New research released today by the Institute of Economic Affairs, High Speed 2: the next government project disaster?, shows that the High Speed 2 (HS2) project is economically flawed. It reveals why the scheme is not commercially viable and asserts that taxpayers will bear a high proportion of the financial risks.
The research finds that policymakers in favour of HS2 are making their case on the basis of bogus assumptions:
Flawed economics
- Huge government subsidies on the existing rail network mean that prices and demand levels are severely distorted.
- Estimates made by the government of demand growth are very optimistic. The long timescale involved also adds to the uncertainty.
The DfT’s Command Paper said demand for HS2 would be 267% higher by 2033. However, in the more recent Economic Case, it was said that this demand level would be reached by 2043 – 10 years later.
- The effect of competition from other rail lines has been ignored when projecting future HS2 ticket prices and passenger numbers. Lower prices would make the project even less viable.
Competition from the West Coast Main Line or from the Chiltern Line could lead to the lowering of HS2 ticket prices in order to attract and retain customers.
- The cost of HS2 will require a contribution of £1,000 per Income Tax payer
- The project has been ‘gold-plated’, leading to grossly wasteful allocation of resources. The first five miles of the route, from Euston to Old Oak Common, for example, will add almost 25% (c. £4 billion) to the cost of the first phase but deliver negligible time savings.
Additionally, the decision to route the line through the Chilterns will require major tunnelling work; this 18-mile stretch accounting for 17% of the construction costs
- Significant environmental and social costs are not included in the assessment of the economic case, with several areas likely to be affected by ‘planning blight’.
- HS2 is likely to create demand for additional high-cost, taxpayer-funded transport capacity. Terminating the line at Euston may require a new Underground line or Crossrail 2 link to cope with extra passenger numbers.
Exaggerated time savings
- The case for HS2 assumes that time on board a train is wasted for business travellers. However, many business people are able to undertake productive work during part of their journeys. HS2’s claims are therefore greatly exaggerated.
Further, the decision to build a new station on the outskirts of Birmingham city centre, as opposed to HS2 travelling direct to Birmingham New Street (the major transport hub of the West Midlands) will wipe out much of the time savings claimed.
Fraudulent ‘green’ credentials
- The ‘green’ credentials of the scheme are highly questionable. At 225mph, the trains will be the fastest in Europe and will consume disproportionate levels of power via the National Grid.
HS2 simply constitutes a strategy of increasing public subsidy to enable more, CO2-consuming journeys
False regeneration claims
- Claims that HS2 will bridge the north-south divide and bring regeneration should be treated with scepticism as the evidence is largely speculative. Alleged benefits must be set against the wider economic losses from the additional taxation required to fund HS2.
Commenting on the report, Dr Richard Wellings, Deputy Editorial Director at the Institute of Economic Affairs and co-author of the report, said:
“High Speed 2 is another political vanity project – like Concorde and the Millennium Dome – being ploughed ahead with with complete disregard for properly thought-through commercial prospects or the mounting opposition to it.
“Its environmental credentials are questionable, its projected passenger figures suspect, and its proposed regenerative effects highly dubious.
“Proceeding with HS2 plans is a recipe for disaster and, as always, it will be the forever-embattled British taxpayer who will end up footing the bill for this latest white elephant.”
For months now the Government and the pro-HS2 lobby have treated with contempt the evidence presented to them that HS2 is not in the national interest. Now that a respected think tank has come up with a report that confirms precisely that, the Government owes it to the country to sit up and take note. As the public consultation will no doubt confirm, the public are extremely sceptical about shelling out at least £34 billion on a project like this – at a time like this. We have a huge debts to pay off, and if the Eurozone crisis ends as catastrophically as many analysts now believe it will, we may well need to set aside billions more to bale out Ireland and other European partners. We need to take stock, improve existing public transport services, and invest instead in building a digital economy, based on ultra-high-speed broadband for all. Within a few years there'll be far more virtual meetings than real ones, and we'll look back and marvel that we used to waste so much time and money travelling to and from meetings, contributing to global warming in the process. By all means revisit the idea when we're back in the black. And if we still think high-speed rail is worth ripping up more of our precious countryside for, let's go for truly cutting-edge technology. Maglev and vactrains are faster, quieter, cleaner and cheaper to maintain than the old-fashioned technology the Government is proposing for HS2.