Opinion
criticised by the National Audit Office. The most notable flaw is the assumption that time spent on a train is not productive, which inflates the benefits from journey time savings. In an age of smartphones and iPads, this is self-evident nonsense, and comes despite research commissioned by the Department for Transport (DfT) in 2009 which concluded that the value of time savings should be reduced by at least 50 per cent. Another flaw is in the use of an outdated
passenger forecasting model, which predicts higher demand growth than the model which has replaced it. According to one estimate, correcting these two flaws alone would reduce the benefit-cost ratio by 1.1. A third error is in the assumption that
average fares on HS2 will be the same as on the classic lines, despite the fact that premium pricing occurs on domestic HS1 services. In reality, HS2 will face significant competition from services on the West Coast Main Line, the Chiltern line, the Midland Main Line and the East Coast Main Line, and fares will be an obvious way to compete. Demand forecasts for HS1 turned out to be very optimistic, and the same is likely to be true for HS2. Add on the recent increase in the cost of HS2, and the benefit-cost ratio falls further still – it will be interesting to
see how the DfT’s forthcoming economic assessment, due out later in the autumn, deals with these issues. Second, even assuming that the benefit-
cost ratio for HS2 is not overstated, alternatives to HS2, which involve upgrades to the existing North-South intercity lines, generally have higher benefit-cost ratios. For example, Rail Package 2, which addresses pinch points on the West Coast Main Line, has a benefit-cost ratio of 4.0, or 4.7 when wider economic impacts are included. A common response is that the overall
benefits of HS2 are far higher because the scheme is so much larger. The problem with this argument is that the DfT has not appraised a comprehensive strategic alternative to HS2 that includes spending an equivalent level of resources. Given that the Eddington report showed that most classic rail schemes, not to mention road and other transport projects, have far higher benefit- cost ratios than HS2, it is very likely that a full-scale alternative to HS2 would represent better value for money. Third, the best argument for HS2 has always been around capacity – the existing West Coast Main Line will be full, and if you are going to build a new line, it might as well be a high speed one. The problem, though, is that it is far from certain that upgrades to the
existing lines will not be sufficient to meet forecast demand increases. The National Audit Office concluded that the DfT’s capacity case lacks transparency, and the use of an outdated passenger forecasting model adds further confusion.
Spectacularly poor use of resources The assessment of alternatives to HS2 carried out by Atkins suggests that upgrades to the West Coast, Midland and East Coast main lines would provide sufficient long-distance intercity capacity. But we have not seen an assessment of the ability of these or similar alternatives to deliver enhanced commuter and freight capacity. Together with long- overdue modernisation of ticketing arrangements to encourage travel outside of peak hours, alternatives may be able to meet commuter demand. But even if they could not, spending £50 billion on a high speed line to alleviate commuter congestion at Euston and increase freight capacity would be a spectacularly poor use of resources. The IoD has long argued for higher
public spending on infrastructure. But we and our members no longer believe that HS2 is the best way to spend such a large sum of money.
•
Corin Taylor is a senior economic adviser at the Institute of Directors.
www.iod.com
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