Fifth HS2 Business Case: Voodoo economics and fantasy

29th October 2013 – The Government today released the fifth version of the HS2 business case in a last desperate bid to defend its case for line.  It follows on from increasingly unbelievable claims about HS2 that experts have found exaggerated, technically wrong and to be misrepresentations. For example the extraordinary and discredited claims that HS2 would deliver growth worth £15bn a year. The latest “Strategic Case” fares no better.

HS2AA, the national campaign challenging the case for HS2 has studied its claims and tested them against the plain facts:

  •  ‘Base’ BCR is hidden and still exaggerated: The Government still clings onto benefits that don’t exist and only states the more flattering Benefit to Cost ratio (BCR) that includes wider economic benefits.  While they claim a BCR of over 2 for the full Y (2.3), the Hybrid Bill is just for Phase 1 – which has a ‘base’ BCR of just 1.4 – and both figures still rely on unsubstantiated assumptions that grossly overstate the benefits. HS2AA estimated the real figure at under 0.5 i.e. less than 50p back for every £1 of subsidy spent.
  • Journey time savings overvalued: Unbelievably the absurd assumption that business people don’t work on trains remains. While DfT recognise they previously overstated the earnings of rail business travellers (and have cut them by a third) they crucially now assume a major increase in the proportion of business travel, and bizarrely have re-valued the cost of crowding (at a 5 times higher rate).  Everyone knows that by the time HS2 starts running in 2026 the time saving benefits to business travellers will have shrunk to nothing.  Indeed long distance trains are already mobile offices for business people, who reserve their seats and are unaffected by crowding.
  • Model shift collapsed: the number of HS2 passengers switching from air and cars has halved since the last 2012 business case.  Now just 1% of HS2 trips come from air (previously 3%) and 4% from cars (was 8%). In no way can HS2 be credibly presented as part of “low carbon economy” and a “green solution”, even before taking account of its damage to tranquil countryside and an AONB.
  • Claimed HS2 benefits massively concentrated on faster journeys: Despite Government claiming it is capacity and not high speed that is now important, 79% (£45bn) of all the transport user benefits (£57.7bn) are now attributed to time savings. The £45bn has almost doubled since the Feb 2012 case when £24.5bn (of £44.1bn) i.e. 55% was due to time savings. This is simply not consistent with the position now being presented by Government that faster journeys are not what matter.
  • More services across the country: claims that cities across the nation will benefit with more services ignore two simple points.
    • The railways run on subsidies.  New services only happen if someone other than fare payers put money in.  These new subsidies are no-where to be found in the business case.
    • No-one should believe Government promises about new subsidised services starting 10 and 20 years hence, when those making the promises will long be out of office.
  • Double counting: Government trumpet the length of journey time savings that HS2 would bring to cities like Newcastle, Sheffield, and Edinburgh compared with the current journey times. They forget to mention that planned improvements will substantially reduce these journey times anyway e.g. what the new IEP trains deliver on the ECML and by Midland Mainline electrification.
  • Capacity: It is simply nonsense to argue that HS2 is needed to cope with rail demand over future decades.  Not only do the latest statistics show long distance rail growth now tailing off, and business travel is falling, but the intercity route that HS2 serves is the least crowded.  Its commuter trains that are overcrowded, not half empty intercity trains.  No one in their right mind builds a new North-South high speed railway just to increase commuter capacity.
  • Alternatives to HS2: The idea that without HS2 rail travellers face years of fixing our current lines is a complete fabrication. The main alternative to HS2 involves lengthening West Coast Mainline (WCML) trains, reducing first class carriages from 4 to 3, and removing 3 pinch-points on the WCML – and this accommodates even DfT’s forecast demand growth, and all for under £3bn. Even Network Rail did not dispute this.

Commenting on the new report, Hilary Wharf, director, HS2AA, said:

“It is disgraceful that Government resort to voodoo economics and fantasising about a world where high speed rail brings countless benefits in a last ditch attempt to make their case for HS2.  It plays more to an MP audience who make over 40% of their travel by train, rather than the taxpaying public who only use rail for 6% of their travel – and fewer than 2% of rail journeys nationally are made on the WCML. 

” Their rabbit out of a hat approach, with a stream of questionable claims (from KPMG, Network Rail/Atkins, and now today’s Strategic Case) are a cynical attempt to manipulate public opinion, and when subjected to scrutiny never stack up.

“While Government are happy playing political ping pong with HS2 they should remember that they are playing with real people’s lives. There are over half a million households who are directly adversely affected by HS2, besides countless more who lose out because £50bn is wasted on this vanity project”

Ends

Notes to editors:

HS2AA is a national not for profit organisation working with over 100 local groups who all believe HS2 does not represent an effective answer to the UK’s transport, economic or environmental needs. HS2AA have focused on an evidenced-based approach to challenging the business case, the environmental case and compensation arrangements.

HS2AA’s facts on capacity can be found here.

Value of time guidance: The DfT today released new draft webtag guidance on valuing journey time savings. It changes the basis of valuing business travel.  Instead of it being based on cost savings to businesses ( i.e. business travelers’ salaries and add-ons) it aims to be about the businesses “willingness to pay”. This tries to sidestep that it matters that people now work on trains. But it fails, because a business would not be willing to pay the same amount for a given time reduction for a journey spent working, as one where the time is all wasted. DfT have applied this new basis with immediate effect in breach of their own procedures.

Business travel proportion: Previously DfT assumed about 30% of HS2 passengers were on business. 30% accords with published NPS statistics on the proportion of business travelers on the main intercity routes of Virgin WCML, ECML, MML. As the vast majority of passengers on these routes are assumed to transfer to HS2 it is unlikely that the proportion of business travelers on HS2 would be much different. Business travel in the UK is actually declining. The new 2013 HS2 case has substantially increased the 30% figure (e.g. London to Manchester is now 66% business). This change accounts for a large (25%) increase in the claimed benefits of HS2 (page 20 of Summary of Economic case). This reflects new unpublished work by HS2 ltd based on point to point journeys. While city to city journeys may give a higher business proportion it is not representative of all the people on these services – as journeys start and end in other locations but still use the service for part of their journey. HS2 Ltd’s latest position is now at odds with the national NPS statistics.

Modal shift: The Government now assumes 69% of HS2 passengers switch from existing rail to HS2, 26% are brand new journey and 5% come from air (1%) or cars (4%). Modal shift has therefore halved since the last assessment in 2012 (when it was 11%).

Claimed benefits due to faster journeys.  The latest figures (page 102, figure 5.6 of the Strategic case) show £45.7bn NPV of benefits are now attributed to time savings (for the Y). This represents 79% of Total Transport User Benefits (£57.7bn allowing for indirect taxes). In Feb 2012 the equivalent figure was nearly half that at £24.5bn NPV – out of total £44.1bn benefits i.e. 55% of total (on Page 26 of Economic case for HS2: Updated appraisal of transport user benefits. January 2012). Given high speed is no longer the issue this makes no sense.

The Governments main documents are here as well as its supporting documents

The core business case figures that DfT have produced over the last 3 years are below:

 

For more information please contact:

Richard Houghton Tel: 07803 178 037
Email: richardwhoughton@gmail.com