NAO Report Undermines Fundamentals of HS2 Business Plan

The National Audit’s report on HS2 – “High Speed 2: A review of early programme preparation” – attacks the fundamentals of the £35 billion line’s business case.

Despite not having a clear justification or a robust business case, the DfT are going ahead with this hugely costly project.  They have already spent £250 million of tax payers’ money and are now trying to speed up the project.

The report identifies a large number of issues, including;

1.       Rebalancing the economy – there is little evidence of how HS2 will address  the North/South divide

2.       10 year old data – to calculate the benefits for business travellers the DFT has used over 10 year old data.  These benefits make up 67 percent (£12.6 billion) of the £18.8 net transport benefits proposed for phase 1.

3.       Working on trains – DfT uses simplified methodology that assumes no business people work on trains currently. The report highlights that DfT research does show that people work on trains, so the value of  benefits should be reduced.

4.       Over-estimated demand – DfT used its latest lower growth model for the WCML franchise competition in 2011, but decided to use the outdated high growth model for HS2’s August 2012 business case. This causes DfT to over-estimate HS2’s benefits.  

5.       Premium fares – no analysis has been done on the reduction in passenger numbers as a result of HS2 charging premium prices when compared to current train services.  An advance London to Birmingham ticket on Chiltern Railways be bought for as little as £6.00 currently.

6.       £3.3 billion black hole – the NAO estimates that there is a £3.3 billion funding gap over four years (2017-18 to 2020-21) which the Government has yet to decide how to fill

7.       Business case unclear – it is unclear if the business case covers the route between London to Birmingham or the full ‘Y’ to Manchester and Leeds. The economic case for the ‘Y’ is much less certain than phase 1 as route designs are less well developed.

Commenting on the report, Hilary Wharf, director, HS2AA said;

“The NAO’s report highlights the failings in the fundamentals of HS2’s business case and is a scathing indictment of the bogus case Government has constructed.

 “HS2 simply cannot withstand independent scrutiny.  The NAO joins a long list of independent bodies and economists who find HS2’s planning and business case woefully lacking. 

 “NAO catalogue numerous failings, from DfT’s assumptions on valuing journey time savings – incredibly half the claimed benefits depend on no one working on trains – to finding little evidence HS2 rebalances the economy.

 “It is astounding that Government – rather than dropping HS2 and saving £35bn of taxpayers’ money – table a Preparation bill to waste money even faster.”


Notes to editors:

  •  HS2AA is a national organisation making the powerful case against HS2. It is a not for profit organisation working with over 90 local groups and national environmental bodies who all believe HS2 does not represent an effective answer to the UK’s transport, economic or environmental needs
  • An open letter from 34 planners and economists in Jan 2013 to the Secretary of State for Transport said that the link between improved transport infrastructure projects to economic growth and more jobs can no longer be relied upon for the UK, which, as Eddington had pointed out in 2006, is already well connected. 
  •  HS2AA met with the NAO and presented their detailed concerns on the business case, many of which have now been recognised by the NAO in their report.
  •  It’s not just HS2AA which is sceptical about the business case for HS2.  Organisations such as Institute of Economic Affairs; Taxpayers Alliance; RAC Foundation; The Centre for Economics and Business Research; Adam Smith Institute; New Economics Foundation; Conservative Transport Group etc have all expressed concerns on the case. Leading academics, Professor Tomaney; Vickerman; Overman; Mackie all told the told the House of Commons Transport Select Committee their concerns that the evidence did not support HS2 rebalancing the economy. 

For more information please contact:

Richard Houghton

Tel: 07803 178 037