Stop HS2 welcomes the opportunity to contribute to this inquiry and would like to express strong support for the committees’ assertion that at a time of major public expenditure cut-backs, it is vital that every pound is invested to greatest effect. This submission focuses on HS2, the current proposals for high-speed rail, which we believe is a perfect example of the shortfalls currently embedded in transport decision making, and the methodologies used to arrive at these decisions.
The Eddington Transport Study of 2006 highlighted the dangers presented by the political momentum which had built up behind the lobby for high-speed rail which belied the facts and risks accompanying the proposed project. In relation to high-speed rail, Sir Rod made the following conclusions which unfortunately have been ignored by Government;
1.1. A new high-speed rail line between two cities would not offer the economy significant new connectivity or trading opportunities, if those cities were already a day-trip away from each other by existing rail, road or air links.
1.2. It is critical that the government enforces a strong, strategic approach to option generation, so that it can avoid momentum building up behind particular solutions and the UK can avoid costly mistakes which will not be the most effective way of delivering on its strategic priorities.
1.3. The evidence for transformational benefits is at best unproven.
1.4. A potential benefit (which should be included in the wider BCR) is that of freeing up capacity on existing rail lines. Whilst this is true, it is not at all clear that creating new networks is the most appropriate or cost-effective method to achieve increased capacity.
1.5. High speed options should be assessed coldly alongside other polices for achieving the same objective. Other transport investments are very likely to offer superior returns compared to where projects rely on new and largely untested technologies.
1.6. Even if a transformation in connectivity could be achieved, the evidence is very quiet on the scale of resulting economic benefit, and in France business use of the high speed train network is low.
1.7. In short, step change measures, such as a new nation-wide very high-speed train network, are not, in a world of constrained resources, likely to be a priority.
The committee asks the question; “What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?”. Irrespective of the context of spending reduction, the answer should surely always be the options which, after careful comparison with other options, provide the greatest overall benefit to the regional and/or national economies. Taking this question within the context of the need for reductions in expenditure, one should also take account of the projects which require the least capital investment and present the lowest risk. Additional factors, such as our commitment to an 80% reduction in carbon emissions by 2050 and other negative environmental and social impacts must also form part of the appraisal process when prioritising projects.
The committee asks the question “Are the current methods for assessing proposed transport schemes satisfactory?” In the case of HS2, they are far from satisfactory and have seemingly been misused, simply to support the desired project. HS2 represents a case of “This is the solution, now what is the problem?”. This viewpoint was echoed by HS2 Ltds Chief Engineer, Andrew McNaughton, who in a meeting with action groups from the Kenilworth and Southam constituency on 17th August 2010 stated; “We need to build something politically which is a statement of a modern form of transport. If the French can do it, why can’t we?”
The significant flaws in assessing the case for HS2 include:
3.1. Inflating passenger demand.
3.1.1. HS2 Ltd forecast background growth of 133% in long distance travel by rail (2008-2033), i.e. the growth expected without building HS2. They also claim that in the same period domestic air travel will increase by 178% and car usage by 43%.
3.1.2. However, HS2 Ltd then forecast that overall growth as a result of building HS2 will be 267%. Chapter 3 of ‘High Speed Rail for Britain’, the report produced by HS2 Ltd, states; “In 2008 there were approximately 45,000 long distance passengers per day using inter-city trains on the southern section of the WCML. According to standard industry forecasts, by 2033 long distance demand on the WCML is expected to more than double.” and goes on to state that by 2033; “Overall the number of passengers on this corridor would increase by around 61,000 (a 57% increase). This is made up of a reduction of some 84,000 trips on the WCML into London and an increase of 145,000 trips on HS2.”.
3.1.3. Other bodies are far more conservative in their predictions for the increase in rail demand. The Independent Transport Commission projects an increase of 35% (2005-30) and Network Rail projects a 70% increase (2008-34). DfT figures predict a 73% increase (2006-2030).
3.1.4. HS2 Ltd claim 8% of the 145,000 users will switch from the air. This volume is higher than current air volumes between Heathrow and the North West and Scottish lowlands combined.
3.1.5. Despite projecting a 178% increase in domestic air travel, internal flights to London has been declining year on year since peaking in 2004.
3.1.6. Growth in train travel since 1995 comes from an unsustainable modal shift from coaches resulting from lower price internet advance fares, whilst full fare demand has dropped and real prices are going up. It is more than conceivable given the proposed price increases for rail travel that modal shift could reverse.
3.1.7. All projections for the values of regional and national economic benefits start from a basis of accepting the HS2 passenger projections, and are therefore flawed.
3.1.8. Similar forecasts were made with HS1, the only comparable project. In 2009 CTRL carried a total of 9.2m passengers, this is against an original forecast of 25m for 2006.
3.2. Including unrealistic benefits.
3.2.1. The benefits to the country of HS2 are assumed up to 2085. Whilst this may be standard practice, this a high risk and well beyond any reputable economic forecasting horizon. This practice is akin to making a projection in 1935 as to how a project commissioned then would benefit and be relevant to the world of today.
3.2.2. One large error arising from using the DfT webtag methodology is that is starts from a position that all time spent travelling is wasted and unproductive. This completely ignores the fact that, notwithstanding overcrowding, many business users find the time spent on trains amongst the most productive time they have, as it allows for focussed working. It is reasonable to assume that the ability to work on computers, facilitated by wireless hotspots on trains has been a driver in the recent increase of business passengers on the railways. Although speculative, it could be argued that a reduction in journey times would be of a detriment to these travellers.
3.2.3. By assuming that time spent on trains is non-productive and inflating values by 2% p.a. leads HS2 Ltd to present a total of £28.7bn worth of benefits to the economy derived through time savings. This is made up of business users saving £17.6bn and leisure passengers saving £11.1bn. In this, HS2 Ltd has implied an average salary for business users of £70k. Whilst there may be a case claiming a reduced journey time of around 30 minutes for business travellers will be of some benefit to the economy, it is unclear how leisure passengers ‘getting there quicker’ will derive this level of benefit.
3.3. Stretching the rules on costs.
3.3.1. HS2 Ltd present discounted rates for costs. By presenting all expenditure on 2009 levels, their report ignores the costs of financing HS2.
3.3.2. Whilst assuming a commercial operator will operate HS2, HS2 Ltd ignore the fact such an operator will wish to operate at a profit.
3.4. Assuming no competitive response.
3.4.1. In line with previous DfT failures in appraisal, HS2 Ltd assume that there will be no competitive response from other transport providers. This was a key factor as to why HS1, both internally and connecting to the continent via Eurotunnel has failed to meet demand forecasts, as the response from low cost airlines and ferry operators was not considered.
3.4.2. It is reasonable to assume that other rail operators such as Virgin and Chiltern Railways will respond to the competition to their services presented by HS2, unless prevented in doing so by legislation or changes to the conditions of their franchises.
3.4.3. It is also reasonable to assume that airlines operating services from the North of England and Scotland will provide a competitive response to the introduction of HS2.
3.5. Ignoring shifting trends.
3.5.1. HS2 Ltd have made no assessment as to how shifting trends in the requirement to travel for work will affect future demand forecasts for travel. Whilst the canal builders did not see the railways coming and the railway builders did not see improvements in roads and the internal combustion engine coming, in the case of HS2 the alternatives to long distance travel are already here and progressing.
3.5.2. HS2 Ltd make no attempt to assess the impact on electronic communication on future business travel patterns. Major businesses such as VW, JLR and GlaxoSmithKline have told employees not to travel for meetings and use video conferencing instead wherever possible. Perhaps the most relevant company to cite in this respect would be ARUP, the company which designed the plans for HS2. Cisco Systems have reported that their investment in video conferencing has already paid for itself.
3.5.3. Within HM Government, G-Cloud is expected to significantly reduce the travelling requirements and Norman Baker MP has recently been given a remit of encouraging ‘non-travel’. HS2 expect that 27% of users, or 39,420 passengers per day, will not travel until HS2 is built.
3.5.4. No assessment has been made as to how home working, better connectivity delivered through high-speed broadband, or future technological advancements will reduce the requirement to travel. 15 years ago, email was hardly used (or even heard of) in the UK outside of the sphere of universities. Now it is an essential part of life and working patterns. On the completion of first stage of HS2, which is planned for in 15 years time, who knows what progressions will have been made?
3.6. Ignoring all detrimental effects.
3.6.1. Cities and towns such as Coventry, Milton Keynes, Wolverhampton and Rugby will suffer less frequent services to London.
3.6.2. In the case of Coventry, the current service to London runs three times per hour and will be reduced to one train per hour, taking approximately 25 minutes longer due to there being more stops. This severely threatens the Friargate redevelopment in the city, which is primarily concerned by building new office complexes adjoining the station site. Centro have claimed that Coventry would gain by having four services per hour to Royal Leamington Spa, but this would not happen until the track between Coventry and Leamington is doubled and electrified, and even the first stage of the ‘NUCKLE’ programme which would bring this about is now under threat.
3.6.3. HS2 Ltd make no assessment of the effect to the economy of the transport disruption which will be brought about by seven years of construction, either in road-works, works adjoining existing rail lines or the building of new track and platforms at Euston.
3.6.4. HS2 Ltd make no assessment of the loss of economic output suffered by businesses which will be forced to relocate or cease trading, lost agricultural output and decreased revenues from tourism which will come as a result of construction and operation of HS2.
3.6.5. HS2 Ltd pay no attention to the reduction of property and land values.
3.7. Overstating the economic benefits.
3.7.1. HS2 Ltd have ignored the research they commissioned from Imperial College. IC concluded that new economic growth created by HS2 would be ‘very small indeed’, maybe just £8m pa.
3.7.2. HS2 will redistribute (not create) economic activity between places. Many expert studies suggest that this is a significant effect, and that in general the larger the local economy the more it will benefit. So-called ‘agglomeration benefits’ flow primarily to the most economically powerful existing agglomerations, i.e. London.
3.7.3. London is also likely to gain because any economic growth would be concentrated in the service sector, not manufacturing or agriculture.
3.7.4. Most of the wider economic benefits claimed by government from HS2 do not depend on the new high speed connectivity, but on improvements to local services. These however would require additional subsidies which seem highly unlikely in the current economic climate. It is likely that many such local projects will not receive funding, due to HS2 requiring an ongoing estimate of 33% p.a. of the Transport Capital Budget from 2015.
3.7.5. There is no robust evidence yet on whether Birmingham would benefit and if so how much. HS2 Ltd have stated they will not have such evidence until the end of the public consultation.
3.7.6. If London and Birmingham do benefit this can only be at the expense areas not served by stations on the proposed route.
3.8. Ignoring the environmental impact.
3.8.1. Whilst the coalition agreement states; “We will establish a high speed rail network as part of our programme to fulfil our joint ambitions for creating a low carbon economy.”, the Booz Allen Hamilton report to the DfT from 2007 entitled “Estimated Carbon Impact of New North-South Line” states; “In essence, the additional carbon emitted by building and operating a new rail route is larger than the entire quantity of carbon emitted by the air services.”
3.8.2. The Cato Institute Policy Analysis No 625 from Randal O’Toole in October 2008 states; “High-speed rail proposals are high cost, high-risk megaprojects that promise little or no congestion relief, energy savings, or other environmental benefits.”
3.8.3. As The Eddington Study states; “There would be significant landscape costs from building new track, including implications for biodiversity, national parks and national heritage.”
3.9. Ignoring the alternatives.
3.9.1. As previously stated, The Eddington Transport Study suggested that; “High speed options should be assessed coldly alongside other polices for achieving the same objective.”, however they have not. The options for HS2 have been assessed against the alternative of doing nothing besides what has already been committed to, i.e. effectively doing nothing. Given this, it is unsurprising that HS2 has proved to be the best solution.
3.9.2. 65% extra capacity is possible just from extra rolling stock on WCML.
3.9.3. Rail Package 2, the DfT’s own alternative to HS2 (which HS2 was not assessed against) would de-bottleneck the WCML, delivering required capacity for just £2bn and gives a better (3.63) NBR than HS2. This can all be done incrementally against need, not relying on long-term forecasts.
3.9.4. There is massive potential on The Chiltern Line and Midland Mainline. Uses which might unlock this potential have not been explored.
In conclusion, it is clear that HS2 is the perfect case study which shows everything that is wrong in the current processes, assessments and methodology which define transport spending priorities. The methods employed for analysing this project are simply not sound. Methodologies are over complicated, out of date and completely unfit for purpose. In short they were biased towards reaching the conclusion that HS2 should be built and is in the best interests of the country. If realistic demand forecasting and Treasury rules are applied to HSR, the revised NBR stands at 0.28, meaning for every pound spent, 72p will be thrown away.
In line with Sir Rod Eddingtons’ conclusion, the challenge to be tackled was not fully understood before a solution was generated, due to intense political lobbying from advocates. The decision on this scheme was not informed by detailed appraisals of specific high-speed rail proposals, or against appraisals of other policy options for achieving the same objectives.
To quote Mark Twain, the approach regarding HS2 was more along the lines of “Start off by collecting all the facts, then you can distort them to your own purposes.”