National Audit Office: ‘lack of common sense’ and ‘unrealistic analysis’ overstated HS2 business case by 86%

The Government previosuly overstated the benefits of the proposed HS2 rail line by 86%, a report from the National Audit Office has concluded. In 2010, the official benefit cost ratio (BCR) was for £2.60 of benefit for every £1 spent, but the Department for Transport has now admitted to double counting many of these benefits, with the NAO blaming a lack of common sense, saying the DFT:

“Does not always recognise the limitations of its analysis nor scrutinise outputs to make sure they make sense. This means that its analysis has been open to challenge and, in some cases, decisions have been made using unrealistic analysis. Economic analysis must be checked to ensure it is realistic.”

The BCR now stands at £1.40 for every £1 spent, however this calculation still relies on the idea that all time on trains is wasted, so therefore a cash value can be put on faster journeys. With regard to the concept that all time on trains is wasted, the NAO commented:
“Economic assumptions also need to reflect changes in real-life behaviour. The Department is well regarded in government and internationally for its economic analysis. However, it was slow to take account of potentially significant changes to passenger behaviour in its initial economic analysis for HS2. It has subsequently revised its business case to include new evidence on the value of business travellers’ time and has a programme of further research to understand how passenger behaviour has changed now that new technology is available such as laptops, tablets and internet connections on trains.”

Whilst it is true that that the last economic analysis provided a lower value for business users time, the DfT decided to compensate for this by increasing the number of business users they predict would use HS2 to keep the benefit-cost ratio up.

Back in 2011, Philip Hammond told the transport select committee: “As rail projects go, a benefit-cost ratio of 2.6 is quite reasonable. If it were to fall much below 1.5, I would certainly be putting it under some very close scrutiny.”

The report also criticises the DfT for a ‘lack of systematic evaluation’, ‘insufficient focus’, ‘unrealistic milestones’, lack of key management information, financing choices driven by affordability ‘rather than value for money’, unclear strategic cases for investment, ‘confused’ governance roles, ‘shortcomings’ in the use of economic analysis’, and delayed decision making.

The NAO said the DfT needs to do more work on developing clear strategic business cases and scrutinising the economic analysis of the estimated benefits of new railways, stating:
“Failing to explain the rationale for investment can undermine the support the Department needs for a programme to go ahead. Programmes that aim to bring wider national and economic benefits, such as High Speed 1 and High Speed 2 (HS2), face the problem of a lack of evidence to demonstrate such impacts. Economic analysis must be checked to ensure it is realistic.”

This report comes hot on the heels of a report by the French equivalent of the NAO, La Cour des Comptes, who concluded with regard to the TGV; there had been over-optimistic passenger forecasts, it was an irrelevant worn out model, there were unsustainable costs, incoherent assessments of socio-economic impacts, and that it is a project taking its last breath.

Stop HS2 Campaign Manager Joe Rukin responded:
“Yet again, we have another independent body producing a scathing report on HS2 on the back of a scathing report about the TGV, which is what we are meant to be ‘catching up’ with. It is hardly news that there was no common sense used when drawing up the business case for HS2, as every argument for the project has been knocked down, and it has only survived because of stubborn politicians who do not want to face the facts organisations like the NAO have revealed.”

“When the national auditors are saying the business case for HS2 was overstated by 86% because there was a lack of common sense, unrealistic analysis and double counting, you have to wonder how many other things have been got fundamentally wrong concerning HS2. The whole case for HS2 has been made up and the project should be cancelled before more money is wasted because of politicians vanity.”

Penny Gaines, chair of Stop HS2 added,
“The National Audit Office report highlights the need for the Department for Transport to take into account the way people really live and work today and for their economic assumptions to reflect changes in real life behaviour. It took years for HS2 to even acknowledge that people work on trains. They consistently ignore the possibility of more fundamental changes due to increased use of videoconferencing and other digital technologies.”

“The NAO also points to the fundamental problem with HS2 – that the strategic objectives are unclear. The government now claim that Phase 1 was about capacity, and that Phase 2 is about connectivity. But every decision about HS2 has prioritised speed over connectivity and the needs of the public. With this week’s announcements about High Speed 3, they seem certain to prioritise speed of any new railway in the north over the real east-west connections that ordinary people want.”

“With Boris Johnson saying that Crossrail 2 was more important for the economy then HS2, and the leaders of northern councils emphasising the need for more connectivity between northern towns and cities, the sooner we look at the real transport needs of the country the better. HS2 should be cancelled as soon as possible.”

The Public Accounts Committee will be holding a hearing regarding the report on 10th November.

6 comments to “National Audit Office: ‘lack of common sense’ and ‘unrealistic analysis’ overstated HS2 business case by 86%”
  1. Pingback: STOP HS2 | HS2 back at the Public Accounts Committee

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  3. I was at the House of Lords committee meeting. It’s clear many of the Lords are sceptical, e.g. Munro said that HS2 assume that people now making 2.1 journeys a year will make 2.9, referring to it as “modest”, Lord Lawson said that is a rise of 40% and not modest! This is a typical example that HS2 are using to support their case, meanwhile the NAO said HS2 overstated their business case by 86%. Could one suggest that MPs were seriously misled, what would the result be if 2nd Reading vote were held again. There is nothing about HS2 that gives any credit to this “Govt”. They should be ashamed.

  4. HS2 Route 3 does not deliver cumulative benefits of HS2 to WCML corridor and Buckinghamshire the people from Watford to Rugby miss out on HS2

    There are near to 800,000 people in the WCML Watford to Rugby catchment area.

    There are near to 150,000 people in the Buckinghamshire area the HS2 goes through or near.

    Both these groups have a loss of opportunity from the location or HS2 phase 1 Route 3.

    The 800K people in the WCML route cannot access HS2 directly and must use of the WCML with slower than HS2 speeds and longer commuter times, there will be decreasing upkeep and more cost per passenger for the WCML users.

    Door to Door Journeys from these people to Leeds and Manchester take longer than would be the case if the HS2 was on one of these corridors and the 5 to 1 ratio would suggest if benefits for users, acccessibility and productivity were to be maximised the route along the current WCML would have been more beneficial for the most local people.

    The other impact of Route 3 Phase 1 has been the detrimental losses of up to 30% housing value loss in the rural/town Buckinghamshire corridor where many people have lost more personal benefits from the proximity of HS2 possibly because it offers no local access gain.

  5. DG HS2 and Managing Director HS2 do not convince of the cumulative benefits of HS2 only abstraction of people from WCML ECML and MML

    Recording of HS2 inquiry by House of Lords with Professor Overman and later with the 2 proposers from DFT and HS2 reveals concerns Professor Overman has about double counting and DFT HS2 rely on modelling and admits little work on HS3 and grooming of numbers on fare to capture existing passengers from other lines. Not convincing when the phase 1 ahead of phase 2 referred to as a traffic jam which already exists in reality.

    Economic Affairs Committee – UK Parliament…/committees/committees…/lords…/economic-affairs...

    The Economic Affairs Committee is one of the five permanent investigative committees in the House of Lords and is charged with considering economic affairs. … Department for Transport and HS2 Ltd questioned · Lords ask HS2 consultants …
    ‎Publications – ‎The Economic Impact on UK … – ‎Membership – ‎Inquiries

  6. On C&W radio this morning Robert Goodwill claimed that the 1.4 / 1.7 ratio did not take account of any benefits accruing after 2036 ( ie only about 10 years of phase 1 “benefits” have been taken into account).

    Now could someone confirm my understanding that this simply is not true ? I have a clear recollection that the original economic case covered something like a 60 year time horizon.

    If I am correct then one of two things just happened. Either :

    1 ) Robert Goodwill deliberately spoke an untruth on the radio , or

    2 ) He demonstrated a total lack of knowledge on the subject.

    Either way he should get the boot.

    He also pooh poohed the claim that HS2 was not wanted by the public. He said “there is support for HS2 right across the country”. Might technically not quite be an untruth but given the 23 % for / 54 % against that came out of the recent YouGov poll Mr Goodwill is clearly economic with the truth.

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