The UK government announced some time ago its intention to build a second high-speed railway line – somewhat prosaically called HS2 – linking London initially with Birmingham and later with Leeds, Manchester and other northern cities. This major infrastructure project has been highly controversial from day one, but the necessary legislation has been outlined in this year’s Queen’s speech and the government is very bullish on the project (despite considerable opposition from rural Tory heartlands which lie on the route).
Opposition varies from the local (people understandably not being happy about such a transport link close to where they live) to the principled (not a good use of taxpayers’ money when the benefit reaches relatively few people). Now, the National Audit Office (NAO) has published a rather critical report which suggests that the economic case for HS2 is currently not a strong one (High Speed 2: A review of early programme preparation).
The NAO website leads with this statement: “It’s too early in the High Speed 2 programme to conclude on the likelihood of its achieving value for money. Our concern at this point is the lack of clarity around the Department’s objectives. The strategic case for the network should be better developed at this stage of the programme. It is intended to demonstrate the need for the line but so far presents limited evidence on forecast passenger demand and expected capacity shortages on existing lines. It is also unclear how High Speed 2 will transform regional economies by delivering jobs and growth.”
The most recent benefit-cost analysis published last year by the government showed a BCR of only 1.4, with the actual figure of course being very sensitive to the exact assumptions made. This does not look a sound basis for committing an estimated £15.4-17.3 billion of public funds (that is, taxpayers’ money) to the first phase alone, linking London to the West Midlands by 2026. Other criticisms include an estimated £3.3bn funding gap for four years from 2017/18 and, in the NAO’s words “HS2 Limited has also not yet analysed the effect on passenger demand, revenues and the benefit-cost ratio of charging passengers premium prices.”
The report does find a better overall case for the complete project, linking Birmingham to Leeds and Manchester via two further stretches of line, but even here the BCR is only 1.7, the projected total cost is £30-35bn and the first passengers would not be carried until 2033 (for more details of the project, see HS2).
Supporters say that this is not just a case of simple economics, that the wider societal benefits would be very significant. This is effectively the response of the Department of Transport to the NAO report. They argue that such a link would boost economic growth away from London and provide much needed additional capacity to complement a West Coast line which is close to saturation at times.
Other proponents of the project point to the Channel Tunnel, HS1 and the M25 as being very controversial projects at the time, but now being taken for granted as essential components of the national infrastructure. This is true enough, as is the point that people who use high speed trains – either Eurostar or the various Continental systems – like them. We also have to take into account that any major project in the UK will encounter local opposition and may take years to pass through the planning system. Successive governments must look with envious eyes towards Paris and other Member State capitals, where decisions on major infrastructure projects seem to be taken with apparent ease.
However, high speed rail, despite its popularity with passengers and steady growth on the Continent, carries only a small proportion of total travellers. There is a general sense that it is quite green and more environmentally-friendly than other forms of transport, but in fact it is quite a high energy user (also, of course, its greenness will be directly related to the mix of generating capacity used to provide electricity).
The big drawbacks of rail are its inherent inflexibility and high cost base, which means that even the most efficient European railway system requires a considerable taxpayer subsidy. Quite large numbers of passengers can be carried on commuter routes at peak times but, except for rush hours, much of the rail network is very underutilised.
On the other hand, the experience of Eurostar suggests that a popular, affordable service could emerge. Although business travellers to Paris or Brussels can pay several hundred pounds for the privilege, it is also easy to pay considerably less than £100 for a non-flexible trip booked in advance. The comfort, convenience and direct access to city centres makes this good value. Unfortunately, for UK domestic travel we would see a premium set over the already-high fares charged for travel at peak times, which may in practice make HS2 the preserve of business travellers.
Department for Transport modelling suggests that 136,000 passengers a day would use the line between London and Birmingham by 2043. This is based on current growth in total journeys and train passengers in particular, plus assumptions about the attractiveness of a faster service. Of course, the only sure thing about such modelling is that the answers will be wrong - although to what degree and in which direction we do not know. In practice, many passengers may still choose cheaper alternatives and it is highly likely that the forecast numbers are on the optimistic side.
Given rail’s inherent inflexibility and high costs, the other legitimate question to ask is what the £30bn+ it would cost might otherwise be spent on. Resources are always limited and choices have to be made; there is what economists call the opportunity cost of losing the benefits of an alternative scheme. For example, Highway Agency estimates suggest a cost of about £25 million per mile of three-lane motorway. The HS2 money would therefore allow 1200 miles of completely new motorway to be built. If major roads were simply widened, this money would go a lot further, both metaphorically and literally.
Such an improved road network would require no further public subsidy to operate and no rolling stock; it would simply provide better and more flexible transport options. Rather than providing just city centre to city centre journeys, which rail can do quite well, it would enable door to door travel at times to suit individuals. With car technology improving continuously, the carbon footprint of travel is unlikely to be significantly different, unless electricity generation moved heavily towards reliance on nuclear.
But, to put all this in perspective, it has been estimated that the German Energiewende will have cost over €300 billion in feed-in tariffs by 2022, according to the environment minister. In comparison, £30bn spent on HS2 – or, indeed, almost anything else – looks like excellent value.
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