but stop hs2 is hardly impartial its all in the name ! and what evidence is there that hs2 is already taking investment from the railway now – it isnt even due to start construction until 2015. we have to plan for the future you know and we have two huge projects in london namely crossrail and thameslink that will benefit all south east commuters. the fare increases are regrettable and not something i would advocate but we face a choice. the farepayer still only pays half the costs of normal non hs2 rail travel the taxpayer pays the other. what is wrong with asking the people who will benefit from the extra trains the increased fares will allow ?

      it would be better to assist the lower paid with rail travel then to mass subsidise everyone on the train as presumably some commuters have very paid jobs. or are you admitting that there are more economic benefits derived from railway investment then just the pure box revenue as with hs1 and hs2 you seem to argue the opposite and deny the additional benefits high speed rail brings.

  4. i think that the whole critique against hs2 has been sloppy including this report which isnt anything new. and who are the taxpayers alliance why does what they say carry any weight.

    because the public mood is against high earners like say bankers it suits the purposes of the hs2 critics to say that the line is only for fat cats. words like white elephant are used all the time to put the idea into peoples minds that hs2 is such a project when the evidence does not suggest that. or saying that the sums dont add up is such a general blanket statement that is used a lot without being too specific.

    • The taxpayers alliance is a pressure group committed to forcing politicians to listen to ordinary taxpayers.

      They point to the hypocrisy and inconsistency of increasing taxes on ordinary families and cutting spending on services like education, while at the same time throwing £billions at a new railway line that will only benefit a few well off.

      The fares paid by passengers on the new railway will never cover the cost of building and running the railway. It will depend on a massive subsidy in the form of taxes paid by millions of people who will never use the line. Therefore it is a tax on the poor to help the rich.

      They suggest that politicians should concentrate on making commuter journeys more convenient and affordable.
      These points ring true with most people and our politicians will not be able to ignore these arguments.

      • below you state that 47% of longer distance passengers are from higher income groups so by extension 53% arent. so how can you then keep repeating the myth that hs2 will only be used by a few well off when by your own evidence that clearly is not the case ?? and if more and more higher income earners who could travel by car are using the railways then not only is there environmental benefit but also higher fare income through more passengers.

        • The data show a clear relationship between long-distance trip making and income, where the long-distance trip rate in the top income quintile is 4.4 times as high as those in the bottom quintile. This feature is not present in data on general trip-making, where the ratio of trip rates is only 1.3 (Department for Transport, 2006).

          That’s pretty well skewed towards the better off as far as I’m concerned.

  5. and if it is a railway for the rich, how can you then say it will lose money ? surely these so called fat cats would have the funds to pay the full ticket price. the european high speed trains arent full of top earning business men so why would that be the case on hs2 ? and if the fares are higher on hs2, well you will be getting a seat and getting to your destination faster. but as there is no evidence that only top earners will be able to afford the fares, it is just another example of scaremongering. hs2 will release large capacity on the classic network and will enable a far greater range destinations and fares. those who stay off hs2 will benefit from a better service and will be far more likely to get a seat. and of course this increase in capacity will tempt further passengers who are using their cars at the moment thus continuing the current trend

    • Research shows that nearly half (47 per cent) of long distance rail journeys in Britain are made by people from households in the top income quintile.

      See page 14-15 of the report

        • Perhaps this needs to be put more simply, although I would think the chart on p15 of the TPA report is clear enough: if you get on an average long distance train and look around you, about half the passengers will be earning in the top 20% (average income £70k). The other half will indeed be ‘normal’, but this does not take away the enormous skew towards the relatively well off.

          The phrase ‘fat cats’ is over-emotive, but equally the idea that high-speed rail applies to all equally is total nonsense.

          • the point is andrew is that the people using the trains will have paid different fares – better off businessmen will use expensive first clas tickets whilst others will use railcards and advance tickets etc. would you prefer it if all the better off people drove their cars instead and the fares were so cheap that the railway had to have even larger subsidies then it already does ?

            • No, the point being made is that the rail system as a whole is subsidised by all, but used disproportionately by the better off (and also disproportionately by London and the south east, but that is a different point). This is a fact, but we are of course left to argue about what it actually means! On the one hand this does not matter as the subsidy could be felt to be justified by the extra income generated by all those business travellers, or maybe simply as a necessary social good – either is fine, but the point remains that yet more spending on railways is yet more redistribution of taxes from the poorer to the richer

              This regressive effect could of course in principle also apply to government spending on roads or airplanes both also used more by richer folk. However the difference here is that those modes of travel don’t get subsidies but instead raise taxes, so the users (wealthy) pay more tax than the non-users (poor) which is as most people would see as a fair situation.

              If HS2 would pay for itself then it would not matter what class of people used it – the fundamental problem is the lack of economic case.

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