HS2 Phase 1 to deliver just 30p for every £1 invested

29 March 2011– Analysis by HS2AA of the Department for Transport’s (DfT) new business case for High Speed Two (HS2) – issued on the 28th February as part of the public consultation – has identified that the actual return on Phase 1 of the new line could be as low at 30p in the pound not the claimed £1.60.

This would categorise the project as ‘poor’ value for money using the DfT’s own criteria.

DFT Claims

The DFT suggests that Phase 1 of the line (London to West Midlands) will deliver a net benefit ratio of just 1.6 (2.0 with Wider Economic Impact). For the full ‘Y’ network a net benefit ratio of 2.2 (2.6 with Wider Economic Impact) is projected.

These new projections mean that the case for HS2 in value for money terms is at least a third worse than was originally predicted in March 2010.

DFT Assumptions

Even to reach these dramatically reduced ratios and worse business case the DFT has had to rely on a number of invalid assumptions.

1. Rail demand on key long distance routes will double

The DFT is over estimating demand for long distance train services by some 47%.

To reach this figure the DFT has used a short term forecasting model but applied it over 35 year period.  This is a 10 year increase on what was done in the March 2010 HS2 business case, which itself was longer than normally used. They also continue to use an out of date version of their model that exaggerates long distance demand, despite research they commissioned confirming its wrong.

2. Time spent on trains is currently wholly unproductive

DFT suggests that correcting this obvious factual inaccuracy would make no difference to the overall benefit as crowding benefits and transfer from air and car would replace the claimed gain.

This ignores the fact that upgrading existing infrastructure will deliver less crowded trains and that air passengers will shortly benefit from the same mobile technologies as rail, and be as productive as rail travellers. Passengers switching from car to HS2 will account for just seven percent of all passengers.

3. Reduced crowding and shorter waiting times will deliver benefits

When compared to upgrading the existing rail system these benefits disappear.Rail Package 2 delivers a load factor of 51% while HS2 has a load factor of 58%.

Commenting on the analysis of the DfT’s HS2 business case, Bruce Weston, Director, HS2AA said;

“HS2 is set to give a colossally poor return on investment.  When you re-do the DFT’s sums using realistic methodologies the taxpayer gets back just 30 pence for every pound spent on Phase 1 and 40p in the pound for the full ‘Y’ network. Even if you include the wider economic impacts the return only rises to a 50p return in the pound for Phase 1 and 60p for the full “Y”.  It simply does not make sense to spend over £30 billion pounds on HS2 when alternatives, identified by DfT themselves, would deliver a better, cheaper and greener solution, and one that can meet the required capacity.”

Net Benefit Ratio Summary (economic and social benefits per £1 of subsidy)

 

Net Benefit Ratios

DFT Figures

March 2010

DFT Figures

February 2011

HS2AA

Analysis of February 2011 figures

Phase 1

£2.40

£1.60

30p

Phase 1 with wider economic benefits

£2.70

£2.20

50p

Full ‘Y’

£4.0

£2.20

40p

Full ‘Y’ with wider economic benefits

£4.3 (estimated)

£2.60

60p

 

For more information please contact:

Richard Houghton – 07803 178 037 or  richardwhoughton@gmail.com

 

Note to editors:

HS2 Action Alliance is a not for profit organisation working with over 70 local groups, which is challenging the case for HS2 and working to get Government to take the right decisions.

Aims

  • Communicate the facts about HS2 clearly and accurately.
  • Provide a channel for local groups to share information and analysis, and pool resources to maximise effectiveness.
  • Question, evaluate and where appropriate challenge the economic & environmental case for HS2.
  • Identify and promote alternatives to HS2 that are in the national interest.
  • Seek to minimise the adverse impacts of HS2 on individuals, communities and the environment.
  • Work with local action and community groups, other interested organisations and businesses, to improve Government decision making on HS2