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30/01/2013
Does the DfT’s case for HS2 stand up to scrutiny?


January 2013

Does the DfT’s case for HS2 stand up to scrutiny?

new economics foundation

David Theiss
Economics researcher, Valuing What Matters

Following the release of our own report on the uncertainties around High Speed 2 today, we examine the arguments in favour of the project from the Department for Transport.

Yesterday, the Department for Transport (DfT) announced the route for the northern sections of the £33bn high speed rail project, HS2. Buttressing familiar sales pitches from the Prime Minister, Chancellor and Secretary of State for Transport ("Our economy might have contracted 0.3% in the final quarter of 2012 but fear not, the game-changing infrastructure investment to catapult the UK forward in the global race for economic prosperity is only 20 years away!”) the DfT published a document that included "12 reasons for high speed rail.” As we publish our own report on some of unanswered questions concerning HS2, let’s look at those 12 DfT arguments in favour of the project. Should we be hopeful? Sceptical?

1. Increasing rail capacity.
HS2 will provide high frequency and high capacity services for passengers.

HS2 will provide additional capacity, but at a significant premium. And whether or not the UK will need the type of capacity HS2 will provide is anyone’s guess. Making matters worse, the DfT does not have a strong track record for accurately predicting demand for new rail services. The National Audit Office found that DfT forecasts for HS1 overestimated demand for the new train line by 30%.

2. More services.
Commuters and regional passengers will benefit from additional/quicker services on conventional lines.

Service quality on commuter and regional lines could just as easily decline. It is important to note that there are no regulatory procedures insuring a minimum service quality on these lines. We often hear that it is not an ‘either/or’ proposition between high speed and conventional rail. Coupling the fact that the UK does not have a detailed national transport strategy and that many existing commuter and regional services still need investment, it very well might be a case of prioritising one service over others.

3. Improved reliability of train journeys.
HS2 will be a new railway network, built to modern engineering standards and using the latest technologies.

HS2 will increase reliability of train journeys in two decades’ time. We do not need to wait for HS2 to have a more technologically contemporary and reliable rail system.  Incorporating newer signalling technology and 21st century integrated timetabling would improve the reliability of train journeys on all train lines within the next few years, not few decades.

4. Connectivity.
HS2 will link 8 out of 10 largest cities in Britain.

This is a bit of a stretch. Only London, Birmingham, Manchester and Leeds will have city centre stations on the dedicated high speed line.  Furthermore, all of Britain’s cities are currently connected to the rail network, some of them by multiple mainlines.  The UK has one of the world’s most dense rail networks and a compact geography. Improving inter-city connectivity is not a priority for the UK, especially considering other regional transport needs.  

5. International connectivity.
HS2 will see UK regions connected with continental Europe.

This is a benefit of HS2. But, such a perk comes with a hefty price tag. Considering that Phillip Hammond, the Secretary of State for Transport during the consultation, said factory workers in cities like Manchester would likely never set foot on HS2, should the average taxpayer be subsiding a travel option for the wealthy while infrastructure and public services are crumbling around them?

6. Regeneration and economic benefits.
HS2 will be an engine for growth and drive regional regeneration, supporting job creation and delivering around £2 of benefits for every £1 spent.

On this point, the Government have provided little to no evidence that HS2 will deliver any material regeneration and economic benefits worth the opportunity cost of allocating £33bn for a single project. Wider economic impacts for the full HS2 scheme will amount to only 37p of benefits for every £1 spent. Previous experience of high speed rail internationally suggests many of these benefits will likely accrue to areas already performing well economically, like London.

7. Creating opportunities.
HS2 will enable the cities of the Midlands and the North to compete and collaborate more effectively, incentivising greater specialisation and promoting investment and growth.

Like number six above, this claim is not an outcome supported by evidence, but a hope. HS2 will likely have a detrimental effect on more than a few non-London cities. There is no way of knowing whether or not a high speed rail line will make a spot of difference for attracting foreign direct investment in the late 2020s. Any investment of £33bn will create some opportunities. The problem here is that the Government has not provided clear evidence suggesting that HS2 will create the best and most opportunities.

8. Foundation for future growth.
HS2 is not just a transport project. It will act as a catalyst to aspiration, growth, regeneration and jobs while representing a powerful symbol of Britain’s international competitiveness.

See above.

9. Changing how we travel.  HS2 will deliver significant benefits to passenger safety, air quality and noise due to modal shift from other forms of transport.

Only 11% of HS2's projected passengers will switch from non-rail transport modes. HS2 will do little to reduce pollution and noise from aviation and over 93% of annual car journeys. HS2 is projected to generate nearly 24% of its passengers from individuals that would have previously chosen not to travel. Putting these individuals in the transport system will, in part, contribute to problems like carbon emissions, reduced safety and noise.

10. Environment - green corridors.
HS2 provides a unique opportunity to establish green corridors along the line of route.

Nothing is stopping the DfT or the Government from doing this now. Constructing HS2 is not a precondition for this.

11. Leisure. Good integration between HS2 and local public transport will provide significant opportunities for sustainable tourism.

Most non-London local public transport networks are desperate for funding. From mass transit to active transport, non-London cities in the UK lag significantly behind their European provincial equivalents. Good local public transport requires significant planning and investment. The need for investment in local public transport far outstrips the need for HS2 and, as stated in the Eddington Transport Study, provides significantly higher value for money for the taxpayer. 

12. Wider infrastructure - broadband. 
HS2 has the potential to deliver other vital infrastructure for the UK and for communities along the line of route via fibre optic cables laid alongside the line.

£33bn is a lot to spend for a trench for fibre optic cables. As with reason 10, the Government could provide this wider infrastructure now, not in the 2030s,without HS2, and at a fraction of the cost. 

After the announcement of the northern sections of HS2 and the justification provided by our elected officials, it is apparent that too much evidence is missing for the case for HS2 to be robust and persuasive.  Conjuring a daring approach to tackling major economic issues is to be welcomed - after all, every investment carries risk and inevitable uncertainties. But the DfT’s 12 reasons for HS2 document underscores how little we still know about the true impact positive or negative impact of HS2. Given the difficult economic context and the sheer impact HS2 will have on the public purse, the UK should not pursue HS2 with a one track mind.

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