High Speed Rail

Oral Evidence

Taken before the  Transport Committee

on  Tuesday 21 June 2011

Members present:

 

Mrs Louise Ellman (Chair)

Steve Baker

Kwasi Kwarteng

Mr John Leech

Paul Maynard

Iain Stewart

Julian Sturdy

   

________________

 

Examination of Witnesses

Witnesses: Stephen Joseph, Chief Executive, Campaign for Better Transport, Chris Nash, Research Professor, University of Leeds, and Christian Wolmar, railway author and broadcaster, gave evidence.

Q1 Chair: Good morning, gentlemen, and welcome to the Transport Select Committee. I would like to start by asking you, please, to identify yourselves with your name and organisation.

Chris Nash: I am Professor Chris Nash, Research Professor at the university of Leeds.

Stephen Joseph: I am Stephen Joseph. I am the Chief Executive of the Campaign for Better Transport.

Christian Wolmar: I am Christian Wolmar. I am a writer and broadcaster on transport matters, mainly railways.

Q2 Chair: Thank you very much. Could each of you tell us what you see as the strongest and the weakest points in the case for high speed rail as put forward by the Government?

Chris Nash: The case rests, essentially, on time savings and additional capacity. The demand forecasts, uncertain as they are, are based on the best evidence available. On that basis, in standard cost-benefit terms, a line from London to the west midlands, ultimately going on to Leeds, looks to have a very strong case. The weakest area in current appraisal practice probably relates to business time savings, which are currently valued on a very crude basis of simply asking what the time costs the employer. I do not know if you want to go into any detail on that, but there is some research on what organisations are willing to pay for their staff to save time on business travel and it does tend to indicate high values. That approach is much sounder than simply working out what it costs the employer.

Q3 Chair: Mr Joseph, do you agree with that or do you have other points?

Stephen Joseph: I would make a slightly different point. The strongest argument for High Speed 2 is about capacity; it is not about speed. It is about the fact that the West Coast Main Line is already relatively full and is likely, even if past trends are moderated, to get to the point where large-scale increases in capacity are necessary. We have been arguing that all the business case numbers are wrong and that, in fact, the likelihood is that we want more capacity than envisaged by HS2, for reasons to do with wider economy, trends in oil prices and so on. In fact, there is a strong case for capacity relief of the West Coast Main Line. The weakest argument is that HS2 is currently being considered in a silo and is not being joined up with wider transport policy. It is unclear how it fits with, say, plans for road and air, airport investment and road capacity, etcetera, particularly interurban, and also how it links with local transport investment in the cities and areas that it is planning to serve.

Q4 Chair: You see no evidence that that is being considered.

Stephen Joseph: If you look at the work that is currently being done by HS2 and public statements by the Department for Transport, there has not been any formal statement of transport strategy or, indeed, a rail strategy within which HS2 is a part. That is why we, the Campaign for Better Transport-and indeed, I should say, other environmental groups-are at the moment quite agnostic about HS2 because we want to see what the rest of the package of which HS2 is a part looks like. Depending on what that looks like, it could be positive or negative for the economy and for the environment.

Christian Wolmar: Oddly, capacity is both the strongest part of the argument in favour and the weakest. Undoubtedly, there is some capacity need on the West Coast Main Line. The projections are rather optimistic about how much demand is going to go up, but, nevertheless, there is some need for extra capacity. But that is also the weakest argument because that capacity could quite easily be met by more conventional means. For example, the Pendolinos are being extended but not all of them. Only two thirds of the Pendolinos will have extra carriages, and they could be extended to 12 carriages rather than 11, except on the Liverpool route, where there are particular problems. The need for that capacity could be met in other ways.

Overall, though, there is a fundamental weakness to this, and Stephen alluded to it to some extent. I do not see the strategic case for this. I do not see this set in the wider context of transport needs-it is very much in a silo and in danger of being a separate railway from the rest of the network-and the strategic needs of the country in terms of the environment and the economy generally. There is no particularly strong argument in favour of why we need this particular line at this particular time.

Secondly, very briefly, the business case methodology is laughably ridiculous. The way that the business case methodology uses very small time savings multiplied by enormous amounts is a very unsatisfactory assessment, on which I am sure that academics like Chris Nash might have some comments.

Q5 Chair: Network Rail tell us that the need for additional capacity, as they assess it, cannot be met in any other way. Do you think that they have got it wrong?

Christian Wolmar: They have. They have a vested interest in this. Network Rail want to be seen to be a gogetting organisation that want expansion, with possibly the idea of some sort of privatisation at the end of it; so they like the idea of growth and having more bits of railway. Looking at the rail package which suggests just expanding the existing Pendolino fleet and changing some carriages from first class to second class would add an awful lot of carriages. Evidence has been given about the precise numbers. I do not see that rail demand is necessarily going to continue on this curve where it has been for the last 10 years, for all sorts of reasons.

Q6 Paul Maynard: Mr Wolmar, returning to the point you have just made, your assessment that demand is likely to taper off, capacity needs can be met through extending Pendolinos, declassifying a number of first-class carriages and possibly extending a few station platforms, is a perfectly valid proposition, it would appear to me. However, are you confident that that is a safe bet to make, because what you are essentially saying is we now have to place a bet on what the capacity demand is going to be in 25 to 30 years’ time? Are you confident that your bets will pay off?

Christian Wolmar: I am not a futurologist and futurologists tend to get things wrong anyway. But, looking, for example, at environmental considerations, do we really want a new line that will undoubtedly require extra new trips to make it at all economically viable? Is that a notion that we want as a society, or do we want people to pretty much travel the same amount?

The other factor, of course, is economics. Fuel prices are going to continue to rise. That is generally accepted. Fuel is also probably running out. These trains will require energy to operate. They will also become more expensive, not at quite the same rate at which fuel prices will go up, but we have a Government policy that says fares are going to go up by 3% above the rate of inflation for the next three years. That will taper off demand as well. There are so many factors here. It is a guess. The Victorians, about whom I have written in my books, built their railways on guesswork, saying, "The wind is blowing that way. Let’s build a railway." To some extent, that is what they are doing here. They are basically saying, "We think that the trends are such that we need to build this railway." My opinion is the opposite.

Q7 Paul Maynard: Mr Joseph, could I just direct a question to you? Your evidence was very judicious and balanced, which I welcome in this debate as it seems to get quite polarised. You have also referred to the issue of capacity, stating that, if you did believe it was necessary, then that would allow for the construction, potentially, of HS2. Why would it be necessary, if you were to build a new railway line, for it to be a high speed railway line? Is there a case for building a parallel high speed line which is not to the very high speeds that HS2 is being planned?

Stephen Joseph: I absolutely agree that it does not have to be very high speed. We and others have been critical of the Department’s specification for this being as high speed as it is because we think that has changed some of the design parameters and may have had an influence on some of the local impacts. Where I would disagree with Christian is that most of the factors we are talking about take you in the direction of needing more capacity, and, yes, having it at very high speeds may not be the right answer.

I would say, however, that, when a few years ago, some Victorianlike pioneers decided to promote a freight line to deal with exactly the same issues-capacity on the West Coast Main Line and provide an alternative for freight, to get a lot of freight off the roads and on to the railways-they used some of this route that is now being proposed and they were faced with equally strong local objections. That was going to be purely privately financed and probably would have had the same impact on its investors as it did for a lot of the people who invested in the Victorian railways, who probably felt at the time a bit like people who invested in Greece do now.

What we have been saying is that there is a case for more capacity and there might be a case for making it highish speed at any rate, to allow for getting people out of cars and planes, to be able to take on domestic aviation. Christian is absolutely right to say that there is an issue of pricing here and, if we have constantly increasing RPI +3%, then that will be less attractive.

However, the point I would make is that, if you look at the HS2 business case, there is a point in one little paragraph in which it admits that oil prices might be somewhere above $75 a barrel or whatever it is the Government’s current projections are and might be somewhere close to what they are now. They say that, in that case, the business case for HS2 is much better, and I would agree with that. The argument we would make is that, for economic reasons, the need to unhook ourselves from oil dependency, and, for environmental reasons, the need to unhook ourselves from carbon emissions from transport, we need a lot more electrified rail as an alternative to cars and short distance aviation. HS2 could be part of that, but it needs to be spelt out what that is in relation to, for example, relative pricing of different modes, infrastructure planning and so on.

Q8 Paul Maynard: Professor Nash, could you possibly offer me a critique of how you think the Government are performing in advocating HS2 so far? Many of their arguments focus on eradicating domestic aviation and its transformative potential to somehow heal the northsouth divide. How do you rate the Government’s advocacy for HS2 so far, irrespective of the views you may or may not have on HS2?

Chris Nash: I have to say I am sceptical of the strength of the case in terms of carbon savings. In the long run, as we decarbonise electricity, that case becomes stronger. But even so, when you look at other ways of saving carbon, if that were the only benefit of building high speed rail, it would be a very expensive way of saving carbon.

Likewise, with regard to the regional benefits, there is certainly evidence of high speed lines attracting development. What is a lot less clear is whether they are just moving development from one location to another as opposed to generating wholly new activity. Clearly, moving development from one location to another can be helpful if it helps depressed regions. But, again, I am not convinced that is a strong argument. I do think, as I say, that the capacity issue, which Stephen stressed, is much more important and this is not just a question of capacity for longdistance passenger trips. It is also the growth of freight traffic, particularly maritime containers, on the West Coast and the growth of commuting into cities-London, Leeds and Birmingham. There are other ways of catering for that capacity, but, to the extent that I have seen studies of alternatives, HS2 looks the best value for money in terms of the ways of catering for that need for extra rail capacity.

Q9 Iain Stewart: To what extent would you agree that the choice between upgrading the classic network, for example, Rail Package 2, and building a high speed line is essentially a false choice, because we need to do both? We need to continue upgrading the West Coast Main Line over the next 15 years before which High Speed 2 would open, and, also, after High Speed 2, we would need to keep investing in the classic network so that we can secure the benefits of the released capacity. Would you agree with that?

Christian Wolmar: You are raising the issue of opportunity cost there. One of the reasons I am very sceptical about HS2 is precisely that point. It has been presented as separate money-new money-that is just going to arrive and be churned out by the Department for Transport, with the happy agreement of the Treasury. That is totally fanciful. You are right that, if the huge demand that is projected really comes to light, then maybe both might eventually be needed. I am very sceptical of the demand figures, but I am also very sceptical of the fact it is just not going to happen that we are going to get both. This is an either/or choice. The presentation of it as an idea that HS2 will be a bonus and we will get all the other improvements that were going to happen anyway is fanciful.

Stephen Joseph: We have made it clear in our written evidence that we think it is absolutely critical that investment in the classic rail network must continue. This is borne out by evidence in other countries. You could argue that the French invested in their TGV network at the expense of the rest of network and have suffered from that.

In our view, if HS2 has any case at all, it is because it is going to free up capacity on the West Coast Main Line for both passenger and freight. This is where Professor Nash talked about being sceptical of carbon benefits. The real carbon benefits are not from HS2 itself. They are what you get from released capacity, which is more capacity for interregional services, from places like Milton Keynes to places further north. Currently, Milton Keynes only has an hourly service to places like Birmingham, for instance. It could justify a lot more than that if the capacity were there. With regard to freight, I would stress rail freight because that is where you get the really big carbon benefits and some really big economic benefits by providing relief from road capacity and real choice for businesses in how they get goods around, which is both lower carbon and lower cost in fuel terms. That capacity simply is not there on the West Coast, even now. You are going to hear evidence from a rail freight group later about that. But that is where the real capacity is.

When I talked earlier about the need to put HS2 in a wider context, and here I do agree with Christian, we need to see how HS2 fits in with a wider national rail plan. If the argument is we are going to have HS2 and we are going to let the rest of the railways rot, then I do not think anybody is going to support it. If, on the other hand, it is part of a much broader strategy, then it has some merit, not least because it allows for some other benefits in terms of creating rail-based development in places like Milton Keynes and other places like the West Coast Main Line, which give people a real option for using rail for local and more longer- distance journeys. You need land use connections to the policy and you need local transport and other rail connections. I absolutely agree that investing in the West Coast and in High Speed 2 should not be seen as choices. We need to do both. We need to do both because otherwise the benefits of HS2 will not be realised.

Q10 Chair: How important would you say it is that that wider strategy is identified and spelt out before there is any decision to go ahead with High Speed 2?

Stephen Joseph: We think it is critical. From a quick skim, the Oxera report that the Committee has commissioned has made the same point. You cannot tell what the benefits of HS2 are going to be. For Buckinghamshire, for instance, you cannot see whether East West Rail will be operable without the extra capacity around Bletchley and Milton Keynes. There are some large benefits from East West Rail. You need to be able to see, in relation to pricing and other capacity of other modes and wider land use policy, exactly what the context is within which HS2 is going to be set, because otherwise you cannot really make a judgment on the economic and environmental costs and benefits you are going to get from it.

Q11 Chair: Professor Nash, did you want to comment on that?

Chris Nash: I just wanted to add a couple of points. Yes, clearly investment in the conventional rail network is still needed, although we have invested heavily in the West Coast Main Line, and that is what has bought us some time at least. The other point I wanted to make is that, from the published reports, it appears that, having reached the west midlands, going on to Leeds-and I say this not simply because I come from Leeds-appears to have very high incremental benefits. The reason is that you can then relieve the East Coast Main Line of some existing trains, provide a much faster Leeds to London service, and give a little bit of relief to the Midland Mainline as well. You can then come up with a strategy where HS2 makes a big contribution in dealing with the capacity problems of all three of the main lines into London from the north. But I totally agree with my colleagues that that integration with the network as a whole to get the most benefit from it is absolutely crucial.

Christian Wolmar: I would like to make a very quick point on this, which is something you should hone down if you get Ministers here. There is a problem about the extra capacity, which is that trains on it will have to be paid for. It is very unlikely that those services will be profitable; so they will require extra subsidy. HS2, in its early years, will also require subsidy. There will be a very big demand on the rail revenue account which I doubt we will be in an economic position to meet.

Q12 Iain Stewart: I have one other question on the upgrading of the classic line as an alternative to high speed. Would I be correct in thinking that any upgrades to improve capacity on London to Manchester and London to Birmingham would be at the expense of shorter-distance commuter traffic on the West Coast Main Line: i.e. to squeeze in more intercity trains, there would be a cap or a reduction on commuter services?

Chris Nash: There is quite a probability of that. To some extent, the timetable that has now come in on the West Coast Main Line has benefited the major flows at the expense of some of the other places on the route, and that could continue if we do not get a major injection of new capacity.

Q13 Steve Baker: Mr Wolmar, in your article of January, which is titled "HS2’s Long Term Uncertainty", you wrote: "The business case is really just so much mumbo-jumbo and is so dependent on forecasts of demand as to be meaningless." Professor Nash, in your written evidence you have said: "As is inevitable with such a long term project, the business case is surrounded by considerable uncertainty, with the future growth in demand the key issue." I want you to help me, if you can, with this slight conflict. You seem to agree that there is huge uncertainty; you seem to agree that demand is the key issue; and yet you seem to have reached quite different conclusions about whether HS2 should go ahead. Could you just try and explain why you have those different conclusions?

Christian Wolmar: I really have problems with business cases and I have just done some work on mega projects. The study talked to a lot of people involved in mega projects. They asked the question: do you think cost-benefit analysis is a valid way of assessing mega projects? These were planners and various other stakeholders. The Bartlett School at University College London has done this. 84% of the respondents, and these are people involved in this, said they thought that the cost-benefit analysis methodology was unsatisfactory. There is quite a strong basis for saying it is really mumbo-jumbo. If you alter factors early on in the equation, by year 10 or something you can be 25% to 50% different from the result that you have given. When they give these precise figures for benefits and say there is a 2.6 benefit-cost ratio, it really is nothing more than studied guesswork. Cost-benefit analysis methodology was initially developed to compare projects with one another, not to develop absolute values for them. The other point about it is that the benefits accrue to private individuals, whereas the costs accrue to the taxpayer. That is also why I am deeply sceptical of it. I cannot quite give an answer as to why I come to different conclusions from Chris. Maybe Chris has something to say about that.

Q14 Chair: Mr Wolmar, just on that point, you said something pretty fundamental. It is the cost to the taxpayer and the benefit to private individuals. Would that not apply to any kind of public investment and not specifically this scheme?

Christian Wolmar: Not necessarily because you might have the benefits where a lot of them are coming through the fare box and therefore are largely being paid for, whereas with this project we are seeing that some of it is coming from the fare box but a very large proportion is these time benefits to individual people, which is their time and not societal time, as it were.

Chris Nash: First, the methodology used in this study is based on decades of research. The demand forecasts are based on modelled relationships. There is a clear scientific basis for it. None of that changes the fact that there are big uncertainties when you are looking 10 or 20 years ahead. Relationships which held in the past may break down. Events may take a course totally different from what you put in your variables in the forecasts. The range of uncertainty is such that this may turn out to have been just a reasonable project but possibly not the best use of money. It is very unlikely that it would turn out to be a complete waste of money. That would require absolutely drastic changes in the course of events. So, on the central forecast, it looks a very good project. At worst, it is probably still a reasonable one.

If I could just add one other comment, France, of course, has been the pioneer of high speed rail in Europe. They have a very healthy law which says that, when the Government puts a lot of money into a project, an ex-post appraisal must be published. For all of the earlier French high speed lines, there is now an expost appraisal of what has happened. By and large, with the one big exception of the channel tunnel, the forecasts have been pretty good and social returns on the projects have been pretty much achieved as forecast. France has taken a fairly similar approach to these issues as we have and it has worked there.

Stephen Joseph: Can I just comment? First, I do think that in this case all the numbers are wrong for all the reasons that people have said. We have been critical of both supporters and opponents of this for focusing on tiny changes in the business case for all the reasons that both my colleagues have said. That means that we need projects like this to take a completely different approach and look at the likely scenarios for the future, high and low oil prices, a different range of ways of things that might happen in relation to the use of communications technology and things like that, and see how robust something like this is against uncertainties and changes in the future. That is the way in which major private sector businesses do approach these kinds of things; they use scenarios. That is what the big oil or drug companies do. They use a scenario-based approach to justify investment as well as straight business cases, and sensitivity tests can be applied to test the robustness of schemes.

It would have been better if the Government had at least supplemented the business cases it has produced with some of those kinds of scenario-based approaches and some sensitivity tests to look at those. The only one, as I have already identified, is one that looks at oil prices and compares a theoretical, much lower crude oil price with one that is approximately what we have now and has much more of a robust business case.

There is one other point I would make. A lot of opponents for this have been talking about HS2 as if it is like HS1 and look at the demand in the channel tunnel for High Speed 1. It did not meet demand; huge amounts of money have gone in and capacity is not anywhere there. We are talking about something completely different here. That was a completely new corridor with new flows. These are corridors in which there are large established flows on road, rail and air. You therefore have a lot of demand. We would argue, as an environmental group, that we want to shift some of that demand from road and air to rail, and HS2 could, in certain circumstances, help that happen. But it is a very different situation from HS1.

Q15 Steve Baker: Mr Joseph, very much on the points you have just made, much of your argument seems to rest upon the oil price. Can I just put three points to you on that? I will try and be as brief as possible. First, have you adequately taken into account efficiencies in motorcars and decarbonisation of road transport? Secondly, have you taken a view on shale gas, because we seem to have discovered worldwide vast resources of shale gas, which will affect the price of hydrocarbon fuels? The third point I will make, which I will try to make simply, is that, if we look at the oil price since the end of the second world war, it is only high and volatile in dollars, which of course is very important because it is traded in dollars. But, in gold, the price of oil has been low and stable since the end of the second world war, and I put it to you it is quite likely that the oil price is so high because of quantitative easing.

Stephen Joseph : I am not going to g et into a debate on that .

Chair: You do not have to address all aspects of that question.

Stephen Joseph: Can I make a general comment? First, the fundamental point is that, although there are lots of things you can do to make motorcars more efficient and also to use alternative fuels and electric vehicles, all the numbers I have seen suggest that alternative fuels like shale gas and things like tar sands, and, also, electric vehicles, are still more expensive to run and the oil is still more expensive to get than current fuels and vehicles are. There has been some work done for the Low Carbon Vehicle Partnership quite recently which has looked at longterm prices of electric vehicles and they still come out as more expensive in cost to the individual than current vehicles do. There are ways round that and we have been talking to colleagues of yours like Zac Goldsmith, who are interested in feebate schemes as a way to look at that. But if you look at what is likely to happen on oil price and the cost of driving to the individual, it is likely to be higher than it has been at the moment.

The International Energy Agency used to deny peak oil was a problem and has now moved to accept that it is likely to happen. That does not mean you are going to look down an oil well and there won’t be anything there. It means the economics will work, the price will go up and that previously untapped reserves, like tar sands and so on, will become economic. That is the case.

By the way-I do not think it is "by the way", but for this argument it is by the way-there are some huge environmental consequences in getting shale gas and tar sands and exploiting those. They are enormously worse, in terms of emissions and local environmental impacts, than conventional oil extraction is, which is why there is a lot of concern by a number of environmental groups about those methods. But, even were that not the case, as I say, the economics of those, as I understand them, means that they are more expensive. I am not an expert on this. I am reading studies that I have seen, commissioned by the likes of the Low Carbon Vehicle Partnership, which suggest that the price of motoring will be higher in real terms in the future than it is now. If you factor that in and, of course, the political consequences of what is going on in the Middle East at the moment, then what you get is high and volatile oil prices which are good economic cases for having more reliance on rail and public transport for journeys where that is appropriate, and high speed rail could be part of that strategy.

Q16 Julian Sturdy: Mr Joseph, in your opening remarks you said that HS2 is being considered in a silo, which to me was quite worrying. In a number of different inquiries on the Transport Select Committee, we have always heard about the importance of connectivity within transport if we are going to make transport efficient and get the most out of it. You yourself have given evidence to inquiries and talked about exactly that-the importance of connectivity. Do you think that, without better connectivity within HS2, the case could be quite difficult to be made or do you think connectivity will just follow on?

Stephen Joseph: We think it is fundamental. It is fundamental for all sorts of reasons but it is particularly fundamental just in its own terms. There has been a lot of talk about parkway stations; for example, there is one at Birmingham on the LondonBirmingham route and there may be one at Nottingham as well towards Leeds. If you do not look at the capacity for getting people to and from those links, then those parkway stations will not work. In fact, we would argue that they probably will not work anyway. If you look at the capacity on the M42 and the M6, which is what you would need to serve the Birmingham parkway or the Birmingham international station, or the M1, which would need to serve the East Midlands station, there is not capacity there now, let alone with background growth in traffic, and you will just be adding to road congestion around those places.

It is also the case that there is some very interesting work being done by the UCL Bartlett School of Architecture that Christian referred to earlier, comparing door-to-door journey times for high speed rail in different countries. They make the point that in Germany there is good connectivity. Because of good connectivity at local level-good local public transport links-places off the high speed rail network in Germany equivalent to, let us say, Burnley or Wolverhampton here will have good door-to-door links because they link into the high speed network. If we do not have any improvement in local rail or public transport connectivity, then we will get more road congestion around the high speed stations and more city centre congestion in the city centre stations, and we will not get the benefits that high speed rail will bring for the surrounding area.

That is why we have been arguing that you need to have, hand in hand with HS2, investment in local public transport links. I am sure that Chris, as a Leeds resident, would reel off the kinds of investment that Leeds has wanted to have in local public transport over the years. Having been pushed away from trams by Alistair Darling, it now has a trolley bus scheme. But that kind of thing is critical if you are going to be able to maximise the benefits of HS2 and get the wider economic benefits as well so that places like the Black Country in the west midlands get any economic benefits that are going from HS2. You need to have, say, the extension in the Midland Metro so that people can get to and from the Birmingham city centre high speed rail station. That is what has worked in other countries. It is also worth saying, by the way, that SNCF would argue quite strongly that parkway stations have not worked in France. They have often been built for political reasons and have not generated traffic. Where people want to get to are the city centres and you need to provide connectivity to those city centres.

Chair: I will not encourage Professor Nash to tell us about what Leeds needs, important as that may be. Do either of the other panellists disagree with the general tone of what has been said? I think it is consistent with what you have both been saying in different ways. Mr Sturdy, is there anything else you would like to ask?

Julian Sturdy: No, thank you.

Q17 Mr Leech: The one thing that you all seem to agree on is that the projections are not necessarily accurate and it is all based on which perspective you come from as to whether or not you use those projections to support or oppose an extension of high speed. We have just spent billions of pounds upgrading the West Coast Main Line and most people seem to suggest that the West Coast Main Line, without any further investment, will be at capacity within six to 10 years. Did any of you predict this prior to that investment being made?

Christian Wolmar: Predict what?

Mr Leech: Predict that we would spend billions of pounds on upgrading the West Coast Main Line and still be back to square one in 2020.

Christian Wolmar: We are not quite back to square one. There are an awful lot of empty trains that go up between London and Birmingham and London and Manchester. One has to be slightly sceptical just because it is full at 7 o’clock on Friday evenings at Euston. That is about a pricing policy and not about capacity. In their RUS-route utilisation strategy-on the West Coast, Network Rail say that something like 12% or 13% of trains within five years will have people standing on them. They mean by that that the line will be full. I am not sure I accept that definition of "full". There is an awful lot of capacity that could be better used through more intelligent pricing policies and all the Rail Package 2 stuff that we have mentioned, which will be necessary. Some of these things will be necessary, but I do not accept necessarily that it is jam-packed full at the moment.

Q18 Mr Leech: Would you accept that, with the level of investment in the upgrade of the West Coast Main Line, it would not have been unreasonable for us to expect some people to be arguing that we would be at capacity by 2020?

Christian Wolmar: We are where we are, as they say in business. But, if you look back, it might well have been an idea to have built a high speed line 15 years ago rather than spending all the money on that. But we did not do that. We did upgrade it, we have improved the services on it and that is where we are. So I do not think there is much point going back to the past.

Q19 Mr Leech: On that basis, could we not be sitting here in 10 years’ time arguing exactly the same point, suggesting that 10 years ago, back in 2011, we should have made that decision to build the high speed line and, with hindsight, we would have done?

Christian Wolmar: There is a risk of that. I do not think any of us sitting here or any of the witnesses you are going to see will be able to say definitely one way or the other that the decision is a correct one. As I said earlier, it is really a matter of blowing in the wind. That is why these wider strategic considerations have to come in. The environmental case, for example, should be very strong on this. There are no carbon benefits promised in HS2 Limited’s report, which says that broadly this is carbon neutral. If this was fantastically carbon positive and would reduce the amount of carbon, then that would be a justification for it. Basing this on the demand is a guess. We would be guessing. All your witnesses coming here will be guessing about that.

Q20 Mr Leech : Does anyone else have a view?

Stephen Joseph: Without having said that the West Coast Main Line was going to be fantastically popular and full beforehand, we have always argued as a group that, if you provide attractive public transport, people will use it and will use it more than traditional forecasts and forecasting methods tell you they will. If you add into that increasing congestion on the roads and apparent changes in oil prices, if not real ones, then you will get more use of rail for freight as well as for passengers. We have seen a welcome growth in rail’s mode share of freight from a low of about 6% in the 1990s to 11% now. That growth is continuing, not just in volume but in the mode share of freight across the country, and we would argue that is good for economic and environmental purposes. The danger of not doing things long term on the West Coast to relieve the West Coast, to provide for that freight capacity, is that you choke it off and you create economic concerns on road congestion and so on.

Chris Nash: Can I just add two comments? First, a large proportion of the expenditure on the West Coast Main Line was basically renewing the assets. There was heavy investment back in the 1960s; those assets were worn out. Something like three quarters of the expenditure was simply renewing the assets. We are all agreed that the capacity of the West Coast Main Line will certainly be needed, whatever. So that was needed anyway.

Just one other point. This is not something that has just crept up on us. We were subcontractors in a study for the Strategic Rail Authority, which first put forward a high speed scheme rather like the one now being proposed, the "Y" shaped scheme. That was 2002 or 2003; I cannot remember. More recently, Network Rail did its New Lines Study, in which there were similar conclusions about the need for capacity. It has been foreseen for some time that this situation would arise.

Q21 Mr Leech : I have one final question to Mr Nash and Mr Joseph. You have both recognised that one of the biggest potential benefits of high speed rail is freeing up capacity for regional and local services and freight services. Have you done any work on what sort of increase in capacity we would have as a result of a high speed network to the north of England for those regional and local services and freight services?

Chris Nash: I have to say the most detailed study I have seen was done by a colleague who is a visiting fellow at Leeds for Greengauge 21, which of course is a lobbying group. He, individually, is by no means a high speed rail advocate and I am quite sure he will not have egged the pudding in terms of what he did. That does provide very good evidence of what could be achieved. As one would expect, the place that gains most in the timetables he looked at was Milton Keynes. One or two places lose some services to London, Coventry in particular, but gain services to Birmingham and to other parts of the country. That report gives a good idea of the sorts of benefits to people not on the high speed line that the high speed line could bring.

Stephen Joseph: We have not done detailed work on that. It is not our role. All we note is that there is a capacity issue on both the motorway links in this corridor as well as rail and we therefore do need to do something. We want to see the investment in rail for various reasons. But we want to see what the full strategy is; so we have not done the detailed work that would be required. There are 18 trains an hour on the LondonBirmingham stretch; that is 18 paths that you could free up on the parallel railway line, presumably.

Q22 Paul Maynard: I will just press Mr Joseph a little further on one of his key arguments, which is to encourage the shift from aviation on to rail. In Europe, we have admittedly seen that where a high speed route has been established, e.g. Paris to Brussels, demand for that aviation route has fallen sharply. On that level, your argument would appear to bear some water. How would you respond to the accusation that this is rather a red herring in the UK’s domestic setting, because we have already seen a very sharp decline on domestic routes into Heathrow? The establishment of HS2 into Heathrow or into Old Oak Common will not actually reduce the number of domestic flights going into Heathrow because they have declined already. Most of our domestic aviation is on routes that are already poorly served by rail or indeed over water. Would you agree that the aviation argument is potentially a weaker argument to pose?

Stephen Joseph: No, for two reasons. First, even when you have high speed rail from London to Manchester, you are not just talking about London to Manchester flights. You are talking about speeding up journeys that involve London to Manchester, even potentially London to Birmingham but certainly London to Manchester, so that you speed up the LondonScotland journey significantly. There is still quite a significant Edinburgh and Glasgow to London aviation market for which this would provide an alternative. But the main point is not simply about domestic but shorthaul aviation and about the potential for near European flights if you have, as we have argued for in our evidence and indeed to the inquiry by Lord Mawhinney, a good HS2HS1 link with through trains. If you do that, then you can provide a good alternative for shorthaul aviation to, as I say, the near continent, which currently is not the case. They are not available at the moment from regional airports and so on.

I would make one other point. When you get to the particular BirminghamLeeds section of high speed rail, it would be possible to speed up cross-country journeys-this is again the point about not having HS2 in a silo and having it as part of the national rail network-so that, for example, ExeterNewcastle journeys can be speeded up for the section that they use on this. What I am talking about here is the potential. We have not looked at the detail because you would need to look at the timetable. But, in fact, I have been critical of a number of the proponents for not looking at these kinds of opportunities and the benefits that those bring. But this is why we have been so agnostic about this. All of these are things that could happen with HS2, had not been spelt out at the moment and ultimately will need Government action to make these benefits real.

Q23 Steve Baker: Mr Wolmar, you mentioned price very briefly and it just struck me that we talk a great deal about demand forecasts and capacity, but we talk very little about the usual mechanism for bringing these two things into balance, which is price. The McNulty report called for a move to predict, manage and provide. To what extent should we be having a different conversation about the management of demand?

Christian Wolmar: Absolutely. That is absolutely key to this. Greengauge has produced some reports suggesting that there will not be any premium prices on this new line or whatever. We do not know that. There is already premium pricing on HS1 where the Southeastern franchise was made to put up its fares by 3% above the rate of inflation instead of 1%. The notion that there will not be some sort of premium rate on this line is very fanciful. That brings into play the wider pricing mechanisms that we have on the railways. I did already refer to that. The bottleneck at Euston at 7 o’clock is created by pricing mechanisms. The Government are already looking at pricing; there is going to be a review next year. But, also, they have a longterm plan to increase the amount of money that is coming from the fare payer and reducing the amount of money that is coming from the taxpayer. All this comes into play, and I am very surprised, like you, that there is not sufficient analysis of that. It is something that maybe the Committee might press Ministers on.

Q24 Chair: Does anyone else have any different view from that? Would you agree that we should deal with demand by increasing prices?

Chris Nash: Can I just add that, undoubtedly, the high speed line itself would practise yield management, as Eurostar and the French TGV networks do, so that there would be a wide range of prices. Equally, on the existing lines, yes, there is more to do on pricing, but there is already a big difference between average fares in the peak and the off peak. I guess the big issue is commuter fares into the big cities. There, the big worry about pushing them up further is that, in general, road users going into cities in the peak are not paying the costs they impose in terms of creating congestion and pollution. Further development of pricing policy on the railways needs to be seen in the light of what we are doing on the roads as well in terms of pricing to cope with the peaks.

Stephen Joseph: I strongly support that. I was going to say that this is not just about rail pricing. It is what you do, for example, with air passenger duty or plane duty, depending on where the Government ends up on that, with the cost of motoring or, indeed, though I know no party wants to go there, road pricing and so on. As members will know, the Campaign for Better Transport is running a Fair Fares Now campaign which is specifically about addressing the RPI +3%, which we think is wrong for all sorts of reasons, and, arguably, the commuters around London are paying a premium compared with what the competitor city regions are paying in other countries. We think there is a real issue about pricing. Pricing across all modes is one of the big uncertainties. It is one of the other things in here, I would agree with colleagues, that you absolutely have to look at in the context of HS2.

Q25 Iain Stewart: Just to follow on from the pricing point, I would like to pick up something that Mr Wolmar said, where you could increase the capacity on the current line by moving people away from the peak times at the moment. But I would contend that those trains are busy because that is the time that people want to use them, and if you increase fares too much, whether on the classic network or on high speed, you are just going to push people away from rail travel altogether.

Christian Wolmar: No. it does not tend to be the peak trains that are absolutely full because the prices are so high. It is the first off peak train that is often the one that is most in demand. There you could have a more graduated policy so that you do not jump from it being something like £200 return to Manchester, to a cheap fare of £50. It could be more graduated. McNulty, in fact, looks at that and says that you could have shoulders where you ease off so you could have more sensitive demand pricing and that might certainly alleviate this famous 7 o’clock Euston thing.

Chair: Thank you very much, gentlemen, for coming and answering our questions.

Examination of Witnesses

Witnesses: Michael Roberts, Chief Executive, Association of Train Operating Companies, Richard Eccles, Director of Network Planning, Network Rail, Anthony Smith, Chief Executive, Passenger Focus, and Lord Berkeley, Chairman, Rail Freight Group, gave evidence.

Q26 Chair: Good morning, gentlemen. Welcome to the Transport Select Committee. I would like to start by asking you, please, to give your name and organisation.

Lord Berkeley: I am Tony Berkeley. I am Chairman of the Rail Freight Group, a representative body of the rail freight industry in the UK.

Michael Roberts: My name is Michael Roberts. I am Chief Executive of the Association of Train Operating Companies.

Anthony Smith: I am Anthony Smith, Chief Executive of Passenger Focus, the independent passenger watchdog.

Richard Eccles: I am Richard Eccles. I am Director of Network Planning for Network Rail.

Q27 Chair: Could you tell us what you feel are the strongest and weakest points in the argument for high speed rail as put forward by the Government?

Anthony Smith: Two very strong points are that a lot of the argument and debate among passengers at the moment is about the capacity of the rail network and the ability of the new high speed line to release both new capacity for high speed services and also, just as important, released capacity in terms of places like Milton Keynes at the moment where, arguably, there should be a much better rail service than there is. A strong point about the high speed line is the potential for capacity. From our point of view, the speed is a slight side effect. If it goes a bit quicker that is quite nice, but when you look at the current priorities for rail passengers improving speed is not necessarily one of the greatest things that they are looking for. The weakest thing is that 2026 is a very long time to wait for a train and it is quite important, as you and colleagues have already picked up, that investment continues in the railways up to that point and continues across the country, because, of course, the current high speed plans will help benefit some passengers but by no means all passengers.

Lord Berkeley: For me, the strongest argument in favour of the high speed line is the capacity that it releases, as Anthony has just said. I believe the passenger forecast for 20 years’ time, 2030, is roughly double the present traffic. Certainly, for freight, our forecast is roughly that the volume of freight will double by 2030. It is mostly containers on the main routes between London and other places or the ports. I believe we need the capacity for passengers and freight and that the high speed line is a good way of doing it. I have one problem, which is that the biggest problem with capacity, certainly for freight, is from Manchester south and Leeds south rather than from London north, because the West Coast Main Line, as the Committee has heard, has been recently upgraded and the improvements are bigger in the southern end. I see, in the first phase of High Speed 2, a problem when it finishes somewhere north of Birmingham, and the capacity there, with the increased demand for freight and all the passenger trains which will come off the high speed line at that time, could be a big problem. I would much prefer that it started at Manchester and Leeds and worked south in the first phase and then the second phase.

You asked what the weakest point is. Cost may be the one of the weakest ones. I do watch the railway industry pretty widely, for passengers as well. The argument for a new station in Birmingham is probably not made and I do not think the argument for a new station at Euston is made because the passenger transfer at Old Oak Common on to Cross Rail, which is very short of passengers when you get west of Paddington, is something that should be looked at. Conversely, there must be a link, as other witnesses have said, between High Speed 1 and 2 to enable full continental gauge trains-passenger trains, certainly, but sometimes freight-to use it and bypass the North London line, which is the present plan.

Q28 Chair: Mr Roberts, what are the strongest points and the weakest points?

Michael Roberts: In terms of the strongest points, I would agree with what my colleagues have said about the preeminent significance of increasing capacity in a corridor where there is already significant demand, particularly at peak times, and it is set to grow significantly in the next 20 years. That additional capacity which will be provided by HS2 would not only benefit longdistance travel-and it is worth remembering that longdistance travel has been the fastest growing sector within the railways since privatisation; it has doubled as a sector-but, also, that additional capacity can be put to the benefit of people using stations on the existing West Coast Main Line on the southern section stations such as Milton Keynes, Rugby and Northampton. This is a potential benefit to relieve the pressure on capacity serving commuter traffic in the southern sector of the West Coast Main Line, as it is indeed for longdistance traffic.

I would add that we would see the benefits of faster and indeed more reliable journey times that would be made more feasible by HS2 as a strong additional benefit in that this, among other things, provides for improving the attraction of rail, particularly for intercity journeys, particularly between what will be the four major conurbations in England, and the potential that that has for attracting demand away from other congested and carbon-intensive modes, such as road and to some degree air transport.

In terms of what I would call perhaps one of the bigger challenges facing the project rather than a weakness per se, I would say that it is the need to see HS2 more explicitly as part of a wider strategy not just for rail but for transport as a whole. This is an important project, but the rail network today is carrying record numbers of people for peacetime. The rail network is currently carrying somewhere in the order of 1.25 billion passenger journeys a year. Greengauge, the lobby group that favours high speed, has identified that, even in 2055, a high speed network for the country as a whole will probably be carrying about 180 million people, so it is quite a difference of order of magnitude. High speed is important in terms of relieving congestion on a very important corridor and serving our major conurbations. We must see it as part of a wider strategy for rail and transport as a whole.

Richard Eccles: I am not going to say a great deal that is new. It is about capacity. It is about capacity on the new high speed line and on the present network. I would not like to distinguish too much between the high speed line and, as it has been called, the classic network. It is one network that we get in the future. It is capacity not just in a railway man’s terms. It manifests itself as choice for the passenger and to some extent for the freight customer too. We are running trains because we are looking to serve the market. We are not running trains because we just enjoy running trains.

I would go with Anthony on the weakness. I am afraid it just takes such a long time and so that defers the benefits and discounts them in the business case. People find it difficult to relate to a new service that will arrive in 2026. Certainly, when I think of getting to Manchester in 2036, I occasionally forget myself and suddenly appreciate how old I will be by that time.

Q29 Chair: Would you regard the need to predict what capacity will be needed so many years ahead as a weakness in the case?

Richard Eccles: No. The need to predict capacity so many years ahead is what the longterm planning process for the railways should be fundamentally about, because we have assets that last. A signalling system will last 45 years, and many of our tunnels and bridges have lasted since Brunel built them. You have to take a longterm plan to deal with the railway and deliver rail services efficiently at an optimum whole-life cost. It is quite appropriate that we should plan that far ahead; it is just disappointing that we cannot deliver slightly faster.

Q30 Kwasi Kwarteng: I am very interested in what people call the "predict and provide" approach, which is clearly what is driving this thing, because not that many years ago we had the Eddington report, which was completely the opposite in terms of transport policy and what we should be looking at, where he identified little problems which were the ones that we should solve. To what degree do you think that the Government is right to pursue this "predict and provide" approach? Clearly, in your last answer you suggested that that was what we should be doing and that somehow the Government had access to this all-seeing futurology, if you like, and we could predict demand in 15 or 30 years’ time. Do you think there is any flaw with that approach?

Anthony Smith: I am not sure it is a flaw. All transport modelling appears to be a bit of a black art when it boils down to it and there are a tremendous number of assumptions built in. But it strikes me that if, as a country, we want to continue to travel around in the way that we do and to do it in more sustainable ways, if we want to have more travel choices in the future and to have an economy that is very successful and based on people moving around, taking big decisions about increasing the space for train and tracks and having more punctual trains is a very key political decision. There is always going to be squeeze round the margins of the peak and how you manage people wanting to travel in the peak and off peak, as you discussed earlier. The concern is that some of the suggestions in the McNulty review in a sense feel very producer-led. The awkward passengers are getting in the way by wanting to travel in the peak and, irritatingly, do not want to book six months ahead for their rail travel to go to Birmingham. It is treating them a bit like units of production. The whole purpose of all this activity is so that passengers and freight can move around the country. If you build that in at the start, you will sense that something has to change in terms of the space on the railways and, therefore, the Government’s decision to move ahead on this is probably not wrong.

Lord Berkeley: Could I come in there, because the Government also has a policy of reducing the carbon emissions by 80% in 2050, which is a long way away? The Department for Transport’s success so far in this field is not very good. The worst one is going to be in freight because nobody has invented a 40 tonne lorry that can go for 300 km or 400 km in a carbon-free means. I am told that the only way you can do that is to have a battery that weighs 40 tonnes, which does not leave much space for freight. Assuming that the logistics industry continues as it is, developing worldwide and Europewide, then one has to think about how the long-distance freight is going to be carried, because rail freight takes about 12% at the moment on a tonne-km. The only way to do it long distance is by water or rail, which could be more carbon-free than the present diesel engines. That is going to involve, on the Commission’s estimates, about three times the existing volume of rail freight. I think it is nearer five times, but it is probably academic being 40 years away. But we have to plan for these things and also work out how it affects other Government policies like the Carbon Reduction Programme.

Q31 Chair: Would anyone else like to comment?

Michael Roberts: An observation is that in this country and probably in most other countries in the world we have never managed to predict and provide properly. We do not predict very well and we certainly do not provide at the time and in the manner that is most efficient. That applies not just to the railways but to road transport, and, indeed, aviation as well. Listening to some of the evidence provided in the previous session, what is clear in this particular case with HS2 is that we have had a situation where it has been known for some time that demand was going to grow and grow substantially within the corridor from London to the north-west, and what we have been unable to do collectively as a nation is to respond to that sufficiently quickly and to a sufficient degree. The great merit of HS2 and the proposals behind it are indeed to provide a response to it. But, as I said to you in my earlier comments, we need to see HS2 as part of a wider strategy which does indeed think about how we use other interventions such as the use of price, properly, not just in rail but in other forms of transport such as road transport, to ensure that capacity and demand is better aligned than it is at the moment.

Q32 Chair: Mr Eccles, it has been suggested to us that Network Rail’s predictions and support for High Speed 2 are down to selfinterest. Is that a reasonable comment?

Richard Eccles: I thought it was slightly harsh. The longterm planning process that operates on the railway is led by Network Rail, but virtually everyone in the rail industry participates in it. When we did our New Lines programme and produced those demand forecasts originally, we had a steering group of the DfT, Transport Scotland and the Welsh Assembly Government, and we were assisted by a number of train operating companies and rolling stock companies. When we did demand forecasts in the route utilisation strategies such as the West Coast Main Line RUS that we are just about to publish, the industry stakeholder management group included 46 separate parties. I do not believe that they would collectively sign off something that Network Rail was doing in its own selfinterest. I would reject it totally, Chair.

Q33 Kwasi Kwarteng: I just wanted to put out a thought and hear your comments on this. This is not a private sector investment, but, if it was, and I was looking at this and I was an investor, a lot of investors look at the downside. You are always trying to protect your downside. I do not think, clearly, we in the public sector have that approach. But, if I were a private investor, I would say yes, the benefits look very attractive, but what particular scenarios-I think a gentleman in the previous session referred to scenarios-could arise for this thing to be a complete disaster? What is the worst case?

Chair: Who would like to tell us about the worst case scenarios?

Kwasi Kwarteng: If you were doing this as a private investor, you would be really focused on that.

Michael Roberts: Clearly, one of the key determining factors for the success of the venture will be the strength of demand to use the product. Scenarios which anticipated, for example, a complete slowdown in the economy, which is a fundamental driver for movement generally and rail transport specifically, which anticipated major increases in, for example, road capacity along the same corridor where that capacity was provided free at the point of use, as indeed is currently the case to users, or where oil prices decline to such a level that, for example, the cost of motoring was significantly cheaper than today, would be the sorts of things, although not the only things, which would fundamentally undermine the business case to the extent that demand drives the need for this project. But I would argue to the Committee that using those particular examples-economic meltdown, massive expansion in road capacity and a price of motoring significantly lower than today-are scenario features which we would not want to consider as the future or are highly unlikely to happen. So I would argue that, yes, the sensible approach would be for any investor to consider the risks and the downside potentially of any investment, but I think a realistic investor would not anticipate the sorts of features that I have just mentioned as likely.

Q34 Kwasi Kwarteng: What you are saying is the doomsday scenario is very unlikely.

Michael Roberts : Yes.

Anthony Smith: I cannot comment on the financial potential implications or otherwise, but it would be a disaster, in public relations terms from the passengers’ point of view, if the new line is ultimately perceived as a rich man’s railway which only a certain sector of the population can use. Of course it is very difficult to predict at the moment the pricing and the way that it is ultimately sold, but it is very important to try and get an understanding of that as quickly as possible. A high frequency, high capacity route from Birmingham to London will attract commuters, apart from anyone else. People will start commuting on it in both directions. How it is sold and how it is priced is absolutely key. The dreaded yield management word has been used already and, of course, there will be a temptation to sell every seat on it at every time of day for £1 leaving any flexible tickets being expensive or effectively non-existent. But you have to look at how attractive the West Coast has become because of the frequency. Three trains an hour between Manchester and London is pulling people towards it. They want to use it and they buy tickets. A lot of people want flexibility. They do not want to be tied to one train with one seat. The way the package is ultimately sold is the PR disaster that could happen, or not, hopefully.

Q35 Chair: Does anyone else want to comment on the worst case?

Richard Eccles: My concern would be capital cost and interest rates, like most businessmen. But the market is quite an attractive market. Throughout this last recession, four out of six of the sectors, as we call them in the rail market, continue to grow in terms of passenger numbers, if not in terms of revenue. All the pointers for growth in the rail market in the future are very favourable. Last period, we had 105 million passenger journeys on the railway compared to 100.3 million in the same period a year ago. Business is booming. This would be a strategic piece of state transport infrastructure, and generally those are considered quite good investments.

Q36 Chair: But 20 years on would that be a reasonable assumption?

Richard Eccles: 20 years on?

Chair: Looking ahead 20 years.

Richard Eccles: As I say, if you could have confidence about the capital costs and the interest rate, I believe that you could take a 20-year view of the market and not be scared off by that.

Lord Berkeley: Madam Chair, as some colleagues on the Committee know, I did work for Eurotunnel for a number of years and there are good and bad lessons to be learned from that. It was a privately funded construction project because Margaret Thatcher required it to be done that way. It nearly went into financial meltdown several times but it got built. The lessons I learned from this were, first, to build it quickly. With any financing, speed is of the essence. Secondly, look at the competition. The competition we have heard about this morning is not only rail on existing lines but road as well, and to some extent air. Thirdly, do not change your mind halfway through, which was part of the problem. But the fourth thing is, having built it, as we saw on High Speed 1 in the early days of its operation, the Government decided that to sell it to the private sector the best way of doing it was to have no independent regulation. The Government argued that it was the best regulator you could possibly have. This is a Government that awarded Network Rail-no disrespect to Richard because he was not involved in it-the management of the infrastructure on a cost-plus basis for 80 years, which is pretty generous really, and then it said it was a great regulator. The channel tunnel is still not regulated properly and the European Commission is looking into it at the moment. So I hope one of the lessons that will be learned from HS2 is to put a proper regulator in there from the start, as we have in the rest of the network. I still think that, for HS2, it is such a big project that having it built in the private sector would not work, and I agree with the Secretary of State’s view on that. But some of the disciplines that come from it and some of the mistakes we learned would certainly be worth taking forward.

Q37 Chair: You mentioned time scale and you said it was important to build things quickly. Does that mean you would like to see this project built in the shortest space of time?

Lord Berkeley: Of course, the planning and the hybrid bill and everything has to be done properly, but it is just the question that, for those financing it, which could include the Government or the private sector, the risk of things changing in a very long construction time escalates. I would love to see the thing, as I said earlier, start from Manchester and Leeds and work south. But if it has to be done in phases, I hope the phases are not quite concurrent but consecutive and overlapping so that the problems that are often caused during construction, and we saw it in the West Coast Main Line upgrade, are as short as possible for the benefit of passengers who get disrupted and freight as well.

Q38 Paul Maynard: One of our tasks in this inquiry is to try to assess the various arguments that are put forward and whether they have merit or not. There seems to be a general consensus that capacity is the key issue we are seeking to solve, yet none the less I do hear many stakeholders in the rail industry, particularly from the north of England, make the argument that the capacity challenge can be met merely by adding a carriage here, lengthening a platform there or declassifying a first-class carriage somewhere else. Could I ask Network Rail what assessment they have made of the capacity gain of those limited, more simplistic interventions?

Richard Eccles: The reason we did our New Lines Study a couple of years ago was to try to look at what the best value investment would be to create the capacity that was necessary into the future. We are already aware how we could create one or two more paths in the morning and evening peak that could only be used by the London Midlands services, and only then if they had 125 mph tilting stock. We are extending the Pendolinos to 11 cars. It is very difficult to see whether they could be extended further than that. We are grade-separating a junction at Stafford that we know will give us an increment in capacity that might allow us to run another off peak path for long-distance high speed services to London. But these are all very tactical interventions; they have a good business case by themselves. But what we cannot get is a strategic intervention that would be value for money on the existing network that would provide the kind of step change in capacity that we know we will require in the future. That is why we looked to see if building a new line would be the best value for money answer for that step change in capacity, and we found that it was the best value for money answer. Then we looked at the secondary issue: did you get a better business case if it was a high speed line? We believe that you do get a better business case.

Q39 Paul Maynard: Clearly, building a new high speed line will have a significant impact on the existing network, particularly at interchange points and at termini. What assessment have you made of the impact of High Speed 2 on services in and around Manchester in particular, because there will be those in the north who argue that the most fundamental transport project for the north of England is not High Speed 2 but, rather, the Northern Hub? What impact does HS2 have on the Northern Hub?

Richard Eccles: We are beginning to look at the Northern Hub and HS2 as a single opportunity. We do very much believe that, wherever possible, in places such as Manchester and Leeds, the station for HS2 should be a city centre station so that we can get connectivity with the rest of the rail network and we can create a catchment area for HS2. Clearly, bringing trains into the centre of our cities is a difficult proposition when the network is stretched in most of the regional city centres, which is why we need to plan both initiatives together, not separately.

Anthony Smith: Sometimes memories can be short and, of course, all of us who lived through the West Coast upgrade will remember how painful it was trying to do a major upgrade on a working railway, the pain that passengers went through in that eight-year period and the premium prices they paid throughout while suffering a very substandard service. The potential alternative of building a new line appears very attractive from the passenger point of view because it does keep the pain, to a degree, off to one side.

Q40 Paul Maynard: Mr Roberts, speaking for the train operators, what is the financial impact on a service’s profitability of declassifying a single first-class carriage on, say, a Pendolino?

Michael Roberts: I do not have that information to hand but I am happy to follow it up, if that would be helpful.

Paul Maynard: I would be interested to know.

Q41 Chair: Mr Eccles, you spoke about High Speed 2 and the Northern Hub being one opportunity, but the Manchester and northern part of HS2 is not planned for many years to be in operation. What about Northern Hub? When are you planning that to start?

Richard Eccles: As you well know, we intend going ahead with the Northern Hub and we have been very fortunate to get some advanced funding to start the first phase in this control period. But, none the less, when we do our longdistance planning, we will be looking to plan the development as one issue rather than two separate issues. In our plans, we will have scenarios where we are assuming that HS2 is delivering passengers into the centre of Manchester. But, again, the assets that we are providing for the Manchester hub need to be supplying services for 20, 30, 40 years.

Q42 Chair: When do you intend to start the Northern Hub?

Richard Eccles: As you know, we are well advanced in the planning of the Northern Hub. We start spending on infrastructure before the end of this control period. In the budget the Chancellor made a statement.

Q43 Chair: So that will not be changing.

Richard Eccles: That will not be changing. Sorry, forgive me. No, this is not going to delay the Manchester hub. I am talking long-distance planning. Don’t worry.

Q44 Chair: Right. I just wanted to be quite sure I hadn’t missed anything there. Lord Berkeley, do you want to make any comments on this question?

Lord Berkeley: Only on Mr Maynard’s original question. Let us accept that the forecasts for 20 years’ time are going to double the passenger and freight traffic. They are all going to be slightly wrong but let us just look at that as a principle. On the freight side, Network Rail is lengthening the loops where you can put longer trains in and we can run longer freight trains, which makes a great deal of difference. But doubling the number of trains needs a step change, as colleagues have said. That either needs a new line or one could put in extra tracks beside existing lines and more grade separation, but, as Richard Eccles has said, that causes problems. So we have got a big change coming and we need to plan for it.

Q45 Iain Stewart: In your opening remarks all four of you rated the capacity gains for high speed ahead of speed and reduction of journey times. I find that quite significant. Following on from that, is it fair to say that the criteria for High Speed 2 have been too narrowly set and, if we looked at other options, building a new high speed line but perhaps not at 250 mph operating speed, we would open up other options, perhaps routeing it alongside an existing transport corridor, opening up better connectivity options that we have been discussing this morning? The question is: have the criteria been set too narrowly?

Anthony Smith: I am not sure the criteria are too narrow, but perhaps what it says on the tin is a bit unfortunate. The title "high speed rail" is a bit of a misnomer in our eyes because it seems to be better called something like Big Rail or New Rail, and the high speed bit is a bit of an addon, because, as I said in my opening remarks, what can be done with the train and tracks, which are freed up in a sense, is just as important. The Committee should probably be aware that Network Rail and ourselves have been asked by the Department to do some very preliminary work on what could be done with that socalled released capacity. We are going to go out and talk to some passengers about what some of the options are in Milton Keynes, Coventry, and north of Birmingham as well. Of course, it is very difficult to think what you might want in 2026; it is a very long time away. But starting to think about this is very important because those potential benefits for those communities and the links between those communities and beyond is a tremendous prize, and it is really worth having and really worth thinking about.

Q46 Iain Stewart: Let us accept hypothetically that we build a new line. What I am trying to get at is this. Are we, by setting this operating speed at 250 mph, limiting our options when there is potentially a broader range that we could consider?

Michael Roberts: I was the one person on this panel who did mention that the faster speeds and shorter journey times, to be specific, was one of the additional benefits and a strong benefit, although maybe not as strong as the capacity benefits. What is important to underline in that respect is the opportunity for shorter journey times, as I mentioned, between our four major conurbations: London, west midlands, Manchester and west Yorkshire. It is the opportunity to shorten those journey times in terms of unlocking wider economic benefits. The case that is being put forward in terms of the economic benefits of HS2 identifies something of the order of £6 billion over the lifetime of the project in wider economic benefits. Those would not materialise without the higher speeds. If one is going to build a new line, building it to a higher speed specification provides that greater opportunity for wider economic improvement that you would not get otherwise.

Lord Berkeley: Could I just add something, Madam Chair? We are in a situation now, as the Committee will have seen from the arguments about the new high speed trains going through the channel tunnel and who builds them, whether it is Alstom, Siemens or someone else, that there is a world market and a European market in these trains and in the design of tracks. Most of them are going in the 300 kph to 350 kph range at the moment. Clearly, Germany, France and Italy have all decided that is the right kind of speed range and you design the track to suit. That is the most economic way of doing it. We do not need to use it all the time but it provides the opportunity for using fairly standard trains, which will save a great deal of money rather than having specials built for this country.

Richard Eccles: A couple of years ago we went out and talked to transport users just to try and explore the very point you are making. We did some research on Virgin trains. We went out to motorway service stations and to a couple of airports and tried to get a feel of what value people were putting on journey times: stated preference theory. It really robustly demonstrated what is probably obvious. People do not value long train journeys. They want to get from point A to point B. Reduced journey time is very attractive. The appraisal methodologies we use are subject to valid criticism, but that is a robust part of what we do, I believe. It is worth investing in reducing people’s journey times. With a high speed line at 250 mph, you are talking about reducing the journey time from Manchester to the same as it is from Birmingham or thereabouts now. You are talking about reducing the journey time from Edinburgh or Glasgow to the same as it is from Manchester now. These are real step changes that give the customer what they perceive to be a massive benefit.

Q47 Iain Stewart: Can I just follow up? I am not talking about building just a normal speed alternative additional line. 250 mph is quite a step up from most of the operating speeds of high speed trains elsewhere. At 250 mph you have effectively got to go in a straight line and that is why the current route that carves through virgin countryside has been planned. If you had planned a route that operated at, say, 186 mph, does that not open up the possibility of routeing it alongside an existing motorway corridor? You would still have substantial time gains in terms of journey times but maybe not quite as much as the 250 mph. Is that viable?

Richard Eccles: There is a difficulty with aligning our railways in this country with our motorways. As I am sure you know, we have built the motorways with bends in them as good, sound, safe driving policy for many decades now. We do not have the opportunity that they have on the continent to build miles of straight railway next to motorways. An 186 mph railway is HS1, effectively. I do not believe you would reduce your construction costs significantly, though I would like to check that and perhaps come back to the Committee. It is much more likely that you would make a sensible investment decision and build, at very little incremental cost, a piece of infrastructure that would support the rolling stock not just that is available today but tomorrow, and particularly driven by the basis that we believe you get significant benefit by reducing journey times, though I guess the bit of the answer I need to check is whether the capital cost of building an 186 mph railway would be significantly less than the other one. I do not have that information with me.

Q48 Chair: Do you have any costings on that?

Richard Eccles: Yes, we have lots and lots of costings; I can get the answer. We did cost building a two-track railway literally adjoining the West Coast Main Line. So we have a number of things we can look at.

Anthony Smith: I have no idea what the optimum speed is from the economic or performance point of view, but it strikes us from the existing passengers’ perspective that it is the whole package. You get potential for more trains, more reliable trains, and there are not slower trains trying to weave in and out of the faster trains. The whole thing comes as a package. Whether it goes at 150 mph or 170 mph or 250 mph, I have no idea what the optimum speed is. But it strikes us that the opportunity of the new build is getting all these things together. If it happens to go a bit faster, then that is great.

Q49 Mr Leech : Based on your most pessimistic growth forecast for passenger growth and in freight, how long would we be able to go just simply by doing additional upgrades on the main line routes without having to have a brand new line?

Lord Berkeley: From a freight point of view, assuming that our forecasts are reasonably correct, within 10 years we shall see some congestion on the West Coast Main Line and the other routes that would benefit from a high speed line that will seriously affect the ability to take the growth in freight. The operators will probably have to turn traffic away. They may offer a different route or a different time, but there is congestion on the other parts of the network as well. So it will constrain growth within 10 years.

Q50 Mr Leech : What about passenger growth?

Lord Berkeley: They are interlinked of course. If he wants more trains, I rather like the idea of Anthony sorting out how many extra trains he can get on the existing line at Milton Keynes. We want more freight there, but we have all got to work together on this.

Michael Roberts: My recollection of the central case is that the southern section of the West Coast Main Line will be full by 2024. I cannot remember what the worst case options are.

Q51 Mr Leech : That is with upgrades.

Michael Roberts: That is anticipating the other changes-the sorts of changes that Mr Eccles already mentioned.

Q52 Chair: When you say "full", what exactly do you mean? Do you mean full at certain times?

Michael Roberts: It would exceed the conventional load factors at peak time that the industry uses at the moment to trigger the case for additional infrastructure, and that classically is at about 70% load factors in the peak. We already face the prospect on that central case of the route being full, given the definition I have just given you, in 2024. But phase one of the route itself will not start coming into operation until 2026, assuming that the planning processes go as currently anticipated by HS2. Even on that central case of everything being fine and going well, planning approval being agreed, the funding in place and construction going to plan, we are already facing the prospect that there will be a gap between the point at which the route becomes full and the point at which additional capacity has been provided.

Richard Eccles: I guess, for me, "full" means that we cannot path another train when any of the operators want it and that the rolling stock that has been used on the route is exploiting the full capability of the route; it is at its longest and its internal configuration is the most appropriate for the market. I do not believe that we have confidence in any interventions on the West Coast that we have planned past 2018. "Full" is a difficult concept, because if you cannot buy a ticket on the train you want to travel on then that is full. We treasure the walkon railway at the moment, but the walkon railway is becoming more and more difficult as the load factors increase. So 2018 begins to be when my long-term planning process runs out without this new line option.

Q53 Mr Leech : One of our previous witnesses, in response to my question about the money we had already spent on the West Coast Main Line, suggested that perhaps a decision might have been made prior to the previous upgrade of the West Coast Main Line to have a high speed rail line planned at that time. Do you think, if we were to decide not to proceed with high speed rail, that in 10 years’ time, with hindsight, we would be saying this decision needed to be made 20 years ago or 10 years ago?

Richard Eccles: I would absolutely agree with that, yes.

Michael Roberts: I would agree with it too.

Q54 Mr Leech : Is there any suggestion that in 10 years’ time, if we decided not to proceed with high speed rail, we would not have that view-that a decision should have been made at an earlier stage?

Lord Berkeley: From a freight point of view there are other options, but I do not think they are very economic. You could put four tracks back in the Midland Main Line; you could put four tracks on the Chiltern line through High Wycombe, which is challenging, shall we say? There are lots of other things you could do, and it may be that for freight that would be fine. There are two major problems though. One is the aggravation to the existing line that would happen during construction, which we have seen on the West Coast Main Line. The second is for economic reasons, which would take a long time to explain, that freight does not pay the same access charges as passenger. The financial case for this just would not stack up and that is the way it is. It starts off with European Commission legislation. From a freight point of view we need the extra capacity. We do not really mind how it is provided, but we cannot pay the capital cost of it because the economics just do not stack up.

Q55 Mr Leech : But, on balance, given all the economics, would you say that from a freight perspective this is the best way of providing that extra capacity for you?

Lord Berkeley: Yes, I would, definitely.

Anthony Smith: Barring the economic meltdown that has been discussed earlier, a step change in the ability of the railway to carry more passengers must be a step in the right direction. How the network of high speed lines is ultimately executed will also be very important, as previous witnesses said, because the simple London to Birmingham tube is obviously just the start of a much bigger network, and how that fits together when it is built is terribly important. How the planning works on the ground will be crucial. I remember the Chairman of SNCF, in a slightly rare moment of Gallic self-reflection, said the thing that they had learned about the TGV network is to put as few stations as possible on it; don’t stop. Don’t have terminal stations if you can avoid it; go through places to other places. Thirdly, don’t forget about freight. It seems like a very important lesson, with three important issues to bear in mind.

Lord Berkeley: Unfortunately, he also said, if you want to build a high speed line quickly or anything else quickly, if you want to drain the swamp do not consult the frogs, which is really rather unfortunate, but there we are.

Q56 Steve Baker: Just one simple question. I got slightly concerned, Mr Eccles, when you said you had no confidence in interventions beyond 2018. Could you just tell what capacity upgrades we will see on the West Coast Main Line before 2026?

Richard Eccles: We are upgrading the power supply, which is necessary to run more trains in the future. We are doing grade separation at Stafford. We are remodelling Bletchley. So we are doing a series of capacity schemes. We are having a look at the mixture of passenger and freight services on the northern section of the route, north of Preston, to see if we need to relocate or lengthen some of the loops that Tony dreads his trains being put into. So we still have a series of them. We are spending a significant amount of money on interventions on the West Coast Main Line, but we would expect to have these largely finished at around 2018 time. Beyond that, for me, for an intervention to be valid it has to have a business case and it has to have funding. I do not have confidence that we can develop any further interventions that will demonstrate a good business case to justify investment and that will attract funding in the context that we will be in there. Perhaps we will be regretting that 10 years ago we did not make a more sensible decision.

Anthony Smith: On the point about the immediate future, we have just finished some research for the DfT, again, in terms of looking at what current users of the Virgin and London Midland services on the West Coast would like to see in terms of new franchises or, in the future, to inform the specification of the new franchise on the West Coast, which is now delayed, as you know. The priorities for improvement are very basic in a sense: value for money for the price of the ticket, punctuality, reliability of the train, and to be able to get a seat. Those are the things that Network Rail, the train companies and the Government in the short-term future need to try and facilitate to keep, in essence, what is a bit of a success story on the West Coast.

Michael Roberts: Just to add to the previous comments, I do not know if Mr Eccles has mentioned the additional Pendolinos that are due to come on stream as well to expand the rolling stock capacity on the route. Of course, before 2026, all being well, there will be 14 years of a new franchise in operation. Depending on how that contract is let, there may be every reason for the new franchisee to bring on additional improvements of the sorts that are being mentioned, in order to deliver the kind of quality benefits that Anthony has mentioned that passengers are looking for in terms of improved capacity and improved reliability. That is a contract which has not been let yet and will not be for another year or so, but there is the opportunity through the franchising process for further improvements to come alongside the hard network-related ones for which Network Rail is responsible.

Lord Berkeley: I think Mr Eccles has forgotten the Nuneaton North Chord, which is a freight chord to connect the FelixstoweNuneaton cross-country line on to the West Coast Main Line and to enable many more freight trains to go direct from Felixstowe on to the West Coast Main Line without going down to London and along the North London line. That is due to be finished in two years’ time.

Richard Eccles: Yes, it is, indeed. Madam Chair, I am afraid I did forget to mention something almost as important as the Nuneaton North Chord, which is that we will be replacing the signalling system, as it comes up for renewal, with a much more flexible system called ERTMS. It is in-cab signalling. That has the potential for an increase in capacity on the network generally, perhaps by as much as a path an hour, which is a very important intervention that I should have mentioned. That will be over the next 10 or 20 years.

Q57 Julian Sturdy: Lord Berkeley very early on in the proceedings raised the fact that he thought high speed rail should start in the north and move south, specifically for freight. Assuming the Government makes the decision to go for high speed rail-this is a question really for the rest of the panel- is the proposed strategy to start in London, move up the Midlands and move north the right strategy, or do you think there are some merits in what Lord Berkeley has said about starting in the north and working south?

Q58 Chair: Lord Berkeley agrees with that. He has made that clear. Does anybody else have any views on that?

Michael Roberts: My view, given the growth of demand on the southern section that is anticipated on the West Coast Main Line, is that I would start at the south and build it up to Birmingham and then beyond. It is worth mentioning, in addition, something that we have not touched on. In terms of the prospects for high speed services to extend beyond the core conurbations that have been talked about with regard to HS2, potentially going further north beyond Manchester and Leeds, this is an area, clearly, that HS2 is looking at, but in principle those high speed services could be delivered by using existing lines rather than a new high speed line or set of lines further north. That would be consistent with experience in France where two thirds of the TGV service is run on classic lines, albeit improved for the purpose. But, having regard to the way the demand is due to go in the next 20 years, one would start at the southern end.

Q59 Chair: The lines you have referred to have been north of where? You are saying it might not be necessary to have high speed lines.

Michael Roberts: It is talking about the prospect of high speed services beyond Manchester and Leeds, for example, which is an area of focus currently for HS2, which is due to report on this at the turn of the year.

Anthony Smith: Given the cost of the project, given the pain it will go through in the planning process, you have to start where the greatest number is. Building the LondonBirmingham bit seems sensible, although it is worth remembering, as previous witnesses said, that will bring benefits for all parts of the country straight away from 2026. Trains from Scotland will be able to use that for the last bit of their run into London and vice versa, so there will be benefits. But the true value of the whole thing comes, as Mr Roberts says, when you link the great conurbations together. The intercity journeys between Leeds and Birmingham, and Birmingham and Manchester, at the moment are very substandard. They need a lot of upgrading, not to mention Leeds across to Manchester as well. There are a lot of other benefits to be had.

Q60 Chair: Mr Eccles, could you also give us an idea of what priorities there would be for the areas that would be released if the high speed line was built? Where would investment go?

Richard Eccles: On the first part of the question, we have to start at Euston. Euston is on the critical path. It is sensible to start all over the route between Euston and Birmingham. In terms of the priorities that have been agreed for use of the released capacity on the West Coast Main Line, there is no agreement yet and there is no solid proposal. We ourselves have looked at a number of timetables, but, as Anthony said, we are just about to go out to users and local authorities and do some research about what the communities that are going to use the existing West Coast Main Line into the future would want the capacity to be deployed on.

Q61 Chair: When is that consultation going to start?

Richard Eccles: That is going to start within a couple of weeks.

Q62 Chair: When will it conclude and when will there be some ideas of what developments might take place?

Richard Eccles: In the late autumn. In September to October time we will begin to get initial information on what people are saying. It is more of a research exercise than a consultation. I suppose there is not much difference between them.

Q63 Chair: What does that mean?

Richard Eccles: It means we are going to go out there and ask questions that are quite structured so that we can use the information we get back. We are going to offer some suggestions perhaps of what the line might be used for and see how people react to those.

Anthony Smith: As we are doing the research for this, I might just be able to add a little bit more detail to that. What we are going to try and explore with current passengers and some of the consultees is the trade-off between using that space for greater frequency, longer trains, more punctuality, and some of the issues and trade-offs that are contained in there, to try and get a sense of what might underpin some of the new timetables that might be worked on towards 2026.

Michael Roberts: Just to put a bit of real life flesh on those sorts of ideas, there is the prospect that the released capacity on the existing line made possible by HS2 could, for example, double the frequency of services to London from towns like Milton Keynes and Northampton in the peak time as well as other times. It could also shorten journey times. The Northampton journey time could be shortened from nearly an hour, which it is at the moment, to something of the order of 43 to 46 minutes. But, also, it could improve the frequency of services within the west midlands region, for example, Coventry, serving potentially a new station at Kenilworth and others. Potentially, there is quite a wide variety of options for the use of the additional capacity, let alone its potential use for freight, which I have not mentioned but which clearly is going to be the focus of the consultation.

Q64 Chair: What about freight?

Lord Berkeley: This all sounds wonderful. In 2026 the high speed line will be built to Lichfield and Birmingham, and I trust that freight will be allocated a number of extra paths in the southern bit of the West Coast Main Line with the released capacity. However, north of Lichfield, all the high speed trains on the HS1 southern bit will go on the existing line. That is maybe three, four, five or six trains an hour, depending on where they are going, plus all the additional freight trains that have been kindly allocated space on the southern half of the existing West Coast Main Line. There is going to be a right traffic jam there going north from Lichfield for a period of about 10 years. I am hoping that Network Rail-and we do work very closely with Richard and his team-will be able to find alternative routes for freight, either from London or from Felixstowe or from anywhere else. It needs some extra alternative routes for passenger trains as well, though, until the second phase from Manchester south and Leeds south is connected into Lichfield. That is going to be a big challenge.

Q65 Chair: Lord Berkeley, you used the word "trust". You said, "We trust this will lead to more freight lines being available." What is the procedure for deciding that? Do you think freight gets a good deal? Does it get a proper look-in on the use of existing lines?

Lord Berkeley: Network Rail and Passenger Focus are doing this study that they both mentioned into how many extra passenger trains would be desirable on the West Coast Main Line. We have already made the point that there has to be capacity for freight. We have a strategic freight network which has been agreed and we should be looking for strategic freight rights on this line so that there are certain paths reserved for freight on all the main lines. It has been agreed on one line already, and we hope we are going to extend it out to other ones so that passenger operators cannot just come and say, "We want that path because we got there first." Freight operators do not take a path until there is a customer or they have a business for their train, unlike some passenger services, which probably operate with very few passengers. It gives us a timetable. It is a different way, but we are hoping, with the strategic freight rights and capacity, that we will be able to negotiate some paths on that line. I am sure we can.

Q66 Chair: Are you confident you will be able to negotiate a satisfactory solution?

Lord Berkeley: I am pretty confident we can do it up to Lichfield in 2026, but north of Lichfield after it has opened-there will be extra passenger trains and that is fine-we shall have to negotiate very hard and there will have to be some new solutions found for the interim, I think, between 2026 and whenever the second bit opens.

Q67 Chair: Do you think the organisation is there to get a proper solution?

Lord Berkeley: I do, yes, Madam Chair. I do. We did have a problem a year or two ago with a train operator who said, "We demand priority for paths because the Government wants it." We said that is not the way the industry processes work. Everybody applies to Network Rail, and if the demand exceeds the capacity then it is the rail regulator, who is independent of Governments-we hope he is; anyway I think he is-that will make a decision. That is the right way and I am confident that we will be able to come up with a solution.

Q68 Chair: Mr Eccles is nodding, so I will take that as agreement. Is that right?

Richard Eccles: Yes. I was simply going to say that we know that, if we can get an extra path an hour for 10 hours a day up and down the West Coast Main Line, that will take 300,000 lorry movements off the roads in a year.

Q69 Chair: Mr Eccles, in the written evidence Network Rail has given us, you make some very strong statements about the benefit of high speed rail, High Speed 2, and particularly about economic development benefits. What is that based on? Is it work that Network Rail has done or are you quoting from other work done?

Richard Eccles: We are quoting from the work we did in the New Lines Study and the work that we have seen that HS2 Limited have done within their business case. Also, in the New Lines Study, we looked at high speed rail around the world with the assistance of Professor Nash and had a look to see what had happened in other countries, because there is a long history of high speed rail in other countries. We believe that high speed rail does make significant contributions to the economic value. We do not believe that the present appraisal techniques demonstrate that fully because they are much more leaning towards socioeconomic benefit, but more appropriate appraisal techniques would much more clearly demonstrate the link between improved transport systems and economic value.

Q70 Chair: What sorts of economic value are omitted from the current assessments?

Richard Eccles: It is not omitted; it is not given appropriate weight. It is things like job creation, tax generation and true economic inputs.

Q71 Chair: Areas like job creation, you think, are not concerned adequately in the current appraisal.

Richard Eccles: Yes, absolutely.

Q72 Chair: But have you undertaken any other alternative appraisal to demonstrate what those benefits might be?

Richard Eccles: Not in this case, but, funnily enough, we have, Madam Chair, just recently completed an exercise in Merseyside where we have compared present appraisal techniques with a technique that we have developed with KPMG and demonstrated what the benefits are in terms of jobs and taxation and that kind of thing.

Q73 Chair: Has that been published?

Richard Eccles: It will be published with the agreement of Merseytravel and Merseyrail in about three weeks’ time.

Chair: We would be interested to have that information, if the Committee could have that, please.

Richard Eccles: By all means; absolutely.

Chair: Thank you very much, gentlemen.

Examination of Witnesses

Witnesses:  Nicolas Petrovic, Chief Executive, Eurostar, and Pierre Messulam, Rail Strategy and Regulation Director, SNCF, gave evidence.

Q74 Chair: Good afternoon, gentlemen, and welcome to the Transport Select Committee. We are very pleased indeed that you have been able to join us today and give us the benefit of your experience in running your high speed rail. That is very valuable to us. Could I ask you, please, if you could just say your name and your positions?

Nicolas Petrovic: Good afternoon and thank you very much for hearing us. I am Nicolas Petrovic. I am the Chief Executive of Eurostar.

Pierre Messulam: I am Pierre Messulam. I am the Rail Strategy and Regulation Director in SNCF.

Q75 Chair: Would you say that your experience of high speed rail shows it to be a success story, or what weaknesses would you think it might have exposed in the project?

Nicolas Petrovic: In the case of Eurostar, high speed rail has been a success. It has brought a number of things. The first thing is the reduction in journey times that we have experienced over the years because the first services were three and a half hours long. Journey times came down. The journey to Paris came down to two hours and 15 minutes. Each time we have had a step change in the reduction in the journey time, we have had an increase in our market share against airlines and an increase in the market size in general. That is the first element that we saw, which was a big success. Where market share as a rail operator started pretty low, close to zero, at the moment on LondonParis and LondonBrussels the market share is 80%. We attribute that mainly to the journey time reduction. The immediate benefit we have had from the high speed lines built to our destinations is the capacity and reliability of our services. Our punctuality was in the region of 70% about nine years ago, and we are now at 94% to 95% punctuality, which is due to the fact that we can operate in a simpler environment and run our services more frequently and more efficiently. This is also a big driver to gain market share against airlines, especially in the business market, which values the punctuality of the services very highly. It is generally a very successful story for us.

Q76 Chair: Were the predictions about expansion correct?

Nicolas Petrovic: On Eurostar, we know that in the past, especially at the start, there were some predictions which were very high, which did not materialise fully. Last year we carried 9.5 million passengers, and we expect to be close to 10 million passengers this year. From a market share point of view it has been a very good success story, once again with an 80% market share. It is very high on our routes. Also, we have developed new markets which did not exist before: for instance, the market of short breaks for continental leisure customers coming to London. There was a bit of that before high speed rail, but we managed to double the size of that market over the years, because we could operate more frequently and more efficiently.

Q77 Mr Leech : Mr Petrovic, you said that one of the reasons why market share has gone up is because journey times are coming down. How much of it do you attribute to journey times for airlines increasing because of additional security, with security checks slowing down the process at airports?

Nicolas Petrovic: That is a very good point. We have reduced our time, and they have increased theirs. We do not attribute the relative weight of each to our growth in revenue. There are a number of factors which drive the fact that people like to take high speed trains. There is journey time, the fact that the time in the airport is generally longer and you have more productive time on board the train, because obviously, when you travel by air it is very fragmented time. You have to go to the airport, wait, go through security, and so on. We do not have the relative weight of each of the factors, but we can see in terms of market share that, when maybe 10 years ago the tipping point between air and rail was maybe a three-hour journey time by train-then people would consider taking the train rather than air-this has gone further now. With a four-hour journey time, we now have more and more people choosing rail.

Another example is this. Now that we have a high market share on a point-to-point basis, we are trying to develop our market share on further destinations, connecting with other high speed classic trains. That is where we see our highest growth. We have more and more customers choosing to travel from, let us say, London to Marseille, or Leeds to Paris, by connecting, because overall they value the shorter journey time and the higher punctuality compared to airlines.

Q78 Mr Leech : Would you agree with that, Mr Messulam?

Pierre Messulam: Yes, broadly. May I try to answer your first question about the experience of high speed rail we have in SNCF? I would say it is a success. We are carrying more than 120 million passengers yearly on the high speed network. It saved the rail industry in France from collapse 30 years ago, because we were going out of business, facing airline and road competition. It helped us to get into the market again, and to have a big slice of domestic travel. Up to now I would say that domestic travel airlines have lost a lot of their market share, and our flag carrier, Air France, is complaining that with TGV it is no longer the same business, for low cost companies, and even for them.

I would say it is a success for us. It is a success for our customers, because one of the key factors was to have good price management, offering the opportunity to a lot of people to travel by train with quite low prices, which was the other side of the high speed French programme. It was a success for economic development, because it had a strong impact on some areas which were losing ground, specifically in the south of France or the northern part of France. There was a better connection with Paris, on the one hand, and between different regions in France on the other, helping to enhance the competitiveness of the territories.

On your question about prediction, I would be a little cautious. We were both over-optimistic and under-optimistic. At the very beginning we were very under-optimistic, and the success was better than expected from, let us say, the first high speed line between Paris and Lyon, which is the major trunk route for the French network between Paris and the south- east. We were so happy about that, that we were perhaps a little over-optimistic on the next lines. On balance, with a 30-year programme, I would say that we have to be very cautious about the predictions. This is not an exact science. We had, let us say, on average, 6% of over-optimistic prediction, but it could be far higher, specifically on the north route to Paris and England, when we just miscalculated our prediction for the channel traffic. When you discuss the matter of traffic predictions with PPP people, and bankers such as Fitch, they are very cautious. That is one of the real risks of the project.

Our experience makes us think that, in the long run, you are quite close to your predictions, but the way you reach the long run may differ in several factors. Basically, on the last two high speed lines we opened, predictions were matched sooner than expected. But when we had matched the predictions, which showed that the predictions were quite right, growth went slow or flat, which means you have to think about both growth and volume in time. But the two factors are important. The first years are very important to generate revenue to pay the first costs, specifically the rolling stock costs. You have to screen your predictions to have a robust business model.

Q79 Iain Stewart: In developing the TGV network in France, by what criteria did you justify intermediate stops?

Pierre Messulam: Our policy was to say, the fewer intermediate stops the better. To put it another way, transportation is basically about geography and demography. You just stop when there are passengers to take care of. Basically, when you build a new high speed line, you are aiming at quite a high volume of passengers, otherwise you cannot balance your investment. Our policy was to say that we are building in two ways. A high speed line should have few stops but should have connections, so that when you leave the high speed line and go on to the preexisting network you can offer connections to people further down the road. The idea was to say that, when you are running at high speed, you should run at high speed. If you stop, you lose a lot of time. Just to stop once on a 300 kph route loses seven minutes. When you consider that your investment is 150 km long, giving you 30 minutes’ gain, seven minutes is a huge loss of competitiveness compared to your investment. The less you stop on a high speed line the better, but you may manage connections with preexisting stations on the preexisting network so that your high speed train runs at normal speed further down and has an impact on the market, but not on the high speed line itself.

Q80 Iain Stewart: Looking back over the last 30 years of operation, would you have done it any differently? Has the reality matched the predictions in terms of intermediate stops?

Pierre Messulam: Previously, six months ago, I was in charge of the next TGV project poised to be open in December, which is a 150 km line between Dijon and the German and Swiss border. We have two intermediate stops. Basically, the decision was made considering the demographic weight of the cities. In one case it was 300,000 people and in the other 200,000. It is a market, so it makes sense to stop.

But on other lines, such as the TGV East, for instance, we have very few intermediate stops between Paris and Lorraine or Paris and Strasbourg, because it does not make sense. There are too few people living there to offer stops. What is important in our understanding of the high speed project is not that you are working on a stand-alone project but you are working on a network project. High speed makes sense for medium or long distance with huge volumes. It is of the utmost importance to provide efficient connections so that, regardless of the big cities at the two ends of the line, other cities may benefit from the high speed operation too. That is what we manage with our TGV network, both with direct trains and with connections with regional trains, so that the project can have a positive impact for a lot of people who do not live in the big cities.

Q81 Steve Baker: On the London to Paris line, has the market now reached saturation, by which I mean is there any growth in excess of the population growth?

Nicolas Petrovic: It is becoming a mature market. We expect natural growth due to GDP and population growth. But you are right: we are close to saturation. That is for the general growth of the overall market. That said, what we notice is that when we have strong marketing activity we can provide seats. Especially for peak periods, there is still room for manoeuvre. This is the reason why, among other things, we are investing in new rolling stock, because on the high speed line we can have more capacity. We need to have trains which have more seats so that in peak periods we can sell more. But, generally, we are close to the total size of the market.

Q82 Steve Baker: You mentioned capacity. What is the number of train paths per hour that you operate?

Nicolas Petrovic: At the moment we operate between two and three trains per hour. We can go up to four or five in the peak periods.

Q83 Steve Baker: But is there anywhere on the network that operates at 18 train paths per hour?

Nicolas Petrovic: 18 pathways per hour?

Pierre Messulam: On a high speed line, nowhere in the world. The Japanese are running 12 trains per hour. We are running a maximum of 12 trains per hour. We are considering next December 13 trains per hour, and nobody does more.

Q84 Steve Baker: What would you say is the practical technological limit?

Pierre Messulam: That is a very difficult matter. I am in charge of some of the ERTMS programmes for SNCF. We have had a discussion in France about this capacity. It is a complex question. You have to consider the braking power and acceleration of the train, and also the stop pattern. The more often you stop, the bigger the impact on capacity. Ideally, you would say you would go from A to B without any stop. Today, we think that with ETCS or ETMS you could have about 15 to 16 trains per hour.

Q85 Chair: Is there a plan that links the high speed rail with the existing regular classic line? Is the network planned as a network rather than just looking at high speed rail?

Nicolas Petrovic: I am not sure I understand your question. I am sorry. What do you mean?

Chair: Is there a plan for a rail network-not high speed rail taken in isolation?

Pierre Messulam: Right at the beginning our approach was to say that the high speed line is a leg of the network itself and is reusing part of the network. Basically, we reused the Paris Gare de Lyon station because we thought it was too expensive to build a new station for high speed operation in Paris. So we reused the network. A lot of connections with the French Alps, for instance, come out of the high speed line around Lyon and use the preexisting network, at lower speed of course.

Q86 Mr Leech : How important has connectivity with airports been in the French high speed network?

Pierre Messulam: We developed two main stations connecting high speed lines with airports. One is of course Roissy Charles de Gaulle near Paris, which has a connection with 65 cities in France daily. The second one is in the Lyon area with the Saint Exupéry airport, which is also located on the high speed line, with fewer connections. It should be said about the Roissy Charles de Gaulle experience that the trains stopping in Roissy are not Paris-bound. It is interregional traffic from Lille to Marseille or to Bordeaux, or Strasbourg to Brussels and so on. A feeder of the system is just interregional traffic. Basically, the business model is to say that people north of Paris use the TGV to reach Roissy without going to Paris itself. People south of Paris use the TGV to reach Roissy without going into Paris. That is two flows, and trains could be quite balanced, with people going to Roissy or people in Roissy going back home north or south of Paris, or east or west, if you prefer. That is basically what happens, and Roissy station is operating very nicely now. We think it is a success. We have a joint venture or a commercial agreement with Air France to have combined tickets with other airline companies now for people travelling back out of Paris to reach the airport.

Q87 Mr Leech : Am I right in thinking that each city that the high speed rail network serves has a station in the city centre?

Pierre Messulam: Basically, yes.

Q88 Mr Leech : Was there any specific reason why it was decided to be done that way rather than having out-of-town stations?

Pierre Messulam: To put it bluntly, it was a matter of money at the beginning. We had stations; we had a preexisting network. It was cheaper to use the track in the urban areas and use the existing station to enter the urban areas.

Q89 Mr Leech : Are there any areas, though, with hindsight, where you might have chosen to take a high speed train just to the airport on the outskirts of the city or set up a brand new station as a more appropriate location for a high speed link?

Pierre Messulam: Again, a high speed line, in our understanding, in our practice, is just a way to harness our competitiveness with shorter journey times. Then we have to save money, so we use the preexisting stations as far as we can. We went to Roissy because there was a market to be addressed. We built up a station in Roissy because there was no railway before. But from Besançon, Dijon and Lyon, we used preexisting stations. Then we had a new question recently on the TGV Rhin-Rhône, but again I shall make a statement about geography, about stations. You have to consider why you need to stop, according to the demography of the territories you are going through. Between Paris and Lyon there is only one major city, which is Dijon, with 200,000 people and that is it. So, no question, you go directly straight from Paris to Dijon. You could have a stop in Le Creusot and Mâcon, but they are very small cities with no big commercial impact, so forget it.

In eastern France you have a batch of medium-sized cities between, 100,000 and 300,000 people, quite close, around 80 km away one from the other. That was completely new for us. How should we address the market? One option was to say a big station, but 80 km is quite far away, or build up stations in every medium-sized city. The question is: is the market big enough to sustain the business? Yes, but that means that some trains go from Paris to Zurich, and stop in Belfort, for example, but not in Besançon or Dijon, the two other small cities, and some international trains from Paris to Germany stop in Dijon but not in Belfort. We have to find a balance. When you have medium-sized cities, you just have to address the market but not to over-address the market. We built up a pattern to have a good frequency for each medium-sized city, but not with trains stopping everywhere, because otherwise the journey time was no longer a match for longdistance traffic. That is why I say you have to think about the way you use your high speed line and the connections you have with regional trains to provide frequency, either with direct trains or with a connection with another station which is a little further down on the high speed line, so that you can offer good journey times and frequency. In our market, we discovered that frequency was a major driver for modal shift in both directions, by the way.

Q90 Chair: Has high speed rail helped economic growth in a city or a region?

Pierre Messulam: Basically, it helped companies to have better connections first with international airports or with international corridors, or with Paris, which are the big decision centres. It runs both ways. For customers of companies, it is easier to visit your suppliers and have discussions, because the connection is better both in journey time and frequency. For the company, it is easier to go and see its customers or go to address new markets because the journey time is shorter so that they have time to make the journey in one run on the same day. We had a strong impact. Take Lyon 30 years ago. The funny story was that, in the first stage, big companies moved from Lyon to Paris because they no longer needed to have big headquarters in Lyon. But then in the second stage smaller companies grew up in Lyon because they could do business because development was cheaper there, the work force were cheaper and it was no longer a problem to commute from Lyon to Paris to visit customers. It is a balance, but basically the lesson we learned with regional authorities is that a high speed line is not a gimmick. You have a strong modalisation of the territory, with a consistent investment plan on roads to enhance connection with the high speed stations, on industrial parks, with taxation of some kind, and training of the work force so that the connection with a high speed line is a catalyst for and will enhance real economic growth. In some areas where local authorities did not pay attention to connection with roads, taxation and training the work force, frankly speaking, nothing happened and TGV could not save them.

Q91 Chair: Mr Petrovic, has Lille been a success because of rail?

Nicolas Petrovic: As Pierre said, it is all about being a catalyst. High speed rail in itself does not create everything. Lille is a good example. It used to be a region with a lot of difficulties. They had to close down their mines and their heavy industry, and the unemployment rate was 40%. When you go there now, it is much better. They have used the high speed line and the station to create wealth. High Speed Rail has also brought our capital cities together: as you know, in London there are many French expatriates who have chosen to live here. It is a catalyst. It speeds up the exchanges between big cities and it takes the businesses a few years, but after that they are very quick to take advantage of the fact that it becomes very simple and seamless to go from one location to the other. All our markets have grown consistently over the past eight years, despite tourism problems, different problems with the flu, with SARS, and obviously with the recession. We have grown our markets consistently over the past eight years with a very strong catalyst. It does not create everything on its own, but if it is accompanied by other things it is very powerful.

Q92 Steve Baker: Is it correct that the further away from Paris the TGV network stretches the more subsidy it needs to operate?

Pierre Messulam: No, it is not correct, for this reason. Fortunately, people who were in the industry 30 years ago chose to make the most profitable project first, which fortunately for everybody, including the taxpayer, made sense. The most profitable route and the most trafficked route is the Paris to Lyon route, but it is just a matter of demographics. Lyon and Marseille are the two biggest cities outside Paris in France, so of course that is where the traffic was; it is more intensive. What happens now is that we are reaching or maybe overreaching the needs and the capacity to finance new high speed lines on both aspects. Maybe environmental constraints are more expensive than when we used to build 30 years ago. But, basically, it is because the markets are smaller. The question now is: what is the bottom line below which you stop? It is a difficult balance between economics because, on the one hand, if the cities are very small it does not make sense to invest a huge amount of money to build high speed lines for our cities with under 100,000 inhabitants. On the other hand, everybody is keen on TGV. It is so important to have a connection with Roissy for the airport, to be connected with Paris with a high speed operation. It is like a brand for our territory. Our position now is that we think we have a good high speed network. We should use it as much as we can and develop a very good, attractive interchange system, with regional trains, for people who do not live near a high speed line station. That makes sense, and if you consider what is happening in Switzerland, for instance, or even in Germany, that is what they did.

Q93 Iain Stewart: In designing the TGV network, did you encounter significant concerns from communities along the routes about the visual impact and the noise impact of the trains, and since they have started operating do you get many complaints about those?

Pierre Messulam: We had a lot of arguments and the more recent the project the more eloquent the arguments. At the very beginning, 30 years ago, we were crossing rural areas with few inhabitants so only hunters were complaining. We had a small problem north of Lyon in Laval La Martinière, which is a more densely populated vineyard area, and we had to build up noise protection along the line. What went really wrong was the connection between Lyon and Marseille in the Rhône Valley. Both inhabitants and Parisians who used to have their cottage in the area were complaining about the noise. We managed it. It was quite painful, but we managed it with changes of the track pattern and with noise protection, basically.

What should be said, also, is that the legal framework of infrastructure in France seems to be quite different from the British one. It means that the state has the power to take over properties for national interest so that people may go to court contesting the national interest-"utilité publique", we say in French-and very seldom the court disagrees with the French state position, for good reasons. Basically, what we have learned is that we have to discuss with the communities around the track to give them a very realistic understanding of the impact. It is not as bad as some people think it will be, and when there is a problem you have to discuss it with people and find solutions. It could trigger extra cost, but the sooner you figure out how you can fix it the cheaper it will be. When you build up a line, you may build up not walls but just earth hills-I do not know the English word, sorry-along the line. It is very efficient, it is green and everybody is happy.

Q94 Iain Stewart: Once you put in these noise reduction measures, do you still get complaints?

Pierre Messulam: No; frankly speaking, no.
Chair: Thank you very much indeed for coming and speaking to us so fully about your experience. Thank you very much.