Transport and the Economy - Transport Committee Contents


Written evidence from Chiltern Countryside Group (TE 114)

We thank the Transport Select Committee for the opportunity of submitting this evidence to their Inquiry into Transport and the Economy.

The Chiltern Countryside Group was established at the time of the National Air Traffic Service's Terminal Control North Public Consultation 2008 as a natural evolution of local groups with the same aim of preserving the character and peace of the Chilterns and its Area of Outstanding Natural Beauty.

Our submission, which is not confined to the locality of the Chilterns, focuses on aviation and rail transport, and is made on behalf of the Group's supporters.

In writing this submission, we are mindful of the criteria set out by the Chancellor of the Exchequer, the Rt. Hon. George Osborne, in his Spending Review October, 2010. We have considered whether the current proposals for a High Speed 2 Rail route as outlined in the Command Paper of Lord Adonis (March 2010) meet this criteria. Our considered view is that they do not.

We give below our supporting evidence which we hope the Transport Select committee will accept and fully consider when reaching their decisions.

We address the Committee's questions on the UK's transport policy and continue with a focus on the High Speed 2 rail proposals.

KEY SUMMARY OF POINTS

  • Fundamental questions for the UK's transport policy do not appear to have been clearly addressed.
  • Since 2006, the UK and the global economy have moved from a growth environment to a period of recession.
  • While there is clear correlation between transport spending and UK economic growth in the past, it is not clear that spending causes growth, even though lack of spending may inhibit growth.
  • The 61B journeys people make to work annually demands a massive energy cost and is not directly economically productive. Policies that encourage alternatives to commuter travel will have national benefit.
  • The core policy should be to enhance regional and national economic growth, subject to fiscal, social & sustainability constraints.
  • The balance between revenue and capital expenditure should be in line with best commercial practices.
  • Current methods for assessing proposed transport schemes are not satisfactory.
  • Are the current proposals for a High Speed 2 rail network the best way forward?

SUPPORTING EVIDENCE

Historically, the fundamental questions for the UK's transport policy do not appear to be clearly addressed.

  • What are the objectives of national transport policy?
  • What are the best ways of achieving them?
  • How are specific project proposals effectively evaluated against these objectives?

As an example of what can go wrong without this framework, the High Speed 2 proposal appears to have reversed the order by evaluating a specific proposal, then working out what it might achieve, then suggesting this should be national policy. The Eddington Transport Study explicitly warned against this approach. (ref: vol.3. 4.171, 4.172)

The Committee poses the questions:

Q1: Have the UK's economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

The country has moved from a growth environment to a period of recession.

The Coalition Government, by definition a reflection of the uncertainty & fragile confidence of the electorate, urgently needs to stabilise both the economy and public confidence. They will not achieve this, if in real terms, or in the perception of the public, they unwisely spend what money is available.

The past four years have seen global financial crisis & the enforced closure of many long-standing world famous organisations & brands. The Coalition Government began its term of office in 2010 with a huge deficit & commendably has made restoring the UK's profitability & world standing the main planks of its strategy.

Therefore, it has never been more important to openly demonstrate to the public and to the business world both in the UK & internationally that the UK Government bases its projects of high capital long term investment on sound & up to date financial & socio-economic advice & that sustainable funds to complete the project will be available. It is our considered view that in the case of High Speed 2 rail this has yet to be achieved.

While there is clear correlation between transport spending and UK economic growth in the past, it is not clear that spending causes growth, even though lack of spending may inhibit growth. Identifying the key obstacles to growth is a challenge, but a period of reduced demand may help highlight which obstacles are truly relevant.

The Eddington study identified congestion as a key obstacle, and a high priority DfT policy has been to reduce congestion. The lower demand reduces congestion, thereby allowing the effect of congestion to be measured.

The DfT has admitted that it has concentrated on demand measurement, rather than demand management. This has an implied national objective that all demand should be met, which is unlikely to be the most cost-effective policy, especially in a recession. (ref: HS2Ltd. Seminar on Modelling 12.11.10) This approach leads to provision of sufficient capacity to handle peak-time commuter travel, implying significant under-utilisation outside these peaks.

Options for better utilisation of resources by demand management have not been seriously considered by the DfT, not least because they might be considered to be outside their remit (e.g. improved telecommuting, flexible working hours, car sharing schemes). These schemes have great potential to reduce the cost to the country, so should be factored into transport spending appraisals.

Q2: What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

The core policy should be to enhance regional and national economic growth, subject to the constraints that it is affordable, sustainable (e.g. carbon emissions) and not detrimental to the environment or individuals. The economic appraisals should include measures of national benefit and national cost to permit proper evaluation for national growth.

For the country as a whole, transporting people to their place of work (the greatest use for transport today - 61B journeys pa) (ref: Eddington p5pt7) demands a massive energy cost, and is not directly economically productive - it is an expense that doesn't increase national value. So ways of reducing the need for transport will directly benefit the country. Therefore policies that encourage alternatives to commuter travel will have national benefit. Within the sphere of transport, this includes creative ticket pricing so occasional telecommuters do not lose season ticket benefits (working one day a week at home reduces transport energy and carbon emissions by 20%).

How many passengers travel into Heathrow or other London airports because London is their destination? Would they use a regional airport if the service was available? Regional airports potentially could save time and additional journeys but this should only be considered if it met the Government's commitment to overall reductions in carbon emissions and did not disadvantage the local population with increased aural & air pollution. (ref. Future of Air Transport White Paper 2003)

The taxpayer and the fare-payer justifiably both seek optimum value for money. The fare-payer rightly expects to travel comfortably, promptly and reliably between his destinations. A ticket is bought which should guarantee a seat for the journey. The taxpayer has the right to see that the revenue to which he contributes indirectly is spent on infrastructure schemes which provide benefits to the communities through which they pass. This is not true for a high speed rail network, as apart from the cities which it is intended to serve, it will be a disbenefit to all other communities, with negative environmental, commercial and transport impact.

Q3: How should the balance between revenue and capital expenditure be altered?

This should be kept in line with commercial practices. Normal business capital investment would expect a return of 5-10%, so planned revenue from a project should be of this magnitude.

Q4: Are the current methods for assessing proposed transport schemes satisfactory?

There are major problems:

The assumed objectives are to satisfy anticipated demand (which may be contrary to well-managed national objectives as stated earlier) with a sufficiently great BCR.

However the DfT and HS2 claim to have good models for predicting demand, given input parameters such as population and fare levels. But they have not considered how other parameters may be varied, or whether active adjustment of parameters may be more beneficial. Some of the assumptions seem over-optimistic (growth figures), not based on the latest research, or using the most recent economic data that includes the recent period of recession.

At least as important is that few alternatives are considered, especially more radical ones such as encouraging telecommuting, greatly improving rail capacity by active signalling methods to replace the 150-year old block signalling, enhanced rail timetabling combined with track improvements permitting more overtaking by faster trains.

There has been little work showing multi-modal transport planning; for example, modelling whether the impact of faster travel with improved luggage transfer services linking airports throughout the West Midlands and South-East - such planning might result in significant passenger benefits and reduction in congestion in London. But it is little considered under current sets of transport responsibilities.

Integrated multi-modal transport models that include true national benefits and costs, combined with an approach to explore completely different approaches, would allow optimisation of the result on a national basis. The current approaches instead favour incremental improvements to single transport modes - whilst these projects may be worthwhile, they miss opportunities for better joined-up schemes.

The transport modelling for HS2 was not fit for purpose. It was incapable of estimating the benefits needed to support the BCR and because of this, the wrong scheme may be being built. For example their model showed that connection to HS1 and Heathrow were not important whereas with a proper model they may well be. It concluded with their Y shape instead if say a T shape because their model did not have the full choice hierarchy.  

DfT guidelines require the model to be composed of a full hierarchy of choices: choice of trip frequency, mode choice, submode choice, time period choice and destination choice. The model they used only had submode choice. It should have sufficient spatial detail to be capable of modelling the infrastructure in question. This model has about 250 zones whereas for infrastructure of such scale it should have several thousand zones. The model should capture all the demand mechanisms which are likely to be affected within the overall hierarchy whereas it omitted air and connection to HS1. The demand data upon which the model was built was ticketing data and without the full choice hierarchy the model would have a build-in a bias towards servicing the current origin-destination trip pattern whereas what this scheme is likely to do is to generate different travel patterns - indeed the whole purpose is to encourage new travel and promote economic development.  

HS2 should build a proper transport model of the country with a full choice hierarchy to sufficient spatial detail so as to do the job properly to DfT standards. They would then have the right tool to be able to design the right scheme on a sound scientific evidence base with a properly supported BCR. Only then can they select a route and only then can they be in a position to be able to persuade people that it is necessary (if indeed it is).

Q5: How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies?

National requirements can only reasonably be met at national planning level. But without regional bodies, there is a serious risk of lack of local oversight to best cater for local requirements. Greater regional consultation processes will be required to involve those with best local knowledge.

FOCUS ON THE PROPOSALS FOR A HIGH SPEED RAIL ROUTE AS OUTLINED IN THE COMMAND DOCUMENT MARCH 2010

We have considered the following points:

  • The UK and global economy.
  • The changing patterns of work and leisure and their effect on forecasting.
  • Risks in accurate forecasting and can we learn from the past?
  • Can High Speed rail aid regeneration & fulfil sustainability requirements?

UK AND GLOBAL ECONOMY

Internationally, all countries are operating under challenging financial conditions. The world economy remains fragile & leading nations differ in their approach to creating stability. In response to the USA's decision in early November to put a further $500 billion into their Quantitative Easing Programme, Germany's finance minister said "It could create extra problems for the world" (ref. Sunday Times 7.11.10).

Investment values of both the "man in the street" and institutions have fallen, particularly those providing pension funds. Redundancies & job losses are now common place and in the UK, the 2010 Spending Review brought wide sweeping financial cuts and reforms which will impact on the public and individual purse early in 2011.

In 2011 higher costs for food, fuel, clothing, VAT rate, coupled with higher taxes and the weakness of the pound are likely to keep inflation higher than previously thought - currently above 3% throughout 2010 with the Consumer Price Index (CPI) more than 1% above the Bank's target rate. (ref. Sunday Times 7.11.10) Thus potential High Speed rail customers, will have less disposable income, more of which will be spent on essential needs, rather than joining the ranks of leisure travellers forecast.

Many existing commuters question the wisdom of billion pound commitments to a new service when existing ones require investment. The Eddington Transport Study (ref p7pt15.1-4,Command Document 1.19) recommends "that the first priority should be the performance of existing networks, before considering new links....a sophisticated policy mix ….careful assessment of the full range of policy options, including pricing, better management and infrastructure improvements" and that there should be "a full range of modal options using appraisal techniques that include full environmental and social costs and benefits". These have yet to be demonstrated in the High Speed 2 rail proposals.

The Chinese Government are to review their High Speed rail proposals after their state-backed experts recommended "a rethink on the emphasis on massive infrastructure investment, particularly the bullet train expansion programme". (ref. FT.com Beijing 7.11.10) China is widely regarded as an increasingly important influence upon the world's, and the UK, economy (hence the Prime Minister's visit November 2011).

The DfT estimates that £21 million will be required in the financial year 2010-11 for the development of the high speed rail proposals. A further £50 million minimum will be needed to fund the purchase of properties under the HS2 Exceptional Hardship Scheme between August 2010-December 2011. (ref. Reply from Mr. Hammond to Caroline Lucas MP Hansard 14.10.10). Is this the best use of taxpayers' money?

The Spending Review stated (p5-7) that the Government's priorities were... "getting the best possible value for taxpayers' money". It is extremely difficult to see how this can be achieved when the HS route currently proposed will start in London, serve only selected cities and possibly Heathrow & will be inaccessible to much of the country's population. The current HS2 proposals would seem to contradict the objectives of the Coalition Government and the Spending Review in the allocation of public resources, which prioritise: "spending that promotes long term economic growth, introducing structural reforms to enable a private sector led recovery and building a low carbon economy; fairness and social mobility, providing sustained routes out of poverty for the poorest". (ref. Spending Review 1.20).

The Transport Secretary stated in response to the findings of the Public Accounts Committee on Increasing Passenger Capacity (2010) "This situation is not sustainable. We have to reduce the costs of our railways, so that both taxpayers and fare-payers get a better deal". We remain unclear how this will be achieved by spending £33 billion of taxpayers' money on a service provision for a limited market which will not be available for many years.

CHANGING PATTERNS OF WORK AND LEISURE &THEIR EFFECT ON FORECASTING

The way in which people work & socialise has been transformed over the past decade in methodology & at speeds unimaginable. Increasingly, work time is spent using electronic forms of communication - these have transformed the way in which we work & communicate - a trend which no-one could now seriously believe has either reached its peak or will slow down.

The Government recognises the national economic significance of this, investing £530 million over the next five years to support the UK's broadband network. (ref. Spending Review 1.39) Digital means will be used as a default option for more Government services (ref. Spending Review 1.104). The speed at which technology is changing challenges demand models for existing transport options. HS2 Ltd has made a serious misjudgement in minimising the potential impact which electronic communication will have on work & leisure patterns. (ref. Command Document pts. 1.10, 1.29).

Prudent and cost-saving budgets by organisations and employers will encourage trends for home-based working as overheads are reduced by cutting office space & moving out of high cost locations. Travel for business, potentially a core proportion of aviation & HS rail markets is being cut to the essential only. When both time & money can be saved by telephone & video-conferencing, email, Skype etc. actually making a journey with all its related add-on costs becomes a second-choice option.

Budget & Spending Review cuts have already started to actually impact upon people's disposable income & will continue, constraining leisure budgets. Demand by leisure travellers, a high percentage of potential HS2 customers, who will also face increased fares, is therefore likely to fall.

For families or groups who need to buy individual seats, ticket prices for aviation & rail will be a crucially important deciding factor in their choice of transport mode. Aviation is the only viable option for some overseas journeys but for some key internal journeys, eg London to Birmingham, there are no flights, so no modal shift from aviation to rail is possible. If rail tickets remain high & indeed rise (ref. Spending Review 1.72), car is likely to continue as their preferred choice & the modal shift on which HS2's viability and projected eventual profitability depends, is unlikely. Anyone who researches current prices & availability of rail or plane between eg the South and Wales, or the North East, will soon find there is no choice of practical route and prices are unrealistically high.

RISKS IN ACCURATE FORECASTING AND CAN WE LEARN FROM THE PAST?

A leading economist highlights the dangers of projecting benefits over a long period of time by asking how accurate a prediction in 1950 would be for today. HS2 Ltd. are forecasting over 60 years, (ref. Command Document pt. 3.11) well beyond any reputable economic forecasting horizon. (ref. Prof. Mike Geddes, HS2 Parliamentary Lobby Day 25.10.10).

The West Coast Route Modernisation project also illustrates the precarious nature of predicting benefits. In the HS2 Command Paper, HS2 Ltd state "it (WCML) cost £8.9 billion ...delivered fewer benefits than originally envisaged and caused serious disruption to travellers and business, at a significant economic and social price in addition to the project itself". (ref. Command Paper p12)

The lease of HS1 has just been sold for c.£2.1 billion thus delivering economic disbenefits. HS2 will cost a projected £9 million now in planning and some £33 billion to construct; what guarantee can the Government give that it will be more successful in its benefits than HS1? We would suggest that the socio-economic and environmental price which HS2 Ltd has not taken into account in the Command Document is likely to be considerably higher than for HS1.

Existing rail travellers face increased fares by 3% above the Retail Price Index (RPI) for three years from 2012 (Spending Review 2.25). Reports (Evening Standard 3.11.10) indicate that London commuters who are not top earners are already forced to reduce their travel costs & journey times by driving to nearer stations with better services & lower fares. A Surrey Rail Users Group predicts a major shift to cars once the A3 Hindhead Tunnel is completed in 2012. This could be replicated elsewhere.

In increasing passenger rail capacity, the DfT has been advised by Amyas Morse, head of the National Audit Office to "implement.. plans [developed in a stronger economic climate] flexibly in the light of current conditions, in order to protect value for money, and to be continually looking to drive down the costs of rail improvement works". (ref. National Audit Office 4.6.10) The proposed plans for a High Speed Rail route are not flexible and will cost each of the 26 million Great Britain households c £1,300.

The premise by HS2 Ltd for its High Speed 2 rail line proposals is based on continued UK economic growth and rising prosperity generating significant increase in demand for travel between the UK's largest cities. (Command Document p11). This premise is thus invalidated by prevailing economic conditions. Therefore to form an accurate assessment of future demand, modelling should be based upon current & professionally recognised predictable future economic trends.

Passenger forecasting is currently, it would appear, an inexact science. A key finding of the Public Accounts Committee's work on Increasing Passenger Rail Capacity (2011) was that the DfT's "knowledge of how many people use which parts of the rail network and when, is inadequate, sketchy and so gives a poor basis for decision-making". (Conclusions and recommendations pt.3) If the DfT is unable to provide accurate figures for present use, it becomes implausible that projected figures for future projects such as High Speed rail can be believed to hold any degree of credibility. The suggestions recommended by that Committee should be adopted, together with "the smart ticketing and other demand management techniques to reduce the inefficiencies of overcrowding in peak hours and underused rolling stock at other times". (pt 2)

Capacity on the West Coast Main Line (WCML) has been identified as a key mover in the promotion of a High Speed rail network. This could be addressed relatively inexpensively and without great disruption to existing traffic with signalling improvements so that more trains can run in the section between Birmingham and London, both at inter-urban and local level. There are frequently gaps of up to 20 minutes between local trains. Work should be undertaken to investigate how signalling & other measures could increase the number of trains using the WCML, without compromising safety. Not all peak trains have eight or 12 carriages.

If extra capacity at Euston is the restriction on increasing the number of trains, this can be overcome by using some, or all, of the land currently designated for the High Speed rail terminal.

Will High Speed rail aid regeneration & fulfil sustainability requirements?

The proposed High Speed trains are as yet technically unproven, especially on noise impact. Their ability whilst travelling at c 250mph, stopping at a limited number of access points, requiring feeder transport, to help build a low carbon economy is highly questionable. Reduction in carbon emissions is a Government target. Environmental sustainability is too important nationally to be ignored.

For the unemployed & those trapped in poverty, finding and keeping a job which is easily & affordably accessible is vital. Long-distance, expensive travel will not make this happen. Better local transport is likely to be of more help.

Developments of designated Business Parks particularly for high-technology & "start-up" businesses are commonly sited at out of town locations, typically not served by either aviation or rail. For example, the cutting-edge Diamond Synchrotron Facility at Harwell, Oxford which, appropriately, is to receive £69 million of public funding (ref. Spending Review 2.48) is six miles from the nearest rail station & public transport requires convoluted & time wasteful journeys. Expansion of these and "brown field" sites is likely to continue & will only add to the demand for local bus services and good road connectivity. Surely it would be more beneficial to consider increasing local rail networks to meet these potential needs, rather than a High Speed train which passes through without stopping?

UK cities are already well connected by rail unlike many in Europe. The French TGV has been developed at the expense of local services. Without subsidies, it is difficult to see how the UK could avoid the same pitfall.

We are unconvinced that the London-centred HS2 proposals will produce the "agglomeration effects" benefits (ref. Command Document ch3) in the areas of the UK most in need of regeneration. London salaries are generally higher and offers more job opportunities; surely this is more likely to attract people to London, rather than away? If this happens, local businesses will lose out on trade & skills and money will move out of the area rather than into it.

HS2 Ltd acknowledge that construction costs for major UK projects are higher than for comparable projects elsewhere in Europe (ref. Command Document p9pt18). To ensure that the construction costs & workforce salaries feed back into the UK economy, UK construction companies will need to put in highly competitive tenders, or they will need to "work with the DfT to consider whether & how civil engineering costs can be reduced" (p10). It is difficult to see how designing, building and commissioning a railway using largely untested technology, as envisaged in HS2 Ltd's plans, can be achieved if cutting costs is already on the agenda. Or to be successful, might this cost the UK taxpayer even more money?

There are statutory targets to reduce carbon emissions & mitigate impact of transport on local landscapes and communities. These must not be disproportionate to eco-socio benefits (ref. Climate Change Act 2008) & the Command Document says these must be "absolute" (ref.2.35). Improved carbon emissions with rail over other transport forms are only achieved with high load factor & if local environmental impacts are appropriately mitigated (ref.2.31). However, HS2 Ltd's modelling shows long distance services on new lines would have a daily load factor of around 60% (ref.5.41), so there will be spare capacity; how therefore do they expect to fulfil the requirement to reduce carbon emissions? No costing has been taken of the huge environmental impact of High Speed rail, which could be reduced considerably by well-designed improvements to existing rail transport corridors.

Funds could be more gainfully employed in providing better transport links between those areas which need regeneration, rather than sacrificing areas which are currently economically viable for a vision of questionable success. There is a risk of environmental and financial degeneration for all areas through which HS2 passes, but does not stop, even if currently they are economically viable and are vital environmental assets for the nation. As one example, the Chilterns Area of Outstanding Natural Beauty is a valuable "green lung" for London and a popular leisure destination for some 52 million UK and overseas visitors annually who bring revenue into the area. The unique character and tranquility of the area will be permanently destroyed by the current High Speed rail proposals. The effect on the Chilterns AONB is likely to be degeneration, rather than regeneration.

CONCLUSION

Our considered view is that the current High Speed 2 rail proposals are at the wrong time & in the wrong place.

We therefore respectfully suggest that, having gathered evidence, the Transport Select Committee might use their powers in this key Inquiry into Transport and the Economy to commission a further independent review of the objectives, assumptions and alternatives for the business case for HS2 in the light of recent and ongoing economic events.

November 2010


 
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