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Principally, the government staked its claim on a flawed and outdated understanding of how commuters fill their time.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 21^st 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

The £32bn Great Train Robbery

The lure of high speed rail travel has proven too much for ministers to resist. Seduced by the chance to finally emulate its European neighbours, Britain will have its very own TGV in the not so near future.

In a 2006 major review of Britain’s transport needs, the former head of British Airways, Sir Rod Eddington, was forthright in this blunt message to politicians:

 “The risk is that transport policy can become the pursuit of icons.”

A message clearly taken to heart by successive governments in pursuit of their high speed fantasy. HS2 will serve as an ostentatious symbol, in an age where ministers seem determined to impose their legacies on future generations, however unnecessary or disruptive they may be.

And, this despite the underwhelming evidence in favour of such a move. Principally, as I intend to demonstrate, the economic case simply doesn’t add up. Supposed regional benefits have been dangerously over-exaggerated, with lessons from Europe ignored.

Decisions have been taken based on shaky assumptions and projections which look no better than overly-optimistic guesswork.

Despite strong support from business groups for HS2, as yet, none of them have offered to commit a single penny to the project. It looks very much like backing from a safe distance, with none of the repercussions if anything goes wrong.

Writing in his column in The Guardian, last week, Simon Jenkins delivered his rebuke in typically cutting fashion:

“…a vast sum of money is going on a single upmarket project whose chief feature is its extravagant glamour. HS2 is gesture spending dressed up as growth. It is Concorde for slow learners.”

When the then Transport Secretary, Philip Hammond, launched the high speed rail (HSR)consultation process back in February last year, he urged Britain not to get “left behind:”

“We must invest in Britain’s future. High speed rail offers us a once-in-a-generation opportunity to transform the way we travel in the 21st century and would help us build a modern economy fit for the future.”

Last week, after receiving almost 55,000 submissions to the consultation in the form of letters, emails and petitions, the government gave Britain’s second high speed rail route (HS2) the go-ahead. 

And, in doing so, they have spectacularly failed to take into account the Transport Committee’s published report released in November.

This was the result of the separate High Speed Rail (HSR) inquiry which received more than 200 pieces of written and oral evidence from a wide array of experts.

Certainly not the first time a government has seen fit to ignore the advice of the experts.

Even in giving its approval, the committee’s verdict for HS2 came with many stark warnings:

“HS2 is not commercially viable and it contains huge financial risks: it will require substantial subsidy in both construction and operation, even if all goes to plan. The discounted sum of capital and revenue costs is £44.3bn against projected ticket sales of £27.2bn. If the project proceeds as planned, it will achieve a financial loss of £17.1bn.” (see: ‘Formal Minutes’)

In terms of raw figures, the economic benefits of HS2 had already fallen dramatically just in the space of the appraisal period, March 2010 - February 2011, and before the consultation process had even started.

The benefit to cost ratio (BCR) with wider economic impacts (WEI) for the London-Midlands section had dropped from 2.7 to 2.0. That is £2 of benefit for each £1 invested. The BCR, without any WEI, had plummeted from 2.4 to 1.6.

As the committee commented:

“…[this] demonstrates the sensitivity of the economic case to changes in variables…These revisions were a result of lower GDP forecasts and consequently slower growth in rail demand.” (see: Economic impacts, 60-62)

It is also worth noting that the tidy sum of £750m had been spent on the preparatory work of HS2, ‘without a single space being turned, and before any decision was made to go ahead.’

The most obvious case in favour of HS2 comes, naturally enough, in the form of speed. The proposed new route will cut journey times between London and Birmingham by 35 minutes, taking only 49 minutes; Manchester and Leeds will only be 80 minutes from London; Glasgow and Edinburgh only 3 hours and 30 minutes, quicker by an hour.

However, the time-savings component of HS2, whilst forming a large part of the economic case for, was met with objections from those who argued that this assumes that time spent travelling is necessarily unproductive.

Indeed, of the £44bn of benefits HS2 will supposedly bring, £25bn is reserved for business travellers.

Objectors pointed out that rapid changes in technology, such as facilities for laptops and Wi-Fi aboard some trains, has meant that time spent commuting can often be highly valuable.

Studies carried out in 2004 and 2010 into how rail passengers spent their time, found that those who found their travel time worthwhile had increased by a quarter in six years. The researchers concluded that the “core assumption” that travel time is wasted time was “flawed.”  (see: Economic impacts, 65.)

The most soundbite-friendly contention to come out from HS2’s cheerleaders, had come in the form of the ‘1 million jobs’ claim, something which the ‘yes to HS2’ lobby had seized upon as their clinching argument, especially in such a delicate economic climate.

The Core Cities Group, an organization representing the eight largest cities in England outside of London, had published a study back in July of last year in which they asserted that:

“Investment in a full high-speed rail network and electrification will underpin the creation of 400,000 jobs in Core Cities, and 1 million jobs in total across their wider urban areas” (see page 5).

In fact, the government has only ever spoken of the “creation of thousands of new jobs,” with some 40,000 projected to come from the London-Midlands leg of HS2, and been wary to cite this report. (see: Economic impacts, 46)

As Andrew Gilligan pointed out in last week’s Sunday Telegraph, the Core Cities report does actually admit that there is:

“…relatively little information available that specifically quantifies the economic benefits that can be generated through high speed networks.”

What they were presenting was ‘the upper best case scenario,’ based upon a number of wild assumptions.

Greengauge 21, one of many high speed rail supporters, is far more conservative and estimates that between 25,000 and 42,000 jobs will be created, more in line with the government’s projections.

The leading transport expert, Christian Wolmar, is pretty unambiguous is his dismissal of talk of 1 million new jobs, which he calls ‘outlandish,’ ‘patent nonsense’ and ‘basically a lie.’

A key argument in support of HS2 comes in the form of the supposedly huge nationwide advantages it will bring.

As the Department for Transport commented:

“The increased speed, capacity and connectivity provided by a high speed rail network would reshape our economic geography, regenerate our urban centres and help to bridge the north-south divide that has held us back in the past, allowing Britain to build a modern economy fit for the future.”

Once again, this claim cannot be backed up by the evidence and has been based on many flaky assumptions and unsubstantiated projections.

In evidence given to the Transport Select Committee last year, Professor John Tomaney, director at the Centre for Urban and Regional Development Studies at the University of Newcastle, gave HS2 a far from ringing endorsement:

“…the impacts of high speed rail investments on local and regional development are ambiguous at best and negative at worst.”

He went on to say that far from benefiting more disadvantaged regions, high speed rail has, in many examples across Europe, exacerbated geographical divides, and actually sucked economic activity more towards capital cities at the expense of others:

“…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.”

Professor Tomaney and other experts have warned that it is in fact London and the South East that stand to gain most.

More than half of the 40,000 jobs mentioned are to be taken up in London, with the government’s own analysis predicting that, overall, seven out of ten jobs created will be in the South East.

Most damningly, HS2 Ltd, the company the government set up to consider the case for high speed rail in the UK, confirmed:

“…that it had not assessed the regional impacts and distributions of benefits or losses associated with HS2.” (see: Economic impacts, 55)

There have also been concerns about ‘winners’ and ‘losers.’ Firstly, from areas which the new line will bypass, such as Stoke and Coventry. Stoke’s two trains an hour to London may be reduced and may well end up being slower as a result of them calling at extra stops.

Coventry, running three trains an hour to London, expects to suffer, as business travellers, making up half of the city’s visitors, go elsewhere.

There is a precedent from France, with towns such as Amiens and Reims losing out economically as a result of not being served by the high speed TGV trains.

The committee heard evidence that augers badly for the economies of Wales and the south-west of England, with the potential loss of up to 60,000 jobs. (see: Economic impacts, 56)

In his analysis of the economic effects of high speed in Europe, Professor Tomaney discovered that it has been capital cities that have gained most.

A 2002 report found that:

“…the main (potential) impact of high speed rail (HSR) is on the location of business services and headquarters suggesting that an increased ability of business service providers and headquarters’ operation to serve remote locations leads to a further concentration of these activities in fewer, larger cities.”

Evidence from France and Spain backs up this assertion. Whilst the French city of Lille has done relatively well out of high speed travel, this has been backed up by sustained local regeneration efforts.

The construction of the Paris-Lyon TGV led to the relocation of headquarters to the capital. The Paris-Rhone-Alpes route led to a 144% increase in flight and train journeys to Paris, with a 54% increase going the other way. Research also reveals that business relocation away from the capital was negligible.

Further evidence showed that in several countries, high speed travel had a knock-on effect on overnight stays by business travellers, dramatically reducing the need for it, and thus affecting regional tourism.

In Spain, the effects of the Madrid to Seville line have benefited the former most, in terms of a greater centralisation of business and population.

 “…the evidence from these countries suggests that HSR is likely to generate or reinforce territorial polarisation.”

In conclusion, there is also a:

“…paucity of evidence to support the contention that high speed rail infrastructure tends to contribute to the rebalancing of regional economies. Additionally, the prediction that HSR will generate growth in peripheral cities is mostly based on assumptions which are difficult to sustain after close scrutiny.” (see: Evidence HSR14, 4.6, 4.13, 4.16 and 4.17)

Away from the questionable regional benefits, it is almost beyond dispute that the wealthiest proportion of the population will be the most direct winners.

One study argues that:

“Nearly half (47 per cent) of long distance rail trips are made by people from households in the top quintile by income. HS2 is a railway for the rich, but paid for by everyone.”

All this without even getting to the supposedly environmental advantages, most suspect to say the least, where the transport committee expressed its doubts that HS2 would reduce the demand for domestic air travel, or have any substantial carbon-reduction effects. (see: Environmental impacts)

Personally speaking, I began as an enthusiastic exponent for HS2, having experienced the delights and efficiency of France’s high speed TGV trains. However, the economic case for Britain’s own version just doesn’t add up.

Last week’s green light demonstrates that ministers have opted for a romantic vision over one which is economically viable.

We will be paying for their ‘vanity project’ for decades to come.


This article was published on the "STOP HS2" (the  national campaign group against HS2) website on Friday 20 January 2012

A much edited version of this article was first published by Left Futures on Wednesday 18 January 2012