DfT’s new business case for HS2 hides more than it reveals

DfT announce a new business case for HS2 that includes the Y route, but does not release it. They declare a better value for money set of figures by ignoring the obvious incontestable flaws – in the demand model; the discredited ‘simplifying’ value of time saving assumptions; and they remain oblivious to price competition between different rail routes. On top of that hidden in the latest modelling refinements are ‘efficiencies’ ie deeper cuts to the classic network. The recently announced £9bn (HLOS) rail improvements that remove some of HS2’s benefits are similarly invisible.

DfT hide the Y route Route options for the Y legs to Manchester and Leeds have been considered and a ‘base option’ selected. But the route included in their new model won’t be released until the Autumn.

DfT hide the ‘real’ figures As a result of ‘better modelling’, latest economic forecasts and changes in the GDP deflator, this fourth update improves the Benefit to Cost (BCR) ratio for HS2 back to its January position. This is still about half what it was over 2 years ago. A BCR of 1.4 for phase 1 and 1.7 for the Y. Add in the wider economic benefits and it increases to 1.7 and 2.5 (the top end of the January range)

DfT achieves this feat by ignoring the key flaws. If they were taken into account then the real case falls to below 1 – just 40p back for every £1 spent or 90p for the Y. And thats before even taking price into account, or recent rail improvements such as Midland Mainline electrification that capture some of HS2’s benefits.

Hilary Wharf, Director HS2AA said “This new business case simply ignores the inconvenient truths. They have cherry picked and included some improvements while simply airbrushing out the fundamental defects that have been identified. It’s not just us saying it but the Chair of the Public Accounts Committee called it ‘bonkers’ and quite ‘shocking’ that price competition between different rail routes is ignored.”

It’s dishonest not to change their base case and keep defects as sensitivity tests even when they have been bowled out – as they do on value of time savings and using an outdated demand model”.

“Yet again they are trying to ignore the elephant in the room, and it’s a white one”

End

Notes to Editors:

1. HS2 Action Alliance is a national organisation making the case against HS2. It is a not for profit organisation working with over 70 groups, who all believe HS2 does not represent an effective answer to the UK’s transport, economic or environmental needs. They have undertaken detailed evaluations of the business case for HS2. They have updated their evaluation of the case for HS2 for this latest change on their website. HS2AA Ltd are currently taking two separate Judicial Review actions against Government (on the environment and on compensation)

2. The latest DfT Benefit Cost Ratio (BCR) figures (see Updated Economic case for HS2: August 2012) show an improvement over the last April update to back where they were in January on the announcement, but they are still broadly half what they were over 2yrs ago. The BCR figures excluding Wider Economic Benefits (WEI) are:

Mar 2010 Feb 2011 Jan 2012 Apr 2012 Aug 2012
Phase 1 2.4 1.6 1.4 1.2 1.4
Full Y 4.1 2.2 1.6/1.9 1.3/1.5 1.9

With WEI included they are now

Mar 2010 Feb 2011 Jan 2012 Apr 2012 Aug 2012
Phase 1 2.7 2.0 1.7 1.5 1.7
Full Y c 4.3 2.6 1.8/2.5 1.5/2.1 2.5

3. But HS2AA have adjusted the numbers for other factors (including those DfT do in their sensitivity analyses) and this takes the BCR numbers below 1 eg

August BCR (excl WEI) Updated demand model 50% time not wasted on trains Optismism bias applied to savings Understimate PM cost Update business travellers earnings Adjusted BCR
Phase 1 1.4 -0.4 -0.3 -0.07 -0.05 -0.15 0.43
Full Y 1.9 -0.4 -0.3 -0.1 -0.05 -0.15 0.9

4. DfT state that the next update of the business case will be published in time for the consultation on the Phase 2 route and consideration of the Hybrid Bill – by end 2013.

For more information please contact:

Richard Houghton  Tel: 07803 178 037