Examination of Witnesses (Questions 309-357)
Q309 <Chair:
Good morning. Would our witnesses please give their names
and the organisations they represent, for our records? I will
start at this end, please.
Steve Allen: Steve Allen from Transport for London.
Sir Robin Wales: Robin Wales, Mayor of Newham.
Alison Munro: Alison Munro, High Speed 2 Ltd.
John Jarvis: John Jarvis, Northern Way.
Q310 <Chair:
Thank you. Mr Allen, in the written evidence that we have
from you, at paragraph 3.5 you quote London First as saying that
the capital's infrastructure schemes generate four times as many
wider benefits for a given level of investment than schemes elsewhere.
That sounds to me a bit like a recommendation to shut the rest
of the country down. Am I misunderstanding that?
Steve Allen: It is very much a theme consistent with the Eddington report, as some previous witnesses were saying. What we are saying is that, if you look at the productivity of London and big urban centres, they are more productive than the rest of the country. If we are going to focus on how transport can help economic growth, then one of the things is to help those more productive centres grow, because lack of transport capacity is currently going to be a constraint on the growth of those highly productive centres.
Q311 <Chair:
Mr Jarvis, do you agree with that statement—that investment
should be presumably all in London or similar areas because it
has more benefit than anywhere else?
John Jarvis: We have taken close account of the work that London First undertook and we have reviewed that ourselves. While we would agree that large productive centres generate strong benefits from transport investment, our findings in relation to the London First work is that there are some issues that we would dispute in there in terms of the benefits that they suggest are generated. Our review of the work suggests that benefits outside London, on a perpound invested basis, are equally strong outside London, in the north, as in London. As part of that work we have also reviewed the emerging work on GVA benefits. This is work by Professor Peter Mackie in Leeds University. That, again, suggests that, in terms of GVA benefits, benefits per pound invested outside London in terms of GVA were as strong if not better than in London and the south-east. We think that the London First work needs closely looking at. The work that we have produced is on our website.
Q312 <Chair:
What type of transport investment should we encourage for
economic success?
John Jarvis: We agree with the prescription that Eddington produced—that it is about links within and between city regions, links with international gateways and, also, links with London. That is because those links produce a range of benefits. Links within city regions are about growing the functional economies of those city regions. Links between city regions are about businesstobusiness connectivity and movement of goods; links to London are about links with the world city functions; and links to international gateways are about international trade, as we heard in the previous session.
Q313 <Chair:
Outside the south-east, should priorities be to invest in
more connectivity to London or more connectivity with other areas
outside of London?
John Jarvis: I think, again, it is about getting the right balance and planning over short, medium and long terms. We know what the shortterm plans are of Government; we are less clear about the medium and longer term. But over the medium and longer term we are certainly looking for more attention to Managed Motorways, the Northern Hub, further electrification in the north and, as part of that process, longterm planning for high speed rail and getting an investment plan that meshes those priorities together.
Q314 <Chair:
Would any other members of the panel like to suggest what
priority investment should be?
Sir Robin Wales: Naturally, I would want to talk about investment in Newham, having come here from Newham.
I can solve your problem between the north and the south; I really can. If you join High Speed 2 to High Speed 1 and put a station at Stratford, it will do two things: it will generate more wealth in the south-east and more jobs in the poorest area of the country, but it will also connect to the north. I sometimes love listening to the numbers that people give, but I thought Lord Heseltine summed it up when he came to a meeting we had, which was that he doesn't believe a word of the numbers; he just thinks, if you build a railway and put a station in, things will happen—it's what the Victorians did.
Now, we have managed to put a station at Stratford which we are not going to stop trains at, which is kind of daft—£210m on a station at Stratford—but if you join that up with High Speed 1 and High Speed 2 and bring it through, you will benefit the north. Of course we should invest in transport in the north. It is madness to have a country that is all based on London, but equally, London is an economic powerhouse so you are trying to balance the two things up. For me, the solution is one small step, which the whole of business in the east of London supports. It is to stop international trains at Stratford and then linking High Speed 2 to High Speed 1. It's just obvious then that you stop at Stratford on the way.
The one thing I am really keen to get across is that Stratford is not in the east of London. Stratford is slapbang in the centre of London now, because London is rapidly moving to the north. Having spent £9 billion on the Olympics, it would be madness not to stop international trains at a station on which we have already spent £200m. At least, that's how we see it in Newham.
Chair:> So
you've got a solution for us. Mr Maynard?
Q315 <Paul
Maynard: Sir Robin, it is a pleasure to
question you because I tried three times to get elected to
Newham Council and failed, so—
Sir Robin Wales: Not for Labour, I take it then.
Paul Maynard:>
No, not for Labour. We spent £210 million on Stratford
International. Clearly, that is an awful lot of public money.
Do you regard it therefore as an example of transport policy failure
that we have built a station? We have built it, and nobody has
come.
Sir Robin Wales: No, no, no, no; no, no, no, no. People are coming; no, no.
Q316 <Paul
Maynard: Not the people you built it for.
Sir Robin Wales: The issue is, do you stop at the station? Interestingly, the difference between the French and the British was that the French said, "You are going to stop your train there. That is what you are going to do. You are going to stop your train there." We said, "We'll let the market decide." That was a mistake. If you build it and stop a train, they will come. It may be a few years since you were in Newham, but we have the largest urban shopping mall in Europe being built in Stratford. London is marching eastwards rapidly. The Mayor of London said Newham is where the regeneration will be for the next 20 years, and of course now there is the Thames Gateway, which is a massive development. It is obvious that that is where people are coming. It is obvious what will happen. If you stop a train there, it will take 51,000 passengers on the service and it will relieve some of the pressure in central London. So I would argue not that it was a mistake to build it but that we really need to use it. We need to stop trains there.
Q317 <Paul
Maynard: So the policy failure was the planning
of what to do with the asset once we had it?
Sir Robin Wales: I would support the principle that we should say, "We built the thing so we are going to stop the trains there." I struggle in this. I am not a transport expert; I am really not. I have to—
Q318 <Chair:
Can we have quite short answers that get straight to the point,
please, because we've got lots of things to talk about?
Sir Robin Wales: You obviously don't know me, then. I'll do my best.
Chair:> Not
that you are not doing that, but it might be helpful.
Sir Robin Wales: I will do my very best. We built it; we should use it. If we use it, people will come. International business will be attracted there. That will be really good for development, it will be good for international trade and it will link to the north. Building transport networks to the north has got to be something this country does. I say that as somebody who lives in London.
Q319 <Steve
Baker: I have a question on high speed rail,
if I may, and the entrepreneurial risk associated with it. Are
there uncertainties around the business case for high speed rail?
It seems to me there probably are. If so, who will actually bear
the entrepreneurial risk of going ahead with the project and finally
carrying either the benefits or the costs of whether or not it
works and regenerates the north?
Alison Munro: Clearly, the business case for high speed rail depends on, for example, how future demand will grow. It will depend on what the actual costs of delivering the scheme will be. There are some uncertainties there, undoubtedly. In terms of how those will be shared in the future, that is something that has not been decided at this stage. We have done some preliminary work on how the scheme might be funded, but that really will be a decision for the future on just how those risks should be shared out and borne.
Q320 <Steve
Baker: So it does seem to me then, in your answer,
that there is substantial scope for the taxpayer to bear the entrepreneurial
risk of high speed rail failing?
Alison Munro: We did some initial work on how the scheme could be funded and our conclusion was, in terms of the construction, that it would be best if that was largely funded by the public sector. That would be the best way of dealing with the risks. Certainly, the public sector would bear some of the risks. That is not to say there would not be scope to get some risks transferred to the private sector but, as I say, those details have not been decided at this stage.
Q321 <Steve
Baker: But the starting point is that the
taxpayer bears the risk?
Alison Munro: Not necessarily. The taxpayer would bear a large proportion of the cost. Through a public sector procurement you can still transfer some of the risk to the private sector, but, as I say, those details are yet to be decided.
Q322 <Iain
Stewart: On High Speed 2 and the benefits
to the economy generally, we have been given a figure of a cost
benefit ratio of 2.4 for High Speed 2, and specifically the London
to Birmingham line. But my concern is that we look at that as
an isolated project without considering the potential other benefits,
one of which is potentially linking up to High Speed 1 and, also,
the knockon benefits from freeing up capacity on the classic
rail network for rail freight and fast services for intermediate
stations. To what extent are you looking at these other possible
models so that they can compare different options—just London
to Birmingham, London to Manchester and Leeds—against having
High Speed 2 as part of a broader economic plan?
Alison Munro: The benefit costs ratio you quote is the figure that we produced for the London to Birmingham stage, which was our initial remit.
Q323 <Iain
Stewart: Is that, specifically on that line,
the knock-on benefits?
Alison Munro: That was specifically for the benefits of providing a high speed line between London and the West Midlands, but it did include the benefits of releasing capacity on the West Coast Main Line; so those were already incorporated. We tried to capture as much in terms of the benefit cost ratio of the actual benefits that would occur. The current appraisal does not allow you to capture absolutely everything, but we tried to do as full a job as possible. Obviously, since we did that work, the Government has announced that it does intend to take the network, in the second phase, to Leeds and Manchester. We are currently working on that. We would expect the business case for that to be higher than just the London to West Midlands stage.
Q324 <Iain
Stewart: Adding connecting to High Speed
1, Stratford International?
Alison Munro: We have done an additional piece of work that the current Secretary of State asked us to do on the options for linking to High Speed 1. Some of those benefits are rather difficult to quantify in monetary terms. There are more strategic arguments about the links to High Speed 1 which I would expect to affect the final decision on that, but we have looked at what the quantified benefits of that would be as well.
Q325 <Iain
Stewart: Is that a published review yet,
or is it still in progress?
Alison Munro: No. We have provided that advice to the Secretary of State and he has said that he will announce his decision by the end of the year on what to do about that.
Q326 <Julian
Sturdy: Just following on from the points
just raised, this is really a question to Ms Munro and Mr Jarvis.
What do you think the impact to the midlands and the northern
economies might be if HS2 weren't to go ahead and do you feel
that potential improvements in the West Coast Main Line could
go any way to offset that at all?
Alison Munro: This is if High Speed 2 were not built?
Julian Sturdy:>
Yes, just hypothetically.
Alison Munro: If you look at the longer-term projections of what demand is likely to be, over the long term there is expected to be a very significant increase in demand. Although in the short term there may be other improvements that you could make to the West Coast Main Line, it does not look as though those sorts of improvements will be sufficient to provide the additional capacity that is needed in the longer term. Without High Speed 2, the expectation of the longer term would be that there would a constraint on intercity travel in that corridor and that would have an impact on the economy.
Q327 <Julian
Sturdy: You feel that would have a constraint
on economic growth in cities like Birmingham, Manchester and Leeds,
and places like that?
Alison Munro: Yes, I would expect that. That would be consistent with Eddington's conclusions—that transport constraints can constrain economies, yes.
John Jarvis: We undertook some early work looking at the wider economic impacts of a high speed network serving both sides of the Pennines, using the Department's methodology for calculating wider impacts including agglomeration benefits. That indicated that a high speed rail network could generate £13 billion of wider economic impacts nationally, of which about £5 billion would be in the north of England. On a per capita basis, or in relation to the size of the north of England economy, the impact would be greater than in the rest of the country. We see that as very important evidence in terms of indicating how the north can take benefit out of high speed rail.
Other areas, clearly, where further work needs to be demonstrated is how the north takes benefit by throughrunning, both in terms of a route to Birmingham and then onwards by throughrunning to Manchester and potentially on the east side, if there were a link to the Midland Mainline in the north so you could access Sheffield or the north-east via HS2, and then, also, throughrunning once you have got the Yshaped network to the north-east again; and, also, how it can be better demonstrated what the benefits are of releasing the capacity for freight and more local and regional services on the existing main lines. I think that work needs to be further demonstrated in support of the case for high speed rail.
Q328 <Mr
Leech: I didn't quite catch part of what
Mr Jarvis said there. You said that there would be £5 billion
of benefit to the north, out of £13 billion?
John Jarvis: Yes.
Q329 <Mr
Leech: Where do you see the other £8
billion of benefit?
John Jarvis: A significant amount in London and significant parts in the rest of the country, into Scotland. I think the point to note in there is that, in terms of the £5 billion, as I recall, our figures are about £5 billion in the north, roughly a similar sort of proportion in the London and a similar amount in the rest of the country; so it is slightly more in the north.
Q330 <Mr
Leech: I think you have answered my followon
question about whether or not it was actually the north or London
that was going to be the biggest beneficiary.
John Jarvis: There would be significant benefits for London, but I think the point we are making in terms of the £5 billion is that it is a bigger figure in relation to the size of the north's economy; so it has greater impact in terms of the relative size of the economy. High speed rail is certainly the most transformational investment that we have found in seeking to attack the north-south productivity gap.
Q331 <Mr
Leech: Are there any other transport projects
that could create the same level of benefit to the north as HS2?
John Jarvis: There are significant benefits from Northern Hub. Northern Hub is appraised at the moment as generating £4 billion of benefit for a £500 million capital investment. That is four to one, once you include operating costs. I think this is where you need to get to a longterm plan that has short, medium and longterm components, because if you are saying, "What is our next priority?", the key one is Northern Hub for the next control period, but that is not to say that the country should not be planning for high speed rail delivery over a 20-year or so time frame.
Q332 <Mr
Leech: But would you agree that HS2 is absolutely
vital for the longterm benefit of the northern economy?
John Jarvis: High speed rail is vital in terms of the increasing capacity constraints of the West Coast, East Coast, and also Midland Mainline. We need that capacity relief. Once you are into relieving capacity you are into new lines and high speed lines.
Q333 <Mr
Leech: To other members of the panel, how
vital is HS2 to the economy of London, and would there be a better
way of spending £30 billion?
Chair:> Sir
Robin, do you have a view on that?
Sir Robin Wales: I have a view on most things, but yes on that one. If the productivity of Thames Gateway went up to the same as London and the south-east, it would be £13 billion to the economy. Opening up high speed rail, opening up the rail network, opening up the opportunities for international trade and all the rest of it clearly will help to drive up the economic benefits in the south-east of England, particularly in areas that are very depressed and very poor. As long as it's linked and it will stop at Stratford, it takes the pressure off central London; it allows a straight run through. I come back again to the point that it will benefit the north enormously, but it will also benefit that area. All the numbers add up to some very substantial benefits for everybody. For me, if you are doing High Speed 2, linking it up and stopping at Stratford makes extraordinary economic sense, and the sooner the better.
Steve Allen: Clearly, I would agree that high speed rail will bring benefits to London as well. I wouldn't necessarily say it would be our top priority if you were to spend £30 billion across the country.
Q334 <Chair:
What would your top priority be?
Steve Allen: I think the top priority would be to spend money on congested networks within cities, so not just London but Manchester, Leeds, Birmingham and so forth. I think you would get more bangs for your buck if you did that than the inter-urban networks. The other thing about High Speed 2 that we are particularly concerned about is how you manage the passengers who arrive in London on an already congested transport network. You've got to plan for where it's coming in. Coming to Stratford is a very good answer to that, but that needs to be considered as part of the planning of the route where the passengers are going to distribute once they arrive in London.
Q335 <Kwasi
Kwarteng: I wanted to ask a question about
high speed rail. It seems to me that some people are saying—certainly
the last witnesses we had—that money would be better spent
on other projects. You are suggesting the same thing, I think,
Mr Allen. I just wanted to ask Ms Munro and Mr Jarvis what
you would say to critics who say, actually, it is a complete waste
of money and we should be trying to look at roads.
Alison Munro: As I have indicated to the Committee, I can't comment on the relative priorities, but certainly the work that we have done suggests there is a good business case for high speed rail and there are wider benefits to the economy through the connectivity and the additional capacity that it will provide. That is what I would say to the critics.
Q336 <Kwasi
Kwarteng: What I want to tease out is this
whole idea of mode neutrality to which Eddington referred. I want
to test that as a proposition, because it seems to me that some
people are saying it makes more sense to invest in roads, whereas
you are saying to the Committee that you don't have a view.
Alison Munro: I am saying I can't comment on high speed rail versus other transport. What I can say is that, clearly, Eddington identified that intercity travel is one of the priorities for supporting the economy. In terms of intercity travel, road isn't the main alternative for city centre to city centre travel. High speed rail is a very effective way of addressing that market.
John Jarvis: Connectivity is fundamental to the future economic wellbeing, in the short, medium and long term. But there is not a silver bullet solution. It is about getting the right balance between modes and between long distance and shorter distance travel. That is the issue that we need to resolve. High speed rail has to be a fundamental part of that, but so has improved connectivity within the north—
Q337 <Kwasi
Kwarteng: You are sticking to this idea
of mode neutrality. You are saying that both are important—
John Jarvis: There needs to be a balance. We agree and welcome the priority that the Government has given to Managed Motorways in the immediate future. There has been a significant set of Managed Motorways projects in the north of England, and we recognise motorway congestion as one of the biggest threats to the north's economy. We have some of the most congested sections of motorway in the country. At the same time, rail is growing the economies of places like Manchester and Leeds more strongly than road. It has been rail that has taken the growth in terms of labour supply into Manchester and Leeds. Those rail services are now overcrowded and we need investment in rolling stock and that capital investment to unlock the Northern Hub. It is getting to that balance of investment and prioritising transport in recognition of its importance to the future economic growth.
Q338 <Kwasi
Kwarteng: So it is both, you are saying?
John Jarvis: There has got to be that balance, yes. I come back to that point: there is not a silver bullet. You can't say you will solve the north's problems by sorting out the motorways, or you'll sort the north's problems by sorting out Northern Hub. You have got to get the balance between those investment priorities.
Q339 <Chair:
The Northern Way has called for a national plan. Is that the
same as a national infrastructure plan?
John Jarvis: We agree very strongly that there needs to be a longterm plan that has short, medium and long-term components and there is clarity about how investments are brought forward. One point we would make very strongly is that the Committee needs to consider why a project with such a value as the Northern Hub has not been brought forward earlier. The reason around that is it is only since The Northern Way came into existence that we began to look at the impacts beyond the immediate impacts of Manchester and the north-west and recognised how the rail network in and around Manchester impacts across the north. You need that input in to actually bringing some crucial projects forward. We have strong appraisal processes but the issues of how things have been brought forward is an important consideration.
Q340 <Paul
Maynard: Clearly, Mr Jarvis, The Northern
Way has managed so far to develop the short, medium and longterm
plans you just referred to, working with the three northern RDAs.
The Government has now announced the abolition of the RDAs. They
are replaced by a patchwork of Local Economic Partnerships. How
confident are you that the LEPs will be able to replicate the
role of the RDAs in supporting the development of transport strategy
that you have been overseeing?
John Jarvis: I think it is a very relevant question at this current time. The funding from the RDAs for The Northern Way runs out at the end of this financial year and there is no certainty about how that will be carried forward. I think the Secretary of State is right in remarks that he has made that LEPs aren't fully in place actually to have that conversation with them at this point of time. We are discussing how The Northern Way might be taken forward with the major cities in the north, pending the establishment of LEPs, but those discussions are not fully concluded yet.
Q341 <Chair:
At the moment what is your view about the likelihood of being
able to continue as successfully as—
John Jarvis: There is a likelihood at a low level we may be able to continue, but to continue at the level of investment in considering how transport impacts on the economy of the north is going to be difficult to sustain. Our costs of evidencebased work have been averaging about £650,000 a year. That includes staffing and business case development. We have been expending that over about the last five years. In terms of the benefits that we have achieved through that expenditure, there is independent evaluation that suggests we have brought forward Northern Hub investment by around five to 10 years. In terms of the value to the economy, that is worth around £600 million to £1.6 billion. In terms of the small scale of investment that we have been making, we have been achieving strong value for money. But it is going to be difficult to replicate investment of £500,000 to £650,000 a year on this work in future, given the abolition of the RDAs and the reductions on local authority budgets that are anticipated. But, like I say, we are in discussion about how we might take it forward.
Q342 <Gavin
Shuker: Just picking up on capacity, which
is an issue that a number of the witnesses mentioned before, to
what extent do you believe that the Department for Transport's
current plans for capacity on rail and on road go far enough to
address the concerns of growth in your own individual regions?
Perhaps we could start with Mr Allen.
Steve Allen: We were obviously pleased in the recent spending review that our plans for continuing to invest in the capacity of, particularly, the tube network and Crossrail, were protected through the spending review, and the important place that developing the transport infrastructure has for economic growth was recognised. Broadly speaking, over the next four years, yes, I think the plans are there for London. Obviously we need to see that they are sustained over the longer term.
Q343 <Gavin
Shuker: Just on that, Thameslink obviously
has slipped by a couple of years now. Will that have a significant
knockon effect to, say, the Northern Line overcapacity?
Steve Allen: Yes. The thing about transport is that it's all about networks. You can't look at any project individually; you have to see how it fits in with the networks. Clearly, delays in delivering any part of the upgrade to the capacity will have a consequent strain on the rest of the network. But, again, I think the main point is that Thameslink is going ahead and that is good, even if it is on a slightly longer time scale than is ideal.
Sir Robin Wales: I have a real concern now in the east of London. Crossrail is coming; that will be very important. If we get a station at Stratford then it completes quite a powerful transport hub in Stratford, in the west of my borough, but the reality is that London is the critically important driver for economic success in the country, and I would question whether we have it right at the Thames Gateway and whether we have the right transport infrastructure there to enable us to expand into areas that everybody recognises we need to expand to. So I would have a real concern.
One of the difficulties is always, in London, trying to explain the significance of the east, the developments in the east and the expansion in the east which is available, against sometimes the perceptions in the west and centre and so on. I think, yes, in the next few years, if we get these things right, we will be able to see some expansion, but I do question the Thames Gateway and whether or not we have really got our heads around the transport infrastructure that we need down there in order to continue development in, say, 10 or 15 years' time. We got the Olympics because we have an international station and we have developed Stratford over 20 years. Who is doing the 20-year thinking out of the rest of east London? I have a real concern about that.
John Jarvis: We welcome the focus on rail investment but I think, as has just been indicated, there is a strong prioritisation at the moment in rail in the south-east. Nonetheless, I think that the electrification in the north-west, the line speed improvements between Liverpool and Leeds, and tucked away in Network Rail's plans some investment on rail gauge as well, which would benefit northern ports, are all important issues for the north. But in terms of one major investment, it is coming on to Northern Hub and actually ensuring that project is agreed as part of the 2012 HLOS. On the previous conversation about the uncertainty about forward planning and Northern Way, I suppose there is a risk of hiatus in terms of what is happening and getting rid of regional apparatus.
Q344 <Gavin
Shuker: You would say there is a real emphasis
on capacity over, maybe, the longer term planning of where the
economy and transport needs to be in the next 20 or 30 years?
John Jarvis: That is a big issue for the north of England rail network in terms of the medium and longterm plans, getting that right and getting that investment into rail. It is going to be rail that will support the growth of the big cities in the north of England.
Q345 <Chair:
There has been a lot of criticism from certain groups about
the appraisal on High Speed 2 and it has been alleged that passenger
demand forecasts are inflated and the estimate of benefits is
unrealistic. Just how sensitive is the case that has been put
forward to changes in, say, the rate of growth of journeys in
the scheme?
Alison Munro: The business case is clearly sensitive to future demand. In forecasting future demand, we have followed guidance from the Department for Transport and methods that are used by the industry which are based on past evidence of growth and relationships between GDP and transport growth, and we projected those into the future. We consider that those are reasonable estimates of future demand, but there obviously is uncertainty when you are looking into the future. We did some sensitivity tests when we did our work last year. We have talked about the fact that we found a benefit cost ratio of 2.4 in that work for the London to West Midlands route. We did tests for sensitivity if demand were 20% lower. That reduced the BCR to 1.5, so clearly it is sensitive. What we are projecting for the future is comparable with what has been seen in the past in terms of rail demand growth. We have assumed that there is a point in the future where demand doesn't continue to grow, so we haven't taken the most optimistic possible assumptions.
Q346 <Chair:
Is it comparable to previous assessments looking at similar
time scales, because this is a big time scale, is it not, a long
time scale?
Alison Munro: We are looking further ahead than most other schemes. Clearly, because of the nature of this, it will take a long time to develop and to build. So we are looking further ahead than most other schemes have done in the past, but the general methodology that we are using is the standard methodology.
Q347 <Julie
Hilling: I want to ask a similar question
to the one that I asked the last witnesses, about other forms
of transport—buses in particular, but also other forms of
transport and their importance in terms of economic wellbeing.
I wonder if you could talk to me about what the Government should
be doing in terms of investment into those sectors.
Steve Allen: The bus system in London is very different from the bus system outside London and I think has benefited hugely as a result. It is worth remembering that the bus carries more than six million people a day in London, more than twice the number of people who travel on the tube. It is a huge proportion of transport within London by bus. The system that we have of the transport authority setting the routes and the Mayor setting the fares and the service levels, and then having the private sector operate those under franchise, has been an extremely successful one, and the reason for the continued success of the bus and the importance of those journeys to the London economy.
John Jarvis: We haven't focused on bus because we have largely focused on the links between the north rather than the links within individual cities in the north; bus is more the territory of the PTEs. But the comment I would make is that we don't benefit from a similar system as in London and the whole issue of how more effective relationships can be developed between the local authority sector and the bus operators becomes much more important in the north, whether that is by way of effective quality partnerships or quality contracts.
Q348 <Mr
Leech: I just wanted to ask Mr Allen what
he thought the economic impact of a London style bus system would
be on other major conurbations in the rest of the country.
Steve Allen: I clearly think it would be beneficial if other cities were able to plan their bus network in the way that London can. You can have better use of capacity so that you are not having inefficient competition, which I think you get in some bus routes outside London, and you can have the competition through bidding for the franchises once the level of service has been specified.
Q349 <Mr
Leech: With regard to the additional cost,
because everyone accepts the London bus system costs a lot more
than it does outside of London, would it be costeffective
in terms of the economic growth that it would bring?
Steve Allen: I think you can separate out those two questions. You can run a system of the city determining what bus services it wants and asking people to pay for that, separate from the question of how much subsidy you want to put into it. There are benefits in the system that are not necessarily reliant on the subsidy.
Q350 <Iain
Stewart: I wonder if I might return to the
question on estimating passenger usage of HS2. One of the criticisms
that is made by the group opposing High Speed 2 is that High Speed
1 had a much higher estimate of passenger numbers than has actually
turned out to be the case. The initial forecast was 25 million,
and the reality is 9.2 million. To what extent have you revised
the methodology for forecasting passenger usage in light of the
experience of HS1?
Alison Munro: HS1 was clearly predicting a different market to the one that we are predicting, in that it was predicting international rail travel. In the field that we are looking at, domestic rail travel, there is more to go on in terms of past experience. The forecasts that we are using are based on past data of actual usage in terms of the rail network in the UK. In that sense, they are based on an existing pattern of travel and existing relationships. I would say that we are not facing the same problem as there was with forecasting the demand for High Speed 1.
Q351 <Iain
Stewart: I have one additional question,
if I may. If I am correct, your report ruled out the option of
intermediate stops at certain points on the line. With the experience
of the TGV system in France, where they have modelled in intermediate
stops, should you not revisit that in terms of boosting the overall
usage of the system?
Alison Munro: Our general approach is that you need to look at it on a case-by-case basis. We did look at whether there should be an intermediate station between London and the West Midlands, and we concluded that there was not a strong case for it for that part of the line. That is not to say that there might not be a case for an intermediate station when we are going northwards to Manchester and to Leeds. We will look at that again on a case-by-case basis to see whether there is a case. We have not ruled it out.
Chair:> Dr
Kwarteng, is it on this issue?
Kwasi Kwarteng:>
It is on a general issue about HS2.
Chair:> I
will take Mr Baker and then I will come back to you.
Q352 <Steve
Baker: Following up Mr Stewart's question
about forecasting passenger numbers, I am afraid I have in mind
the old adage about economists. The only purpose of economic forecasting
is to make astrologers look good. I am just nervous and sceptical
about these models. I hear what you are saying about having much
more historical data, but could I just ask you to comment on the
validity of historical data in respect of forward projections,
and also to come back to the issue you raised about sensitivity?
With all of that in mind, how have you quantified the risks?
Alison Munro: I think there are two questions there. Dealing, first, with the historical data, we have looked at the historical data but you can also look at the variation in rail travel between different income groups. For example, the top quintile travel twice as much by rail as the average person. It is not just historical trends. There does seem to be a lot of scope, as incomes grow, for people to travel more by rail. Rail is also a relatively small market. It is only about 2% of trips. So, again, there potentially is scope for rail to increase quite significantly.
In terms of the risks, we have not tried to attach probabilities to different outcomes. As I said, what we have tried to do is to look at sensitivity testing. If demand were so much lower or so much higher, what would the impact be on the business case? That is the way we have approached it.
Q353 <Steve
Baker: You mentioned the top quintile being—sorry,
how many times more likely?
Alison Munro: Twice.
Steve Baker:>
I bear in mind the nation's income distribution and it just
seems to me immediately that means that poorer people will end
up subsidising the rail travel of better-off people. I just wonder
if you could comment on the social justice of that.
Alison Munro: I think that is outside my remit.
Q354 <Kwasi
Kwarteng: I would like to ask a simple question
to each member of our panel here. It refers to what has been discussed
about HS2 and the road network. You are not allowed to fudge the
answer. It has to be one thing or the other. What is more important?
Is it more important to have connectivity between our cities or
to improve the actual local transport systems within the cities
themselves? A lot of this HS2 debate seems to revolve around which
stance you take on this question, and I wanted to ask you all
individually which is more important: connectivity between cities
or improving regional transport in those cities?
John Jarvis: I am very happy to try to answer that, and I hope this won't be seen as trying to fudge it. We have looked very carefully at the issue of connectivity within and between city regions in the north of England. There have been a number of pieces of work around this that all come to the same conclusion. If you improve connectivity within two city regions but don't improve the connectivity between those city regions, the strongest economy will improve at the expense of the weaker. If you improve the links between the city regions without improving the links within the city regions, it helps to spread the benefit and you get a better overall return. That is not to say that, again, you do one or the other, but it is getting to the balance of the two. Our experience of improving links between city regions is that the evidence suggests it helps to spread the benefits by connecting weaker economies to the stronger economies. We have looked at that in relation to both a Leeds and Sheffield pairing and a Leeds and Manchester pairing. If you look at Leeds and Sheffield, improving links within the Leeds city region and within the Sheffield city region, it benefits the Leeds city region. If you do the links between, it helps to spread benefits to Sheffield. If you do Leeds and Manchester, as Manchester is the stronger economy, improving links within Manchester and within Leeds, it benefits Manchester rather than Leeds. If you improve the links between, it helps Leeds rather more and helps to spread the benefits.
Alison Munro: We have not addressed the question of which is better, but I would say that high speed rail is not just about one or the other. Although a high speed rail line would benefit intercity travel, the capacity it would release on the West Coast Main Line or the other lines with a larger network, the Midland Mainline or the East Coast Main Line, would allow better local services, commuter services.
Q355 <Kwasi
Kwarteng: So, again, you are not taking
a view as to which.
Alison Munro: You need both. Obviously, it is about endtoend journeys. You need the supporting network in the cities as well so that you can distribute people.
Sir Robin Wales: I take a broader view. I think there is a real concern that, if I look round the country, the reality of the current economic situation is that in London there are jobs, people can access them, it is quite difficult and we need to invest in people, whereas outside in other parts it is much more difficult. If we are going to spread economic benefit across the country, the first thing we have to have is good infrastructure and that means transport infrastructure. I look around Europe and other people seem to think high speed trains are quite a good idea. Certainly, from where I sit, high speed rail is very important. Once we have done high speed rail I would like to improve links within Newham of course, but do high speed rail first.
Q356 <Kwasi
Kwarteng: You are saying connectivity is
the important thing?
Sir Robin Wales: I think connectivity is absolutely essential for the north if we are going to try to stop the movement of people down into London and spreading London out. But, equally, London is a powerhouse and we need to make sure the economics of London are developing as well; so I think that is important. I then think about issues like bus. If you are talking about social justice, buses—
Chair:> Can
you just answer the question, please? Social justice is very important,
but that wasn't the question.
Sir Robin Wales: If you are looking at internal movement, bus is extremely important in London and you wouldn't just talk about rail; you'd look at bus as well. They are all important, but I have to say that I think if I was taking a view nationally I would say, without those links to the north and without those things working, we will put the north under more pressure, and that makes no sense.
Q357 <Kwasi
Kwarteng: In terms of Britain in 2010, at the end
of November—
Sir Robin Wales:
And Newham 2010—they come together.
Kwasi Kwarteng:>
—the connectivity is important to you?
Sir Robin Wales: I think that is right.
Steve Allen: If you look purely at the question of where you get the most economic growth for your investment—recognising that transport infrastructure is not purely about delivering economic growth—you get the most growth by enabling the highly productive industries to grow into larger clusters. All the evidence is that these industries work better in clusters in particular places, and that means that improving the investment and the infrastructure within the city is going to give more economic growth.
Kwasi Kwarteng:>
As opposed to the connectivity. So it is a different answer
to the other three.
Chair:> But
you are speaking from a London base. Thank you very much for answering
all our questions and coming here today. Thank you.
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