Monday, 18 June 2012

HS2: The evidence finally catches up with the government

The future of High Speed Two (HS2) hangs in the balance. Just writing this sentence seems preposterous, considering the amount of time and effort that has gone into hyping up its supposed benefits. The government’s high speed fantasy looks like it will become just that.

This is meant to be the great transport project of our age; enthusiastically backed by ministers, dreamt up by Labour. Barely six months after receiving the official go-ahead, the wheels are starting to come off. Once vaunted, yet now being mentioned in lukewarm terms at best.
According to The Spectator, it has been told that HS2 is “effectively dead,” with “momentum draining,” and only David Cameron’s personal support keeping it on “life support.” Missing from the Queen’s speech, supposedly being held back for another year, the coalition’s solitary nod to Keynes is getting the equivalent of the ministerial cold shoulder. Several cold shoulders, if reports are to be believed.

The Spectator alleges that the current Transport Secretary, Justine Greening, was never an unequivocal backer in the mould of her predecessor, Philip Hammond. Most significantly, the man with the purse strings, Chancellor George Osborne, has apparently turned against it, citing capacity problems at Britain’s airports as a bigger priority. At least they’ve realised the folly of one idea, only to replace it with the folly of another. We shall we.
Back in January, I wrote a lengthy piece demolishing the arguments in favour of HS2. It seems the evidence has finally caught up with the government.

The cost was always going to come back to bite minsters where it hurt. With the total of the full Y-network (that’s London to Birmingham, and then on to Leeds and Manchester) nudging up from £32.7bn last year to £36.4bn this year (this is before we include rolling stock capital: £8.15bn, and operating costs: a further £21.7bn. See page 37 for a complete breakdown), and wider economic benefits falling year on year, or every other month, as has been the case this year, the government’s grip appears to be loosening with every new evaluation.
Readers of last November’s Transport Select Committee report into HS2 (of which I admit to being one such nerd), won’t be in the least bit surprised by the unravelling of the case for.

Principally, the government staked its claim on a flawed and outdated understanding of how commuters fill their time. Opponents have consistently pointed out that the government’s desire for high speed rested on the assumption that time saved travelling would mean more time at work. In the case of the London to Birmingham leg, journey times would be cut by 35 minutes, and only take 49 minutes.

However, studies conducted in 2004 and 2010 concluded that travel time is more worthwhile for passengers than ever before. Laptops, smartphones, and wifi access have meant time spent commuting can often be highly valuable.
Last weekend’s Sunday Telegraph found the business case for HS2 grossly exaggerated. An internal, unseen, Department for Transport (DfT) report from 2009, was basing many of its sums on a “1960s” interpretation of the behaviour of commuters, with 82% of their modern day counterparts admitting to doing some form of work on the train. DfT researchers found that:

"A reduction in journey time does not lead to much extra productive time overall...Sixty per cent [of business travellers] reported that they would do no work in the 'saved' time."
Which is a bit of a problem since government forecasts predict that business users (of whom 70% of HS2’s benefits are aimed at) stand to gain the most: savings of £32bn out of a total of £47bn (at 2011 prices).

The benefit to cost ratio (BCR), the amount which is to be recouped by the taxpayer in relation to government spending, has been on a downward curve since 2010. In March of that year, the BCR for the London-Birmingham route stood at 2.7 (£2.70 benefit for every £1 spent), down to 2 in February last year, before falling twice this year: 1.7 in January, and then 1.5 in April. In other words, HS2’s benefits have been almost cut in half in just two years.
As the Select Committee commented last year:

…[this] demonstrates the sensitivity of the economic case to changes in variables…These revisions [in November] were a result of lower GDP forecasts and consequently slower growth in rail demand.”
Rather worryingly, as Andrew Gilligan notes:

According to the DfT itself, any scheme with a benefit-cost ratio of less than 1.5 is officially deemed "low value for money," not to be proceeded with.”
“...the project has also been graded "red-amber" by the Government's own Major Projects Agency, signifying "major risks or issues in a number of key areas."

The government’s difficulties lie in the fact that most of their predictions seem based on shaky assumptions and overly-optimistic guesswork. As one analyst has pointed out, projections for revenues (£34bn) have been taken to cover a 60 year period, which most critics say is unlikely to be accurate:
"The government’s projections of the benefits are based on future ticket prices, demand, economic activity and how the railway line’s competitors are likely to respond. If any one of these variable changes significantly over the next few decades – and it seems inconceivable that none of them will – that will throw the assumptions completely out of whack.”

At its launch Philip Hammond urged Britain not to get ‘left behind’ and invest in travel fit for the 21st century. For its supporters, HS2 will bridge the chasm that is England’s north-side divide. But again, much of the testimony given to the Select Committee disputes this. With a rigorous examination of all the evidence, and using examples from France and Spain, Professor John Tomaney concluded that:
“…the impacts of high speed rail investments on local and regional development are ambiguous at best and negative at worst.”

“…the weight of recent theoretical and empirical academic work emphasises that high speed rail connections between cities or regions with different levels of development may favour already strong regions at the expense of weaker regions.”
It is in fact capital cities which benefit the most. The government’s own figures show that of the 40,000 jobs expected to be created, more than half will be in London, with seven out of ten confined to the South-East.

I don’t write any of this as someone who’s gleefully rubbing their hands, feeling vindicated by their stance. I started out as a passionate supporter of HS2. It was the weight of evidence against it that swayed me, nothing else. A country this size doesn’t need high speed rail, however glamorous it may sound.

If this week’s murmurs are to be believed, HS2 is heading for the scrapheap. And this will be one u-turn the government should be proud of taking. Unless of course they are merely softening us up for ‘renewed discussions’ about the merits of a third runway for Heathrow. After all, it seems that as far as this government is concerned, u-turns are infectious.

This article was first published by Labour Uncut on Monday 18th June 2012

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