Facts, Stats + Myths!

FACTS:

HS2 –THE EUROPEAN CONNECTION: BACKGROUND:

HS2 forms part of The Trans-European Transport Networks, a set of road, rail,
air and water transport networks designed to serve the entire continent of Europe.
The European Commission adopted the first action plans on trans-European networks
(transport, energy and telecommunications) in 1990. The transport network is known
as TEN-T.

The EU promotes the development of networks by a combination of
leadership, coordination, guidelines and funding. They are technically and financially managed by the Trans-European Transport Network Executive
Agency (TEN-T EA), which is based in Brussels and was established by
the European Commission in October 2006. http://en.wikipedia.org/wiki/
TransEuropean_Transport_Networks#Timeline_for_TEN-T_guidelines

The Trans-European Rail network is made up of the Trans-European high-speed
rail network as well as the Trans-European conventional rail network. Each is
encouraged to show

• it should play an important role in long-distance passenger traffic

• it should permit interconnection with airports, where appropriate

• it should permit access to regional and local rail networks

• it should facilitate freight transport by means of the identification and
development of trunk routes dedicated to freight or routes on which freight
trains have a priority

• it should play an important role in combined transport

• it should permit interconnection via ports of common interest with short sea
shipping and inland waterways.

Crucially for rail it requires that all future high speed networks conform to a common
standard-mainly that trains should be able to travel at a potential 400km/h (258mph).
On the current West Coast Mainline they are limited to 125 mph (200km), although
Virgin argues that with full signaling upgrades (currently held back) they could
achieve 140mph (225 km). So the West Coast mainline –even enhanced-would not
meet the spec for TEN-T

Although independent, the TEN-T EA is closely linked with its parent, Directorate-
General Mobility and Transport (DG MOVE). DG MOVE deals with all policy-
making issues related to the TEN-T programme, while the Agency exists to execute
the programme’s specific tasks

European Commission (DG MOVE): defines the policy

• Makes political decisions regarding the TEN-T programme

• Takes the final financing decisions

• Monitors and supervises the Agency

Defines strategy, objectives and priority areas of action

TEN-T EA: turns the policy into action

• Implements the TEN-T programme on behalf of the European Commission and under its responsibility

• Efficiently manages entire project lifecycle, including:
– Organising calls and evaluations
– Giving support to Member States

• Prepares financing decisions

• Provides key feedback to the European Commission

http://tentea.ec.europa.eu/en/about_us/mission__introduction/
mission__introduction.html

The stated current costs of HS2 vary from £17billion to £30billion, although it’s not
obvious whether that figure is just the cost of the line itself or includes things like
compensation for those disturbed by it or the rolling stock to go on it.

HS2 is encouraged and potentially part funded by Europe… but maybe, not by that much!

Hansard: Written Question (Transport): Railways:
Finance-House of Commons

25 October 2010

Tony Baldry: (Tory MP North Oxfordshire) To ask the Secretary of State for
Transport what proportion of the costs of High Speed 2 he expects to be met from
European Union funds. [18587]

Mr Philip Hammond: In considering their approach to the funding of a new high
speed network, one of the Government’s objectives will be to ensure that third party
funding contributions are maximised. This may include contributions from European
Union funding streams, in particular the Trans-European Networks programme, under
which the Government expects funding for high speed rail projects to be a priority.
However, it is unlikely that the level of European Union funding available will be
sufficient to cover more than a small proportion of the overall costs of any new high
speed line.

Thus to challenge the rationale for HS2, there may be value in applying pressure on
Brussels as well as Westminster.

It might be noted that HS1—the south coast to London high speed service which
runs on the Eurostar lines-is part of the same programme. Domestic services
were launched in Dec 2009. But by May 2010 because passenger numbers were
significantly down on forecast (10% to 30%), the Government was forced to commit
to pay the operator £80m compensation over four years.

It might also be noted that another part of TEN-T—a new sea ferry service from
Nantes in Western France to Gijon in Northern Spain–is being subsidised by the EU
to the tune of £750 per hour—year round!

Independent “Traveller”8/01/11.

MEMBERS OF THE EUROPEAN PARLIAMENT:

The West Midlands—including Staffordshire—is represented by six MEPs. They are
collectively responsible; rather than being elected for any one part or constituency in
the region.

http://www.europarl.org.uk/section/your-meps/your-meps#

Two are Tories, one Labour, one Liberal-Dem, one UKIP and one described as
Independent. The Tory, Labour and Independent members say nothing about HS2
on their web sites. The Liberal is for it —but on a modified route—which leaves only
the UKIP member Mike Nattrass obviously against it. His web-site makes clear his
hostility. He has already met with opposition groups south of Birmingham and claims
to be working with Staffs County Council in opposing HS2 absolutely.

Pressure needs to be put on the decision makers-Westminster and Brussels—
both upward and downward. And those who have already declared for it need to be offered a way to change their minds whilst retaining their dignity.

RSG/HS2 (MEMBER OF wpcstophs2.wordpress.com – Action Group) 11/01/2011

STATS: HS2 Economic Case Overview (by Robert McDonald) – January 2011

Summary

  • The economic case for HS2 uses questionable data and has major flaws.  It has received very little detailed public scrutiny to date and is not well understood
  • HS2 will cost at least £19.3bn to build with all funding and risk taken by the taxpayer
    • All other national budgets are being cut to fund this project and reduce debt
    • £19.3bn is equivalent to over 4 years of NHS investment or 35 flagship hospitals
    • Excludes real costs of environmental damage and blight
  • Forecast passenger numbers are extreme and defy common sense
    • 165k passengers per day forecast on North West route to London by 2033, up from 45k in 2008
  • Quoted financial benefits are highly subjective and impossible to validate
    • Key benefit of £13.7bn based on value of reduced journey time to passengers
    • No proper analysis against other realistic cheaper options
  • Even with forecast passenger numbers HS2 would lose money on a commercial basis
    • £11.9bn over the next 60 years

Background

The published business case for HS2 was presented to Parliament by the Department of Transport in a paper named High Speed Rail in March 20101.  This paper is highly strategic with little consideration given to the economic case for HS2, other than to infer that the project is affordable (as development costs are spread over 15 years) and offers high value for money, delivering more than £2 of benefits for every £1 spent.   The detail underlying these assertions has received very little parliamentary or public scrutiny and is not well understood.

The information for the business case came from reports prepared for the Department for Transport (DfT) by HS2 Ltd, who in turn were advised by WS Atkins and Ernst & Young, amongst others.  These reports were released in March 2010 and can be found on the HS2 Ltd section of the DfT website2.

The economic case for HS2 is appraised using WebTAG methodology, introduced by the Department of Transport to measure and compare transport projects, and data is subject to a great many subjective adjustments.  In consequence the numbers are opaque and the analysis complex, making detailed review very difficult.  HS2 has not been measured on normal commercial criteria.   Nevertheless there are excellent detailed reviews of the financial case published by the HS2 Action Alliance3 and by Wendover HS2 Business Group4 (used by StopHS2), which should be read in conjunction with this overview.

HS2 Costs

HS2 Ltd has not quoted a clear headline cost for the project and consequently a wide range of costs are reported in the media. The following costs are quoted by HS2 Ltd, with all costs stated at 2009 values (hence all actual cash costs will be higher):

  • Construction cost of £16.5bn for HS2, based on a detailed costing of £12.3bn plus a risk based contingency of 34%.  Within this cost is £930m for land compensation, including stations.  This construction cost is expected to increase to approximately £30bn when the route is extended to Manchester and Leeds.
  • These costs exclude trains and rolling stock expected to cost £2.8bn for HS2.  Total expected development cost of HS2 is £19.3bn with peak annual expenditure of £3.9bn in 2020 (Ernst & Young Financial Considerations Report5)
  • The overall quoted cost for HS2 is £25.5bn, which is the cost used for benefit appraisal.  This includes the costs of building and operating the line for 60 years, discounted to 2009 prices.  Within this the construction costs include unclear adjustments for net present value discounting and tax totalling £5.6bn, reducing the initial construction costs from £19.3bn to £13.7bn.  The quoted cost is made up of:

  • Construction 13.7
    Renewals 4.1
    Operating and maintenance 7.6
    Total 25.5

Having analysed these costs in more detail, Wendover HS2 Business Group consider a more likely cash cost for construction of HS2 is £35bn.  This includes inflation adjustments to represent real cash and a more realistic assessment of costing optimism.

None of these costs take account of environmental damage or blight.

Funding

The overwhelming majority of the cost will be funded by the taxpayer, at least in the first instance.  The Government have accepted that external funding opportunities are very limited.

  • We are not eligible for the main EU Cohesion Fund which has contributed to other EU train projects. We may gain access to part of a £350m EU transport fund (TEN-T)
  • There is little opportunity for business partnership (possibly on station builds)
  • Potential for future sell-on exists (as for HS1) but is dependent on success of HS2

Consequently the taxpayer will carry the burden and full risk of HS2 and its funding competes directly with other national priorities.  Relevant alternatives are:

  • National Health Service, capital budget now reduced to £5bn a year.  The massive flagship Queen Elizabeth hospital in Birmingham cost £545m to develop – 35 such hospitals could be built instead of HS2
  • Education capital funding is having to reduce from £8bn to £3bn per annum despite the condition of some of our school buildings
  • The national debt is £863bn and rising, and needs to be reduced.

Benefit Appraisal

At the heart of the benefit case is a demand forecast prepared by WS Atkins plc for HS2 Ltd.  This forecast extrapolates recent growth in long distance rail passenger numbers and applies various detailed parameters to determine likely passenger demand in future years, particularly 2033.  Parameters include changes in mode of transport, local population and employment growth, and particularly forecast increases in GDP.  Minor adjustments are made to model in the current recession.

This analysis provides a forecast that background demand on the West Coast Main Line (WCML) route will increase by 133% from 2008 to 2033.  This is:

  • An annual increase of 3.3% each year
  • An increase from 45,000 daily long distance passenger journeys in 2008 to 105,000 in 2033
  • An increase from 7,300 daily passengers to and from Manchester to London in 2008 to 20,300 per day in 2033.  A further 20,500 a day will travel from Birmingham, 6,000 from Glasgow etc.

This massive increase in forecast demand is used to indicate that capacity on the WCML is insufficient.   There has been little scrutiny or public debate however to provide confidence in these forecasts.

Construction of HS2 is expected to further increase passenger numbers on the west coast route by 60,000 per day, reflecting further transfers from road or air and a growth in people travelling because of the existence of high speed rail.  This increases the overall traffic on the west coast route to 165,000 daily passengers, of which 145,000 are expected to travel on the new HS2 line.

Some 70% of extra passengers are expected to be non-business users, with “leisure trips likely to be particularly important”.   The assumption on train fares is that they will rise annually at RPI +1%, with no difference between HS2 and the remaining WCML.   On the basis of these extra passengers and fares, HS2 expect additional fare income over 60 years of £15bn (at 2009 prices).

Using WebTAG methodology, HS2 Ltd have calculated the financial welfare benefit for transport users in the west coast corridor to London, based on the perceived softer benefits that HS2 brings, such as saving in journey times.   This benefit is calculated to be worth £32.3bn over 60 years (at 2009 prices).  Very little detail is given of these benefits, which are quoted as:

  • Time savings and crowding benefits for business users of £17.6bn, and for commuting and leisure users of £11.1bn.  A separate breakdown of these numbers, including information gleaned by the Action Alliance,  suggest:
    • Time saving and improved reliability on board trains £13.7bn
    • Time saving in access to stations £5.4bn
    • Reduced crowding (including on the retained WCML) £4.8bn
    • Reduced waiting and interchange £2.9bn
    • Reduced road users £2bn
  • Wider economic benefits of £3.6bn, essentially based on better linkages between firms.

The above benefits are quite subjective, contentious, selective, impossible to verify, and based on extreme passenger forecasts.  However, using these benefits the WebTAG appraisal process scores a net Benefit Cost Ratio of 2.7 for HS2, implying a “high value for money” project, and driving the government perception of over £2 benefit for every £1 spent.  The ratio is derived from the welfare benefit (£32.3bn) divided by the net cost (£25.5bn less £15bn extra fares plus £1.4bn tax adjustment).

The calculation is highly sensitive to the forecast passenger numbers and to welfare benefits which can never be measured in reality.  Moreover the appraisal does not consider HS2 against realistic cheaper alternatives, only against a minimum action option.  It is a flawed appraisal, and a very weak base from which to consider such a major project.

Even using HS2 numbers a conventional appraisal would compare £25.5bn of costs against £13.6bn of extra fare revenue and adjustments, and recognise a loss of £11.9bn.   This would be a more honest place to begin a proper review.

MYTHS:

Myth 1:   HS2 is ‘green’ – it’s part of the low carbon economy
Untrue: even DfT say it doesn’t reduce CO2 emissions, but is ‘broadly neutral’ (and HS2 Ltd’s sums flatter HS2). 360km/h trains use more than twice the power of 200km/h trains. 84% of journeys on HS2 will indisputably create more emissions – all the new journeys (27%) and those switching from conventional rail (57%).
A showcase transport investment should contribute to our target to reduce emissions by 80%

Myth 2:   HS2 is ‘transformational’ and will deliver wider economic regional benefits
Untrue: DfT/HS2 Ltd say there are benefits (worth £3.6bn, ie 11% of all benefits) but £2bn of this is from additional local transport using freed-up existing capacity, not faster connectivity. Government now claim further ‘transformational’ benefits, but provide no evidence. The redistributive effects will benefit London – not the regions. London is dominant: it’s seven times bigger than the next biggest city. DfT assumptions imply trips to London will grow at twice the rate of those from London to the regions – and with 70% leisure passengers on HS2 they will be taking money from the regions and spending it in London.

Myth 3:    HS2 is a sound investment – over £2 benefit for £1 cost (NBR = 2.7)
Untrue: It loses money – it costs £25.5bn but only generates £15bn in extra fares, requiring an £11.9bn subsidy that goes to business and the affluent, inducing them to travel more. A re-examination shows the benefits to be 60% overstated – totalling more like £13bn rather than £32bn (with an NBR about 1, not 2.7). The largest benefit (time savings) assumes all time spent on trains is wasted, ignoring mobile technology developments. The case is also driven by huge (267%) projected increases in demand that represent an optimistic scenario, rather than central case. HS2 Ltd admit a 20% shortfall in demand reduces NBR to below 1.5.
The appraisal uses an unrealistic comparator (inflating benefits) and rejects valid alternatives.

Myth 4:    Only HS2, ie a new railway, can solve the rail capacity problem
Untrue: can get 65% extra capacity with just extra rolling stock on WCML and there is
massive potential on Chiltern. These improvements come without material disruption.
DfT’s own alternative to HS2 (Rail Package 2) de-bottlenecks WCML, delivering required
capacity by running more and longer trains (for just £2bn) and gives a better (3.63) NBR than HS2. Everything can be done incrementally against need – not relying on long-term forecasts.

Myth 5:    HS2 will greatly reduce domestic air
Untrue: to get enough modal shift from air (8% of HS2 journeys) HS2 Ltd assume a 178%
increase in domestic air by 2033: but it assumes a third runway at Heathrow. They ignore the declining domestic air traffic for London, including with the NW and Scottish Lowlands. Opportunities to displace air by HS2 have been reducing, not increasing.
Any reductions in domestic air services will be replaced by more polluting long haul services.
Experts agree air wins against rail for trips over 3½ hrs: HS2 Ltd say 4hrs for some markets.

Myth 6:   UK lacks a fast national railway network
Untrue: UK – unlike Europe – has had one for a long time.
As Eddington said, the UK has extensive fast inter-city services. We have routes capable of
200km/h (125mph) – with quicker rail journey times between the capital and the five largest cities than in other major West European countries (averaging 145 mins in UK, 151 mins Spain, 184 mins Italy, 221mins France, and 244 mins Germany).

E&OE

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