Opinion Institute of Directors
A survey of IoD members has revealed a high degree of scepticism over HS2. Corin Taylor discusses the reasons why
‘W
hen the facts change, I change my mind.’ These words of the famous economist John Maynard
Keynes have been paraphrased several times in recent weeks, as former supporters of HS2 have publicly expressed doubts or outright opposition. The increasing cost, which has now reached £42.6 billion for the line and £7.5 billion for the rolling stock, is the relevant fact in this instance. And even Alistair Darling, the former Chancellor who signed off the early stages of the project, is now opposed. In my last column I wrote of the benefits
of re-routing HS2 via Heathrow, which would transform surface access to the UK’s only hub airport. But unfortunately there seems to be little likelihood of that happening, and the rising bill for the Y-network has prompted a wider rethink by the IoD of the merits of the planned line. This has been informed by a survey of
more than 1,300 IoD members, carried out in early August, which uncovered a large degree of scepticism.
There are five aspects to this.
First, although HS2 has been widely promoted as a way to help rebalance the UK and boost growth outside of London, IoD members don’t see it that way. Overall, London is seen as the region that would benefit the most, with members in most regions agreeing. Even in the North West and West Midlands, London is still seen as the prime beneficiary. Second, only 27 per cent of IoD members think that HS2 would be good value for money, with 50 per cent thinking it would be poor value. In no region do more than 35 per cent think that HS2 would be good value, with much higher proportions in every region believing that HS2 would be bad value. Third, 70 per cent of IoD members think that HS2 would not have an impact on their productivity, with only 24 per cent believing it would have a positive impact. Again, this
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view is quite consistent, with majorities in every region saying that HS2 wouldn’t improve their productivity. This is not a particularly surprising
finding. One of the key benefits cited in the official economic case for HS2 is the gain to business travellers from reduced journey times. And underlying the analysis is an out- of-date assumption that people don’t work on the train. Our survey found that only six per cent of IoD members never work on the train, and that 48 per cent spend at least half of their journey working productively. Fourth, when taking a hard-headed look
at what would benefit their own business, investment in existing intercity lines is seen as important by a far higher proportion. Overall, 80 per cent say that investment in existing intercity services is important to their business. By contrast, only 41 per cent think that investment in new high speed rail is important to their business, a figure that has fallen from 54 per cent in August 2011. This basic finding is common to every region. Fifth, taking these points together, 63 per cent of IoD members think that the money
earmarked for HS2 would be better spent on other transport schemes, with just 20 per cent disagreeing. Again, opinion is quite consistent across the regions. In no region do less than 54 per cent of members agree that the HS2 budget would be better spent on other transport projects, and in no region do more than 30 per cent disagree. So the views of IoD members are clear. But the survey is not the only reason for the IoD deciding to oppose HS2. There are three other reasons – the economic case for HS2 is weak; the alternatives have better benefit- cost ratios; and it is far from certain that HS2 is the only way to alleviate future capacity shortages.
Let’s examine each one in turn.
First, in the most recent economic assessment carried out in August 2012, the benefit-cost ratio for Phase 1 was 1.7, and for the full Y-network 2.5. Both these figures include the wider economic benefits. There are, however, several major flaws in the methodology, many of which have been
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