Transport Committee - Minutes of EvidenceHC 1185 High Speed Rail

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Oral Evidence

Taken before the Transport Committee

on Tuesday 13 September 2011

Members present:

Mrs Louise Ellman (Chair)

Steve Baker

Julie Hilling

Kwasi Kwarteng

Mr John Leech

Paul Maynard

Iain Stewart

Graham Stringer

Julian Sturdy


Examination of Witnesses

Witnesses: Sir Brian Briscoe, Chairman, HS2 Ltd, Alison Munro, Chief Executive, HS2 Ltd, and Professor Andrew McNaughton, Chief Engineer, HS2 Ltd, gave evidence.

Q434 Chair: Good afternoon and welcome to the Transport Select Committee. Could I ask our witnesses, please, to give their names and position? This is for our records.

Alison Munro: Alison Munro, Chief Executive of High Speed 2 Ltd.

Sir Brian Briscoe: I am Brian Briscoe. I am Chairman of High Speed 2 Ltd.

Professor McNaughton: I am Andrew McNaughton, the Chief Engineer of High Speed 2 Ltd.

Q435 Chair : Thank you. Many of the environmental groups who have made representations to us say that the speed of 250 mph has precluded alternative routes that might be less environmentally damaging. Were you instructed to design the route at 250 mph or was that your choice?

Sir Brian Briscoe: I will ask Andrew to comment on the engineering arguments for the particular speed that we have been designing to. Perhaps I could say first of all, though, that our remit is from the Secretary of State for Transport to advise on a business case for high speed rail, to advise on potential routes and to support him and the Department in consulting on London to the west midlands. We are not advising you or him particularly on strategic transport policy or alternatives, and if there are questions the Committee wants to ask they would be better directed at the Secretary of State.

Q436 Chair: Sir Brian, if you are advising on the routes, that must involve consideration of some of these factors. We have been told by other witnesses that, because the maximum speed is 250 mph, that has precluded some routes from being considered. That would be a factor in your advice on routes, would it not?

Sir Brian Briscoe: Clearly, the engineering specification is affected by the speed of the route and I will ask Andrew to comment on that in a moment. Can I also say, though, that we have been consulting on both London to the west midlands and the wider strategic network with the Department? The consultation closed on 29 July. We have had over 50,000 responses to that consultation. We have not yet been able to analyse all of that material or to do the work necessary to give advice to the Secretary of State about what those results of consultation are saying. What we are saying today is about the work we did before consultation rather than a response to what has been said during the last five months of consultation.

Q437 Chair: Were you instructed that this had to be the maximum speed?

Professor McNaughton: No, we were not. The original remit from the previous Secretary of State was a high speed line of similar standards or similar type as High Speed 1, in other words, that it was to European standards and at least 300 kph. We developed our early work with our engineering advisers, Messrs Arup, looking at all the possible corridors we could find. There was the original very long list of corridors and that was before we took any view about potential top speeds.

In developing those corridors, it became apparent to us that some were more amenable to higher speed than others. In developing for each one the balance of journey time, cost and impact on sustainability, environment, people, etc., we took each route in turn. I know people have talked about our routes which followed motorway corridors. They had a certain speed potential over various parts of them, greater or lesser. The other routes we looked at similarly, because, while we have a high top speed, the actual speed at any point on the route is always a balance between cost and journey time and impact. Even on the route that we recommended to Government and Government has consulted on, by no means all of it is designed for that top speed.

If I mix kilometres and miles please forgive me, but I will stay in kilometres for the moment. The reason we went initially for 350 kph to 360 kph was partly because each of the routes we looked at, including motorway corridors, had potential for that sort of speed while retaining suitable sustainability impacts. That technology is widely available now, all the major manufacturers produce technology for those speeds, and around the world all our colleagues in every country are designing an alignment for at least that sort of speed.

We took it a little bit further on to the 400 kph or 250 mph for two reasons. One is because we learned very strongly from people that we respect, like Guillaume Pepy in France, that they had wished that they had not designed to the limit of the day because the technology continues to advance. They warned us very clearly not to design to the limit and always leave something in hand either for future generations or simply because engineering systems work better when they are not running on the limit. There are examples around the world where people have run things on the limit and they go poorly in the end. But we did not, dogmatically, at any time design to that top speed. That was where it was sensible, practical and gave what we considered in our judgment an acceptable balance of minimising journey time and, therefore, benefits to the cities that High Speed 2 would serve, against the cost and sustainability impacts.

Q438 Chair: So the people who believed that the routes aligned with motorways were ruled out because of speed are wrong. Is that what you are saying?

Professor McNaughton: They are wrong. They were ruled out on the balance of longer journey time, higher cost and being no better on sustainability. That was written up in our original report.

Q439 Kwasi Kwarteng: I am interested in this claim, or rather ambition, to have 18 trains per hour. Given that, as I understand, this does not happen in any other high speed network in the world, what makes you so confident that you can achieve this target?

Professor McNaughton: It might be worth mentioning just in passing that High Speed 1, now that it is in the private sector, has stated publicly that it offers up to 20 paths an hour on High Speed 1, but High Speed 1 is a shorter and more compact route. We are confident because those of us who are involved with High Speed 2 have worked individually with the control systems and colleagues around the world on high speed for over a decade.

On a personal level, I have chaired the meetings and the Committees around the development of ETCS or ERTMS, the control system, since 2001. We have worked it through as a whole system because it is not just about technology. It is about the type of service you operate, the layout of stations and so on, which I can go into probably in more detail than you would wish this afternoon but I can if you wish, to provide a system which is very high capacity. We devised this from the start as a high capacity system.

We have worked from first principles to come to a conclusion that, comfortably, reliably, day in and day out, a future railway could operate with 18 trains an hour. Technically, we came to the conclusion at High Speed 2 that our worst case, looking at the whole system, was actually that it would be completely full at 21 trains an hour, but, again, you do not want to run a system right to the limit. That is not just our view; it has been supported. Bearing in mind we know people have challenged this, I have asked others to peer-review our work and our conclusion of this band of round about 21 trains an hour, which means 18 trains an hour reliably, is supported by Network Rail and by Professor Rod Smith, who is the current President of the Institute of Mechanical Engineers.

We have asked independently one of the signalling majors, which is Bombardier Transportation, to do their own calculations uninfluenced by what we have done. They have reported to us that they have come to the same conclusion and they have done more ETCS installations in the world, I think, than anybody else. In recent days Systra, the French railway consultancy, have also reported to us that they have come to the same conclusion. 18 trains an hour was what we went to consultation with and we remain completely confident that that is what we should be basing the future upon.

Q440 Kwasi Kwarteng: Is anyone else going to comment on that? Just as a followup on that, to what extent do you think that the capacity argument is dependent on 18 trains per hour? You are suggesting that you could actually do more if you were pushed to it.

Professor McNaughton: I would not recommend more because a railway that runs completely at capacity then is subject to perturbation day to day and therefore is likely to be less reliable, which is why we adopted this prudent approach of sticking to 18 trains an hour.

Sir Brian Briscoe: The capacity issue is one that was at the forefront of people’s minds in doing it to provide an entirely new railway. You will have seen arguments that there is still capacity to be obtained from the West Coast Main Line. We are confident that there is not sufficient to meet the level of demand. You have heard from Network Rail about their view about when the West Coast Main Line will be "full" and the view that a new line would provide a substantial increase in capacity for inter-city movement but at the same time free up capacity for shorter distance movements on the existing railway network. You will also have seen in our report that two lines, one in and out of London, were felt to be sufficient at the moment for what could reasonably be thought to be the level of growth likely to occur in demand for long distance rail travel.

Q441 Iain Stewart: I would like to go back to Sir Brian’s opening comments just to check that I picked up on them correctly. You said your brief was to advise the Government on specific routes and the design specification of a high speed railway. You are not advising on a broader transport strategy. Is that correct?

Sir Brian Briscoe: What we were asked to do in our original remit by the then Secretary of State was to examine the business case for high speed rail, to examine in particular options for routes between London and the west midlands, and to give advice on a wider network. Our March 2010 report did all three of those. It provided a report on a route from London to the west midlands, including connections to Birmingham and on to the West Coast Main Line going north. It included also, though, a proposal for a route going north from the west midlands on the west side to Manchester, connecting with the West Coast Main Line and therefore going north to Scotland, and also travelling on the east side from the west midlands through the east midlands, through South Yorkshire to Leeds and then connecting back into the East Coast Main Line providing services to Newcastle and Edinburgh.

Q442 Iain Stewart: The reason I ask is because we have received quite a large amount of evidence from groups who are not opposed to high speed rail but have concerns about it and also the evidence we ourselves found when we visited France and Germany that what makes a high speed network successful is not the line itself but how it is integrated both in a strategic and a micro sense into the rest of the transport network. I am just a little concerned that you are designing a perfect isolated railway but ignoring the broader considerations about how that integrates into both the classic rail network and broader transport issues.

Sir Brian Briscoe: I think critics who say that are probably wrong. What we are endeavouring to do is to provide high speed rail capacity initially at the point where the capacity constraint is greatest, which is the southern end of the West Coast Main Line corridor, so that there can be better inter-city services north. They could go as far north in the first phase as Glasgow and in phase 2 would go as far north across to the north-east and Scotland, running classic compatibles on the part of the route that is not designed specifically as high speed, in other words north of Leeds and Manchester. Also, we are looking in the station selection for the stations that we have already recommended and also, in terms of looking further forward to the north, how best high speed rail connects with local services, local regional transport and also how the release of capacity on the existing rail network could be used more effectively to improve local accessibility and local connectivity.

Q443 Iain Stewart: Could I give one example of where I think there might be a problem? We heard evidence from representatives in London to say that, once the high speed trains arrive at Euston, very few people actually go to a destination that is within walking distance of Euston. They have to have an onward journey, but the capacity of the tube or bus system is not there to meet the additional passenger numbers so that additional tube lines or Crossrail or whatever it is would have to be built, and that has not been properly assessed in this overall package. That is just one example of how I am concerned that this line fits in properly with the broader transport network.

Chair: Do you see that type of integration as being part of the remit you have?

Sir Brian Briscoe: Certainly, high speed rail works best when you get off a high speed train and you continue your journey quickly; otherwise you lose the time-saving benefits from high speed rail. So it is important that high speed rail is integrated with local transport networks and that has been a part of our planning.

In relation to London, we have made two propositions. One is a station at Old Oak Common which would connect with Crossrail and a station at Euston which connects with quite a substantial tube network at present. We have seen comments that High Speed 2 would drive extra demand into the Euston area and create pressures on the tube system and the local transport system in that part of London. It is true that we do add a little bit to what is already a rapidly growing demand in the Euston area, but that little bit amounts, in our calculations, to about 2% addition to the growth that will be occurring anyway as a result of more movement in London. HS2 itself is not making the case, if you like, for additional tube lines or additional Crossrail investment. It is saying that this is a well connected part of London. It makes sense to bring high speed passengers into that part of London.

Q444 Paul Maynard: Your design, as you have indicated, appears to be predicated upon the importance of journey time, which is a factor of speed. Is that correct?

Sir Brian Briscoe: Yes.

Q445 Paul Maynard: Who set that criterion? Did you choose journey time to be your designing factor or was that set for you by the Government?

Sir Brian Briscoe: It is a convention in transport planning that journey time is the factor that determines demand or influences demand. So when you improve a journey time between the two locations you increase the demand for the use of that transport infrastructure.

Q446 Paul Maynard: Could I possibly rephrase the question? I am sorry-Ms Munro.

Alison Munro: Journey time was not the defining factor. It was obviously an important factor in assessing the benefits of high speed rail and the benefits of alternative routes, but it certainly was not the only factor that we took into account. We also took into account the cost of different alternatives and also their environmental impact. The way we approached the route determination and also the choices around stations was a balance of those combinations about what it did in terms of journey time and benefits against the costs and the environmental impacts.

Q447 Paul Maynard: The perception we have received, listening to all our evidence, is that the predominant factor has been one of achieving high speed on as straight a line as possible with as few intermediate stops as possible. In other words, you have designed almost the perfect high speed line, as Mr Stewart indicated, and restricted the flexibility in terms of other interactions with the transport network. Key to this and perhaps most controversial that I have come across is the decision to interact with Heathrow at the Old Oak Common hub, which appears to be a highly controversial decision. To what extent were you able to influence Government in a decision over Old Oak Common?

Sir Brian Briscoe: Our remit required us to provide a connection to Heathrow. In the initial report we looked at routes that could run through Heathrow. For a variety of reasons, benefit and level of demand and so on, we decided that that did not make sense, it added cost and did not increase the business case. Old Oak Common is a convenient place for distribution of passengers entering London but not wishing to go all the way to Euston and there will be a network connection there to Crossrail. Old Oak Common is both a convenient place but it is also a place that is strongly supported by the local authority in the area, Hammersmith and Fulham, who see this as a major regeneration opportunity. Alison, do you want to add to that?

Alison Munro: We identified a good case in transport terms for having the Old Oak Common station and, as Sir Brian has said, for the better way it would allow people to get into certain parts of Central London. We estimate that about a third of people using High Speed 2 would choose to use the Old Oak Common station to get into London and that also helps to relieve the pressures on Euston to which you were just referring.

Q448 Paul Maynard: Did your remit preclude you from evaluating any option that had the high speed line going through Heathrow itself, as we have heard many suggest?

Alison Munro: No. We looked at a number of different options for serving Heathrow, either with a direct route through Heathrow, a station in the Heathrow area connected from our route by a spur or a loop and the Old Oak Common interchange station. We looked at all of those options. Our conclusion was that in the first phase of a high speed line there would not be a sufficiently large market wanting to go to Heathrow itself to justify the additional cost that serving Heathrow would bring, but the Old Oak Common station provides a much better way of getting to Heathrow in the first phase. In the longer term, if there is a larger market to serve Heathrow, we considered what the best way was of serving the airport as against what is the best solution for the other people on the high speed line who are doing city to city journeys. That latter market is a much bigger market. Our conclusion was that, in terms of the overall benefit the line would bring, it was better, if you were going to serve Heathrow, to serve it by a spur or a loop so that most people who want to do a journey straight through to London would not have their journey delayed.

Q449 Chair: Atkins and Greengauge 21 have submitted alternatives. Have you looked at those?

Alison Munro: We have looked at a number of alternatives. We have not looked in detail at, for example, the Greengauge ideas of linking further southwards and connecting up to the rail network southwards, although we recognise that the proposal that is currently in the Government’s preferred recommended scheme with a spur to Heathrow could actually be extended to provide connections further south. There are certainly opportunities in the proposal to extend in that direction.

Q450 Steve Baker: I would like to ask some environmental questions, but before I do could I just pick up the point you made about journey time driving demand, Sir Brian? Surely, price also drives demand in a crucial way.

Sir Brian Briscoe: The way in which the modelling that we have used for High Speed 2 works is that we make an assumption that fares remain the same on the high speed network as on the conventional network. We do not make a distinction between the two. It is a tactical matter managing the railways that determines how fares are managed.

Q451 Steve Baker: I would just question whether that assumption is valid, bearing in mind that HS1 has premium fares.

Sir Brian Briscoe: It does, but, if you are doing the kind of work that we were doing, which was establishing whether there is a business case for high speed rail, you would either increase the fare or reduce the ridership. Either way it is not going to make a big difference between the estimates you are making of the way the system would operate.

Q452 Steve Baker: You are saying that the business case for this extremely expensive project is largely independent of the price paid by its customers.

Sir Brian Briscoe: I am saying there is a business case which is independent of the price paid for the fare, yes.

Q453 Steve Baker: Perhaps I could just move on to the environmental aspects. How wide will the High Speed 2 corridor be?

Professor McNaughton: The answer always has to be depending on whether it is on the level, an embankment or cutting in. I am sure you recognise that. The basic width between the overhead masts, which is the visible sign of High Speed Rail, is just over 11 metres. We have said through our consultation that a guiding rule is that the railway, even in those places where we include a maintenance access track alongside it, fence to fence is around 22 metres. It is less in urban areas where we would not have the room or the necessity to have a roadway alongside.

Q454 Steve Baker: What is the expected total land take of HS2?

Professor McNaughton: I do not have that number in my mind.

Q455 Steve Baker: In that case I am guessing we do not have a commercial value for that land.

Professor McNaughton: We have an estimated value in our business case for land purchase which, forgive me but it is from memory, is around £1 billion.

Q456 Chair: But do you have that information?

Professor McNaughton: That information is-

Q457 Chair: It is not in your mind.

Professor McNaughton: It is not in my mind at the moment. The information was published in our 2009 report.

Q458 Steve Baker: I am sorry, you said £1 million.

Professor McNaughton: £1 billion.

Q459 Steve Baker: I have seen elsewhere in evidence £4.5 billion.

Professor McNaughton: It is a matter of fact that it is in our report as published.

Q460 Steve Baker: What vegetation and wildlife would be permitted within that corridor?

Professor McNaughton: You need vegetation for stability and coverage. Within the boundary of the fence you would not expect to have trees, but bushes are acceptable. It is no different basically from the existing classic railway, where one of the benefits of having particularly prickly bushes is that it provides a wildlife refuge because it is all part of encouraging people not to go near the line. So there can be bushes, grasses, mixed vegetation, but no trees. Therefore, just as on the existing railway, bird life, rodents and the like, but not those of the burrowing kind, would be encouraged. You see that on High Speed 1.

Q461 Steve Baker: What about crossing points for wildlife such as deer?

Professor McNaughton: In a new railway you would design those in with the detailed design, such as green bridges for large wildlife. For the last 20 years we have been designing, in Britain, badger runs and other types of runs into the railway underneath it and they seem to work very well.

Q462 Steve Baker: Could you just let us know how much spoil you expect to be created by HS2 and how it would be disposed of?

Professor McNaughton: Forgive me if I do not remember the exact number, but it, again, is in our published documentation. We designed this railway very similarly to High Speed 1. In fact, a number of my people worked on High Speed 1, so we have brought that experience through. Generally speaking, it lies deep into the landscape rather than on top of it. So we have an imbalance of spoil to embankment of about four to one. That is a lot of spoil. It is about 2.9 million cubic metres.

High Speed 1 used 95% of that spoil to landscape locally, to mitigate, to hide the railway and to provide in places false cuttings and green tunnels. We have every expectation that we would follow a similar line and hopefully with a similar proportion, which means that a very limited amount of spoil would need to be taken away to landfill remote from the project. But this is early stages and that really gets worked through in a detailed design should the Secretary of State decide to go ahead.

Q463 Steve Baker: Steve Rodrick, who is the Chief Executive of Chiltern Conservation Board, said that HS2 would be a Berlin wall for wildlife. It sounds to me that, if you take billions of cubic metres of spoil and use it to disguise the railway, it does sound rather like it would be a Berlin wall for wildlife.

Sir Brian Briscoe: Can I just make a comment on that? The Kent Trust for Nature Conservation had all these concerns about High Speed 1. There was a lot of discussion between the Kent Trust and the promoters of High Speed 1. The Kent Trust now say that the line of High Speed 1 is actually a kind of dual carriageway for wildlife because it is protected from other things. It is not farmed, there is no pesticide and there is a degree to which this has actually been a positive for nature conservation. Certainly, we would want to put the Chiltern Conservation Board in touch with KTNC to talk about how that was done. It seems to me to be an important thing for us as promoters of a project to be able to do.

Can I just make a comment on the spoil issue? One of the things that would be really important in managing spoil, as Andrew says, is that the object would be as far as possible to consume it within the works itself and therefore never take it off on to roads. But we would have agreements with local authorities in the area for the way in which spoil would be handled, for the routeing of spoil disposal, and we would keep it off the local roads.

Q464 Julian Sturdy: I would just like to go back to capacity. The key reason behind HS2 is the extra capacity that it will provide, but, when working out future capacity, how satisfied are you that you have actually got the growth figures correct, especially around peak demand?

Alison Munro: Clearly, predicting into the future there is an element of uncertainty as to what future demand will be, but we have used the best practice available in terms of demand forecasting techniques, using the Department for Transport’s recommended approach. We have also tested our conclusions against what has happened in the past, so, for example, over the last 15 years we have seen a doubling of growth in long distance demand, averaging about 5% a year. Going into the future, we are predicting growth at about 2% a year, so we are predicting lower growth than there has been in the past. There is actually no evidence at the moment that the growth in long distance rail travel is levelling off; so we have actually assumed that it will level off, in our current model, around 2043. We have taken the best possible advice that we can on how to predict into the future. We have taken what we think is a cautious approach on the whole, and we have also tested our results, using various sensitivity tests, to see how the business case would be affected if we had got it wrong.

Q465 Julian Sturdy: If the growth over the last three years then does not continue and we can manage peak demand and spread out peak demand, are you saying that there would still be a case for HS2 rather than improvements on the classic line?

Alison Munro: Clearly, the critical thing in the case for high speed rail is what future demand growth would be. That is the main driver of the business case, but there is no evidence that the current growth that we are seeing in long distance rail demand is tailing off. One has to take the best view that one can about what the future will be like. The current evidence is there is no reason to think that that demand is going to stop. As I say, we are assuming slower growth than we have seen in the past so to some extent we have been rather cautious about what the future might look like. Demand could equally be higher than we have forecast, in which case the business case would be stronger.

Q466 Julian Sturdy: You think either way the business case-

Alison Munro: Either way-

Q467 Julian Sturdy: That is what I am saying, because we have seen increased demand over the last three years, as you rightly say, but even if that falls away, you feel that the case for HS2 stacks up instead of investment into the classic line. That is the point I am trying to get at.

Alison Munro: If it did not grow at all, then the business case would obviously be severely affected, but as long as a reasonable level of growth continues into the future, our assessment suggests that there is a business case for high speed rail.

Q468 Julian Sturdy: What is that critical point then?

Alison Munro: Our current assumptions have about a 2% per annum growth in future demand up to about 2043. On that basis, for the Y network, we have a benefit-cost ratio, so a ratio of benefits to cost of 2.6. On that basis there is a strong business case. On a lower rate of growth, we tested that only from London to the west midlands so far. If the rate of growth there was lower by, I think it was, 1.1% per annum that we tested, in that case it would reduce the business case without wider economic impacts from 1.6 to 1.3. So it does have an impact, but you would have to have significantly lower demand before there was not a business case at all.

Q469 Kwasi Kwarteng: Am I right in understanding that, if demand does not go up past 2026 for whatever reason, then the benefit-cost ratio will be less than 1 of the project?

Alison Munro: We tested, as a sensitivity test, what would happen if we capped demand in 2026 and there was no further growth. On that basis we estimated that the business case, excluding wider economic impacts for the London to west midlands line, would have a benefit-cost ratio of 0.7, I think it was.

Kwasi Kwarteng: Less than 1 .

Alison Munro: There would be less than 1 without wider economic impacts on that basis, but that is quite an extreme view, given what we have seen in the past, about the rate of growth. We do not think that is a realistic assumption. We tested it to show the robustness of the business case, but that is not our view of what the future is likely to be like.

Q470 Chair: When you say "growth", are you distinguishing between growth at peak times and growth overall?

Alison Munro: This is overall growth. We have not gone to the level of detail of being able to predict differently how the peak and the off peak will grow. This is overall growth I am talking about.

Q471 Mr Leech: One of the biggest reasons why expansion of numbers of passengers has increased so dramatically is the fare structure, the cheap advance tickets and also the availability of trains, three trains an hour from Manchester-more regular than buses sometimes. Have you factored your plans for a fare structure into how you would generate the levels of growth that you are talking about?

Alison Munro: At this stage we have essentially assumed the same average fares as on the existing railway so broadly similar sorts of fares structures, but we have not assessed that in any detail at this stage.

Q472 Mr Leech: Have you made any assessment on how you are actually going to charge people? Will people be able to turn up and just buy a ticket or will they have to buy tickets in advance, because that would clearly have an impact on the number of people who choose to travel?

Alison Munro: That really would be work that we would do at the next stage, if the Government decides to proceed with the project. It is not work that we have done at this stage.

Q473 Mr Leech: But surely, depending on whether or not you have that kind of fare structure would have a significant impact on the number of passengers.

Alison Munro: There are choices that can be made there and one would expect that the Government would choose an approach that gave the best answer. That would be something, as I say, we would look at in detail at a future date, but the aim would be to maximise the benefits that you were getting from the line.

Q474 Mr Leech: What have you based your figures on, then? Have you based your figures on a structure where people can turn up and pay, or have you based it on a structure where everyone would have to pay in advance, because surely that would factor in how you calculate how many passengers and the level of growth?

Alison Munro: Implicitly, we are operating as a service today. That is the underlying assumption.

Q475 Mr Leech: Basically, you are saying that people would be able to buy advance tickets.

Alison Munro: It would be a mixture, yes.

Q476 Chair: The same system as we have now.

Alison Munro: Yes, that is essentially what we assume.

Chair: That is the assumption.

Q477 Mr Leech: Why have those assumptions not been made public, because there has not been any discussion about how people would be able to purchase tickets?

Sir Brian Briscoe: All we have said is that the assumption in our demand forecasting is that the high speed railway and the conventional railway would both operate on the same fare structures, which implies that, whatever the fare structures are, we would operate for long distances or short distances or whatever.

Q478 Mr Leech: If a decision was made to have a closed system with advance tickets only, that could potentially have a significant impact on your calculations on passengers.

Sir Brian Briscoe: I do not think it affects our calculations on passengers. It might actually affect the outturn of what actually happens if and when the railway is built because, clearly, an operator is going to manage the railway and his fare structures in order, one assumes, to maximise revenue from that piece of infrastructure.

Q479 Mr Leech: If you have made your calculations based on a similar model for the conventional railways, that is based on advance tickets and walkup fares. So, surely, if you were to just go to an advance ticket model only, as they have in some areas, that would have a significant impact on numbers.

Sir Brian Briscoe: I do not think we have done the work to demonstrate that one way or the other.

Chair: You say you have not done the work and you do not have a view.

Q480 Mr Leech: Professor McNaughton, do you have a view, because you were nodding?

Professor McNaughton: Sorry, I should probably keep quiet. I was trying to understand why people would operate a different system from the one that works well today; that is all.

Q481 Chair: Some high speed systems do operate in a different way and you have to book a ticket before you can go on it.

Professor McNaughton: As you look around the world, of course you are right.

Q482 Chair: We are not discussing what is happening in other places. We are asking what the impact would be on the predictions, and you do not know.

Sir Brian Briscoe: Madam Chairman, we have just got to be clear that we do not know the answer to that question. The work has not been done. I think we understand where the issues are and we understand the point that is being made. That will be a next stage piece of work if the Government decides to go ahead.

Q483 Graham Stringer: How many jobs will be created by High Speed 2 when it is running to Leeds and Manchester?

Sir Brian Briscoe: We have set out numbers of jobs associated with the particular stations. I cannot recall them off the top of my head but they are in our paperwork. There are 20,000 at Old Oak Common, for example. Those are directly associated with the development that will occur around those stations. There is also a wider economic benefit from improvements in connectivity and accessibility which will deliver more. Then, though we have not measured this in our modelling, people in the north-west and people in the west midlands have asserted that improvements in this kind of connectivity would drive other economic development. There certainly is evidence that that has happened in other places where high speed railways have been opened and where the policy environment for development has been positive and benign, such as the developments in Lyon and Lille in France and in parts of Spain as a result of high speed rail. While we put a conservative figure on the number of jobs to be generated directly by the railway operation and the associated development, there are probably wider economic benefits that we are not measuring in our modelling.

Q484 Graham Stringer: That means you have not assessed the potential for induced jobs, really, at the end of the line, that is just the jobs of the people working on the railways or closely associated with the railway effectively.

Sir Brian Briscoe: Or development immediately around the stations.

Alison Munro: We have done calculations at this stage only for the London to west midlands phase. For that, we estimated 9,500 jobs for construction, about 1,500 permanent jobs in terms of operating the railway, and then there are about 30,000 jobs we estimated that will be supported around the stations. That is just for that first phase. That is really only in the immediate vicinity of the station. It was not, as Sir Brian has indicated, intending to represent the full picture of what might be generated over the wider region. For example, Centro have indicated that they think that the high speed railway could generate 22,000 jobs in the west midlands region. Our numbers are, as I say, not intended to capture everything.

Q485 Graham Stringer: The evidence from other high speed routes is that you get more jobs the longer the line.

Sir Brian Briscoe: You get more jobs around the station but you also get them spreading out from those areas as well.

Q486 Graham Stringer: We have had evidence from Wales that they believe if High Speed 2 is built that Wales will lose jobs. Have you looked at any negative impacts?

Sir Brian Briscoe: Not specifically at that kind of impact. My own personal view is that it is unlikely that 60,000 people would move from Wales. What they are saying is there would be a relative benefit to places that are served by high speed rail compared with a relative downside for those areas that are not. That is really just a reflection of the obverse of what I have just said. Places that are served by high speed rail seem to be able to capitalise and create development.

Q487 Chair: What was the remit for the consultation?

Sir Brian Briscoe: For the consultation that has just been carried out?

Chair: Yes, the formal consultation.

Sir Brian Briscoe: It was a joint consultation between the DfT and HS2 Ltd. It was to examine the case for a strategic rail network, and that includes the whole of the Y that we have talked about and connections back, and then a detailed consultation on the route between London and the west midlands with a station at Birmingham, a station at Euston and two intermediate stations.

Q488 Iain Stewart: It is the question of intermediate stations that I would like to discuss. Am I correct in thinking that you assessed the case for intermediate stops in the context of the London to Birmingham section only?

Sir Brian Briscoe: Yes, we did.

Q489 Iain Stewart: Would it not be sensible to assess the case for intermediate stops in the context of the whole Y and a possible connection to Heathrow and a possible connection to High Speed 1 on the continent?

Sir Brian Briscoe: Let me take that apart a bit. Yes, it would be appropriate for us to look-and we will because we have not done that piece of work and finished it and recommended to Ministers yet-at the legs of the Y and what the proper strategy would be. One of the reasons that it is difficult to put an intermediate station between London and Birmingham is that the distance is relatively short, and, while you could have a station which would bring benefits to a place somewhere midway between London and Birmingham, it would diminish the benefits of the network as a whole because it would slow trains down and therefore reduce the demand on the network. That is partly because that is a fairly short distance and also it is the part of the network that would have the greatest pressure on capacity. Further north, going north up the Y, because our remit asks us to, we are looking at the potential for stations in the east midlands, South Yorkshire and a station in Leeds and on the other side a station at Manchester. We have not done the work yet and we have not completed it, but certainly we will need to have demonstrated why we would or would not think it would be a good idea to have intermediate stations as well.

Q490 Iain Stewart: Could I just challenge you on the viability of an intermediate stop between London and Birmingham. We visited and indeed travelled on the German high speed line between Frankfurt and Cologne and there are two intermediate stops there. It is designed in a way where a through express train alternates with a stopping train. I am just puzzled that we are being asked to make a decision on building or not building an intermediate stop in the first leg before a proper appraisal has been done of the full network. It might be that a station that serves Milton Keynes, Buckinghamshire or Oxford could be valuable to travel to Manchester or to Paris if it connects up with High Speed 1. I am concerned that we are not thinking this through logically.

Sir Brian Briscoe: I will perhaps ask Andrew or Alison to comment on the engineering. Our judgment was that the section of line from the west midlands to London is the one that will carry most of the long distance traffic. It will carry traffic from north of the west midlands, as well as being the bit of line that carries the greatest demand from the two biggest centres in the UK. The judgment, and we have a business case illustration of this, is that, if you put an intermediate station in there, yes, you gain benefits in that intermediate station which add to the business case, but you lose benefits because of the necessity of taking time out. If your examples in Europe are bypasses where trains just go straight through, which I imagine they are, but they can also stop, that would be in an area where you were not running 18 trains an hour in order to meet the demand for the whole of the network, I am assuming. That was where our judgment was made.

Q491 Iain Stewart: But you have not actually done the assessment of the business case in the context of the full Y. You have not done that work. That is what I am trying to establish.

Alison Munro: We have done a high-level assessment of the business case for the Y network and that is presented in the consultation materials. Our conclusion from that is that, certainly over time, there will be sufficient demand from the legs of the Y, then travelling down that core trunk to London, to use the 18 train paths an hour that you have on that line. Therefore, if you are going to have an intermediate station, the trade-off is either that you are displacing potentially longer journeys that could be made from points further north, which will carry more benefit with them because they have bigger journey time savings with more revenue, or you impose journey time penalties on all of those journeys. So the balance of that core bit of route is in favour of preserving that for the longer distance journeys. But the balance may well be different, as Sir Brian indicated, when we look at whether there is a case for intermediate stations north of Birmingham. That balance will be different.

Q492 Paul Maynard: Which is more important-reducing journey times or increasing capacity?

Sir Brian Briscoe: I think the driver behind providing a new piece of infrastructure is the need to provide capacity for inter-city movement.

Q493 Paul Maynard: Everything I have heard today appears to be predicated on the need to accelerate journey times and all the caveats to any alternative to what is being consulted upon are being rejected on the grounds that they would in some way slow a train down, reduce the 18 trains per hour that you are targeting, rather than seeking in any way to increase capacity or ridership or imaginative use of intermediate stations. It does seem to be that this particular model that you have alighted upon is predicated solely upon reduction in journey time rather than the increasing capacity where there appears to be general consensus that we need it. Where there is not a general consensus would appear to be this particular route, straight as an arrow, through the Chilterns, no stopping. That is where there appears to be a lack of consensus.

Sir Brian Briscoe: I am not quite sure how to respond to that as a statement, but the capacity of a high speed line at 18 trains per hour is, in our judgment, sufficient to manage the longer-term network and will provide enough capacity. If at the moment, on the evidence we have, we put intermediate stations in, we lose capacity on that line and that is the place where we need it most. What we do as a result of providing that capacity is to open up possibilities for use of the existing network in different ways and we open up train paths that would be available because they are not being used for long distance travel for more local services. That is the judgment that is being made.

Q494 Paul Maynard: The figures we have been shown clearly demonstrate that constructing HS2, as proposed, represents a massive step change in the provision of capacity, undoubtedly. What I am trying to get at is what the reduction in capacity could be that would justify the consideration of a more flexible route either along the existing motorway corridors or providing intermediate stops at places like Milton Keynes. Yes, you are making a massive step change in capacity. Therefore, surely, there should be some flexibility at the upper margins to consider how you might be able to create a more consensual proposal that everyone might be able to buy into.

Chair: Is it possible that as a result of this consultation you can look at a different route? Is that possible?

Sir Brian Briscoe: Certainly, it is possible that there will be things that we will need to look at and report to Ministers on and Ministers will need to decide whether or not those things require some change.

Q495 Chair: So that would be the Minister’s decision.

Sir Brian Briscoe: We will recommend what we think is the best outcome.

Chair: You will make a recommendation.

Q496 Chair: Is it possible within the remit you have that, following the consultation, you could recommend a different route?

Sir Brian Briscoe: I cannot really say that without having done the work, but certainly nothing is fixed until the Secretary of State makes a decision about the route.

Chair: I think that is what we want to establish.

Q497 Steve Baker: To what extent have you worked with legitimate groups who have brought forward alternative proposals often backed by longstanding industry experts? I have in mind 51m, for example, and HS2 Action Alliance. To what extent did you work with them?

Sir Brian Briscoe: We have had conversations with a lot of action groups and a lot of organisations about their proposals.

Q498 Steve Baker: Did you conduct a serious and proper appraisal of the capacity delivered by their proposals?

Sir Brian Briscoe: I think that is part of what the Chairman was just asking me. Would we be doing that in the runup to the Secretary of State deciding whether or not to go ahead? Yes, we will.

Q499 Steve Baker: To what extent have you considered the capacity increases that have been delivered by the Chiltern line upgrade?

Alison Munro: We have not taken account of that in our modelling so far. As we have indicated in our written evidence to you, our view is that that would not have a significant impact on our assessment of the case for High Speed 2, but we would expect to do some further work on that and advise the Secretary of State by the end of the year. At the time we did our original work it was not a firm commitment, which is why we did not include it.

Q500 Steve Baker: Living in High Wycombe, I am not affected by High Speed 2 but I am affected by this upgrade, and it has certainly reduced commuter services from High Wycombe, Beaconsfield and Gerrards Cross in order to deliver capacity for Birmingham. I am conscious that there might be lessons here for HS2, but at the moment you just have not done the work because it was not committed and you will do it later.

Alison Munro: We have not done it but we will be looking at it because it is a point that we expect to come back through the consultation; so we will be looking at it.

Q501 Chair: Some of the groups criticising your proposals have submitted freedom of information requests to get the data upon which your recommendations were based. Those were refused. Did the Government instruct you to refuse them?

Sir Brian Briscoe: I am not aware of which ones they are because we have certainly responded to an enormous number of freedom of information requests and responded positively to them.

Q502 Chair: On the ones you did not respond positively to-

Sir Brian Briscoe: I assume either they did not fall within the rules or there was some other reason why they were commercially confidential or whatever. I do not know the answer.

Q503 Chair: Who set those rules?

Alison Munro: We make our own judgments.

Q504 Chair: Who made the judgments?

Alison Munro: We apply the rules within the law and we make our own judgments about how to respond to freedom of information requests.

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

Examination of Witnesses

Witness: Rt Hon Philip Hammond MP, Secretary of State, Department for Transport, gave evidence.

Q505 Chair: Good afternoon, Secretary of State, and welcome to the Transport Select Committee.

Mr Hammond: Good afternoon.

Q506 Chair: I understand you would like to make some opening comments.

Mr Hammond: Yes. I would just like to clarify, perhaps for context, where we are in the process of developing our proposals for the high speed rail project and therefore to give some context for the comments that I shall be making. As members of the Committee will know, the consultation period came to a close on 29 July. The consultation covered both the Government’s overall strategy for high speed rail and the proposed route for an initial high speed line from London to the west midlands. We have received a large number of responses, and my Department and HS2 Ltd are jointly analysing those responses and considering the arguments that have been put forward and any new evidence that has been presented. I should say, however, that that analysis is still at a relatively early stage and at this point I have only had very high-level initial discussions with officials about its progress.

I have not received any detailed reports of any new evidence or any new arguments that have been put forward or raised or any potential conclusions that might be reached, so the comments that I make to you this afternoon will be based on the work done to develop the Government’s proposals that have been published as set out in the consultation. In some cases, I may be able to draw on additional consideration that we have given to issues that have been raised in the wider public debate over the course of the last few months, but I should stress that you should not take any remarks that I make at this stage as being indicative of the Government’s conclusions following consultation because no such decisions can or should be taken until the analysis of the consultation has been completed and I have had the opportunity to consider the key points made. I have said previously that I will announce my decisions by the end of this year, and that remains my intention.

Q507 Chair: Thank you. Can you envisage any circumstances in which you might decide HS2 should not proceed? Can you envisage any circumstances in which you might reach that decision?

Mr Hammond: As I have said consistently all along, the Government believe that there is a strong case in favour of High Speed 2. Prior to analysing the consultation responses, we have not heard any arguments that we believe defeat that view, but we will look carefully at any new arguments that are advanced or any new evidence that is provided in the course of the consultation and consider it.

Q508 Chair: What kind of evidence could possibly persuade you to change your mind?

Mr Hammond: It is not for me to speculate on the evidence that opponents of the scheme might put forward, but perhaps I should say that some of the arguments that have been advanced and the evidence that has been submitted in support of them is not as robust as the promoters of those arguments clearly genuinely believe it to be. In the response to consultation, we will seek to deal robustly and in detail with arguments that have been advanced, some of which I have no doubt will repeat arguments that are already in the public domain.

Q509 Chair: Will you be producing a new economic appraisal when you give your decision?

Mr Hammond: The economic appraisal is continually reviewed. If we feel that there are material changes that need to be made at any time, material new information which means that a new economic appraisal would be appropriate and would present anything of value, then we would publish one.

Q510 Chair: The opponents of HS2 have been designated as NIMBYs, Luddites and toffs. Do you think that is offensive to people who might have legitimate concerns?

Mr Hammond: I have said publicly that I regret that the phrase NIMBY has become central to the argument that has gone on here. In fact, if I go back in history, it was while I was recording an interview with the Deputy Chairman of the Chiltern Society that he used the phrase. He said on camera, "I am a NIMBY." I said, "There is nothing wrong with being a NIMBY. There is nothing wrong with seeking to protect your own local environment and to promote the interests of your own community. Just be honest about that particular agenda if that is what you are seeking to do." Some people have presented arguments that are very openly about the values and interests of their specific communities or their specific personal circumstances. Others have advanced arguments that address or purport to address a much wider issue about the national interest, and it is important that we understand when people are arguing about HS2 what case it is that they are seeking to advance.

Q511 Chair: What is your single most important reason for supporting High Speed 2?

Mr Hammond: I am sorry not to give a simple answer to that, but the case for High Speed 2 arises out of a coincidence of requirements. There is clearly a need for additional capacity on the southern part of the west coast corridor from Birmingham to London. It is clear to me that that cannot be provided effectively in any way other than by the construction of a new railway.

Having come to the conclusion that one needs to construct a new railway, the benefits of constructing that as a high speed railway and extending it to Manchester and Leeds and thus delivering economic benefits and regeneration benefits to the northern cities are very considerable. It is the aggregation of these different elements. The Government’s agenda of rebalancing the UK economy and the way in which high speed rail would contribute to that, the need for capacity and the benefits that high speed delivers over and above a conventional railway, added together, present a very compelling case for the project.

Q512 Chair: You start off with capacity.

Mr Hammond: I start with capacity. If the compelling case for additional capacity on the London to Birmingham section, in particular also the London to Manchester section, was not there, then a large part of the case for high speed rail would be undermined. Clearly, we build from the capacitydriven case to the benefits that high speed delivers once you get beyond Birmingham. But I fully accept that, if the railway was only going to Birmingham, the case for high speed would be very much less compelling than with a railway that connects to Manchester, Leeds and allows onward running to Scotland.

Q513 Kwasi Kwarteng: I would like, if I may, to ask a question about the politics of this thing. Clearly, as far as your Department is concerned, this has been a huge debate and it has aroused a lot of passion on both sides. Why do you think that the case for High Speed 2 is not making perhaps the strides that you would like it to make? Why has this been such a political hot potato if it is so obviously in the country’s interests?

Mr Hammond: This is anecdotal but perhaps this will help to explain the answer. I have tended to find that, when one has the opportunity to speak directly to people who are not passionately committed against the project but who are generally sceptical of it and you are able to explain the capacity issues so that they understand it is not just about going faster but it is about the need to provide additional capacity and the argument then becomes do we provide that capacity with a low speed line or a higher speed line, they are much more likely to be persuaded. The arguments are complex, and too much of the public debate has focused on speed. There is a perception out there that speed is somehow elitist; it is only important to business people whizzing about on important business; it is exclusive and it does not affect other people. The benefits of the extra capacity and the benefits on the existing classic railway of released capacity in the future on the east coast and west coast have not penetrated the public consciousness enough during the course of this debate.

Q514 Kwasi Kwarteng: What do you think of the characterisation that this is somehow northern jobs against southern environmental concerns, because the pro-HS2 campaign has been quite strident in pushing that line?

Mr Hammond: Yes, there is a shorthand there which, as always, oversimplifies the case. The benefits would be for the UK economy as a whole, and it is clear to me-I have said this on many occasions-that the UK cannot prosper as a first rank world economy if half the country is left behind. We have to get economic growth rates in the north, in particular the big urban conurbations in the north, up to the sort of economic growth rates we have been seeing in the southeast if we are to remain globally competitive because you cannot be internationally competitive if only a small part of your economy is delivering that growth performance.

Q515 Steve Baker: Secretary of State, could I draw your attention to the articles in The Economist of 3 September? The first one, entitled "The Great Train Robbery", said: "High-speed rail lines rarely pay their way. Britain’s government should ditch its plan to build one." If I could go through four headlines from it, they say that high speed railways usually fail to bridge regional divides, that they often displace economic activity rather than create it, that rich regions and individuals benefit at the expense of poorer ones and that high speed rail is a good idea when it connects dense but distant populations. Finally, the last point is that the underlying assumption of high speed rail is that proximity to London measured in journey times is key to regeneration. What would you say in response to The Economist?

Mr Hammond: The Economist, as you know, does not byline its articles so I have no idea who wrote that piece. I have on my desk the draft of a reply which will be going to the editor of The Economist tonight.

Q516 Chair: Will you give us a preview?

Mr Hammond: Yes, I will. As you may know, The Economist only publishes responses two weeks following the article in question, so that will go off tonight. We believe that the points that you have quoted are simply wrong and are disputed by the evidence, and we will be putting forward the counter arguments. On the last point that you mentioned, there has been a tendency in this debate to think this is all about connectivity to London. It is not. Connectivity, for example, between Birmingham and Leeds at the moment is shocking. It is two hours and five minutes, which is completely unacceptable. The improvement in connectivity between Birmingham and Leeds, cutting it to one hour and five minutes, will create very significant opportunities for economic benefits in both cities from the effect of that greater and more efficient connectivity between them. It is nothing to do with London. We can go through all of the individual points that are raised in that article and we can and do dispute them, and very much evidence has been published elsewhere which says something quite different indeed. My recollection is that The Economist has previously published comment that is much more favourable to HS2.

Q517 Iain Stewart: Secretary of State, we have received quite a number of submissions of evidence from groups who are not opposed in principle to High Speed 2 but are concerned about the narrow specification to which High Speed 2 Ltd has been working. Are you comfortable that all the options of building a new fast railway line have been properly appraised?

Mr Hammond: When you say "narrow specification", do you mean particularly in relation to speed?

Q518 Iain Stewart: Speed and whether or not there are intermediate stops, how it integrates with the broader transport network, and whether it could follow a motorway corridor. The concern expressed is that because it is to be a 250 mph line, in roughly a straight line, other options have been prematurely ruled out.

Mr Hammond: There has been an analysis done of alternative options, including following more closely motorway corridors, which, as you say, would mean operating at significantly lower speeds because of the minimum radius of curvature used in designing motorways being much tighter than that appropriate for a high speed rail line.

The problem is that as you move down the speed curve, as it were, the cost of building a new railway diminishes only moderately. I believe the engineering estimate is that a brand new railway built to run at conventional speed, 125 mph, would be about 10% to 15% cheaper than a railway built to run at high speed, 250 mph, yet the benefits it would deliver would be reduced by about a third. The cost-benefit ratio and the value for public money would be very significantly diminished if you chose a combination of new railway and low speed.

Q519 Chair: High Speed 2 told us that they cannot specify the precise maximum speed but did you give a range of speeds that they had to look at?

Mr Hammond: This has probably happened before my time because HS2’s remit when the initial work was done under the previous Administration-

Q520 Chair: But it would have been something you took an interest in.

Mr Hammond: I have not specified to HS2 a speed assumption. HS2 have explained to me in my early briefing on the project how any consideration of operating at a lower speed in order to be able to follow more closely a motorway corridor or indeed to be able to avoid more specifically areas of particular sensitivity, which was one of the questions of course I asked them, would have a disproportionate effect on the cost-benefit ratio of the project because it would diminish the benefits without significantly diminishing the costs.

Q521 Iain Stewart: If I could raise another example of where there is some concern about the specification, it is assumed that the line goes straight into the centre of London, to Euston, with a possible intermediate stop at Old Oak Common. That brings up problems about how you are going to disperse passengers to their onward destinations because of capacity restraints on the tube network. Do you have an open mind to other scenarios, for example, having the terminus at Old Oak Common or another area close by, and the onward connection would be provided by Crossrail? I am just trying to establish the degree to which you are willing to be flexible in looking at these variants on the high speed option.

Mr Hammond: There is a multifaceted answer to that. Let us deal first of all with the idea of terminating the scheme at Old Oak Common. There would be a number of issues. First, the experience of high speed rail elsewhere shows that it is the city centre to city centre connection that delivers the greatest regenerative effect and the greatest economic benefits. If HS2 were to terminate at Old Oak Common, it would be entirely dependent upon Crossrail for onward movement of passengers. That of course would be a very high quality eastwest connection but it does not provide any northsouth connectivity at all. Passengers wanting to go elsewhere in London or elsewhere in the southeast would need to change twice, once at Old Oak Common and again somewhere else, probably Euston or in the vicinity of Euston, in order to access a northsouth route.

It would also significantly erode the resilience of the network overall. If Crossrail were out of service because there was a problem on Crossrail, you would have people piling up at Old Oak Common with no practical way of dispersing them at all. There are not even going to be any very significant road links at Old Oak Common. You would, in practice, have to stop the operation of HS2 for the duration of any outage of Crossrail. One of the big advantages of having Crossrail and Euston is that, first of all, you have more options for dispersal, you take some of the passenger load off at Old Oak Common and disperse via Crossrail, you take others off at Euston and disperse via the Northern Line, Victoria Line and so on, but also you have resilience. If Crossrail is not working, passengers would continue to Euston and make their way via other routes.

Q522 Julian Sturdy: The key, as you have said, for HS2 is the need for additional capacity. Are you happy that there is enough accurate evidence out there to make a proper informed decision on future capacity?

Mr Hammond: Of course it is a forecast and all forecasting depends on assumptions, but I think the assumptions that have been used, which are standard assumptions that the industry uses, are conservative. In fact, when we look at the evolution of demand for long distance travel over the last 15 years and over the last five years, they look extremely conservative. Long distance journeys on the West Coast Main Line have more than doubled in the last 15 years. The rate of growth of long distance rail travel over the last five years has been 5% per annum on average. The model that HS2 has used assumes 2% per annum on average. I generally find when I come before the Committee-perhaps this is reassuring for all of us-that the questions you ask me tend to be the questions that I have been grilling civil servants on. I have asked this question for a year and a half now: how robust are the demand projections? How sure are we about them? It is clear to me that the risks are on the other side and that we may be, if anything, underestimating the passenger demand for long distance rail in the future. It is very unlikely that we are overestimating at 2% per annum.

Q523 Julian Sturdy: With HS2, it has gone on the "predict and provide" principle. Why are we not looking at other transport areas like road and air travel in the same way?

Mr Hammond: Because the Government have an agenda of managing carbon emissions. We have a clear agenda on reduction in carbon emissions by 2050. That certainly will drive the way we look at domestic aviation and, indeed, international aviation. Under the previous Administration, it has coloured the way road projects are looked at. We have made it clear that we believe that if we can get the decarbonisation of motoring to the point where it is clearly on an unstoppable trajectory, by which I mean the big motor manufacturers have invested so much money in it that it is going to happen, then it will be possible for us to look at roads in the future as an infrastructure option that does not conflict with our longterm carbon agenda.

Q524 Julian Sturdy: Does HS2 put other transport projects and infrastructure at risk in the longer term, on the investment side and financial?

Mr Hammond: There will always be a requirement. First of all, there will be a requirement for other rail infrastructure to provide connectivity with the high speed routes that would be the backbone of the network. There will always be a requirement for adequate road infrastructure, but I would hope that for inter-city passenger journeys, once a high speed rail network is established, high speed rail would become the mode of choice for the overwhelming majority of inter-city passenger journeys. Of course, as we move through the decarbonisation of passenger vehicles on the roads, some choices will need to be made by consumers, by society, and some of those choices have range implications. Battery-operated, pure plugin electric vehicles have range limitations which make them more suitable to urban and suburban journeys rather than longer distance inter-city journeys. The growth of a high speed rail network to provide the majority of inter-city journeys is probably the right way forward for an economy like the UK.

Q525 Julian Sturdy: Just to go back to my original question on this, you talked about modal shift. Do you feel that the modal shift you have described has been accurately put into the future predictions regarding capacity?

Mr Hammond: The modal shift that I have described?

Julian Sturdy: The modal shift back to rail.

Mr Hammond: There are quite modest assumptions about modal shift in the model. I can look this up if you want me to, but from memory, I think 6% of road and 9% of aviation as a shift. As with all other aspects of the model, this is conservative. It is conservative for a reason. I do not think anybody involved in this project has ever been in any doubt that every aspect of the modelling will come under intense scrutiny. It would not have been sensible to move forward with a model that used optimistic assumptions. It has been sensible to use conservative assumptions throughout.

Q526 Julie Hilling: A number of witnesses that have come before us have expressed concern, particularly the anti-HS2 campaigners, that other investment projects will suffer because of HS2. In terms of things like Northern Hub, issues like lines between Manchester and Leeds, and overcrowding on the trains, can you give us any indication of how those projects will be taken forward in parallel with HS2, or will they disappear?

Mr Hammond: No, they will not disappear. I would say three things. First of all, I hope we have sent a powerful signal about our views on the Northern Hub project by giving the goahead to the Ordsall Chord project, which is the crucial first step in creating the series of projects that are collectively known as the Northern Hub. Secondly, there is a very important point here about the balance of strategic investment in the UK. There has been huge strategic investment going into rail, but most of it has been going into London with Crossrail, tube upgrades and Thameslink. That actually was the right thing to do. London’s transport infrastructure had lagged behind. London competes directly with other global cities and was, frankly, losing the battle, so that investment was vitally needed. All of those projects are now within sight of their successful conclusion. By the end of this decade we will be looking at all of those projects having effectively reached their conclusion. HS2 envisages a rebalancing of strategic rail investment in the UK away from intraLondon travel to travel between London and the other cities and between the regional cities of the UK. Great Western electrification with HS2 is a vital component of that.

Secondly, the way I always think of this is that we are currently spending £2 billion a year on Crossrail. The HS2 project is a £32 billion to £33 billion project spread over 17 years; that is almost exactly £2 billion a year. It will suck up the strategic investment capacity that the completion of the Crossrail project will make available. But, as we are doing in parallel with building Crossrail, so, in parallel with HS2, we will carry on investing in conventional rail and we will carry on investing in strategic roads in order to provide the overall connectivity that the UK needs. It is very clear that HS2 will only succeed if, at its various nodes, it is effectively connected into a good urban transport infrastructure and a conventional rail infrastructure that will spread the benefits of HS2 way beyond the dedicated high speed network.

Again, an important point that has not always come across in this debate is that this railway does not just serve Birmingham, Manchester, Leeds, the east midlands and Sheffield. It will serve the cities that are beyond those points but can be reached via them by high speed running to those points and then conventional speed running and beyond. Cities like Liverpool, Preston, the Scottish cities, Newcastle and no doubt others which I shall be pilloried for having forgotten at the moment, places like Chester and north Wales will also benefit progressively from the construction of phase one and then phase two of the high speed rail project if it goes ahead.

Q527 Chair: What commitment can you give that this would actually happen? We have received numerous representations from people who are very concerned about this point and who believe that by directing funding into High Speed 2 that might deprive other services of the sort you describe.

Mr Hammond: I can only point to the Government’s record. It would have been easy and it would have followed in a time-honoured tradition of British Governments of both political persuasions that, faced with a fiscal crisis, you cut capital spending. The Chancellor very specifically committed to a programme of transport infrastructure investment which matched the expenditure over the previous four years during this spending review period and a large portion of that has gone into rail. So, at the time of greatest pressure on the public finances, we have demonstrated by deeds rather than words that we will continue investing in rail. All of the economic analysis of high speed rail shows that in order to extract the maximum value from the project you need to go on investing in the connective rail infrastructure. One of the other questions I will probably be asked at some point in these proceedings is about the commitment to build Birmingham to Manchester and Birmingham to Leeds. You have to assume that we are rational economic actors, that we want to extract the maximum value from this project. Having committed to building the project, it is clear that you get the maximum value out of it by building it to Manchester and to Leeds, and you get the maximum value out of it by continuing to invest in the rail infrastructure which connects into the nodes on the high speed network.

Q528 Kwasi Kwarteng: Some people on the Committee might dispute your assertion that Governments are rational economic agents.

Mr Hammond: This Government will inevitably.

Q529 Kwasi Kwarteng: Leaving that to one side, clearly you have made a point about the capacity, but there is an issue about rebalancing the economy which you referred to earlier and that was one of the questions that raise some concern. What evidence do you have that this is somehow going to rebalance the economy? You have talked about connectivity, but are there any specific ways in which you think that the northern areas will be regenerated directly because of High Speed 2?

Mr Hammond: There are direct and indirect effects. First of all, directly, it is clear to me that faster and simpler connectivity to a location is vital, particularly for inward investors. I have said on countless occasions when I have been in places like Manchester and Leeds that it may not be the way you like to think about it, but the reality is that for most people outside the UK they think about the UK through the prism of Heathrow. That is how they arrive. The question is not, "Where is it?" The question is, "How long does it take for me to get there from Heathrow?" If the answer is that you get on a train and trundle into London, then you get on a tube and pick up a taxi and trundle across to another station, then you get on a main line train and you take a three-hour journey and then you are there in the northeast or the northwest, that is not as appealing as the proposition that we are suggesting here by the completion of this project. You will come out of the terminal at Heathrow, get on a high speed train and in 30-something minutes you will be in Birmingham, in 70-something minutes you will be in Manchester, and in 80 minutes you will be in Leeds. That is something that investors, business people, can clearly understand, so I think there is a direct benefit in that sense.

Clearly, connectivity with London is critically important. All the major regional cities understand and acknowledge that their connectivity to London is important to their prosperity. The evidence from around Europe, where high speed rail networks have been built, is that regional cities can and do benefit from the construction of better and faster links to the capital. But, as I said earlier, it is also about links between the regional cities. Ms Hilling mentioned the Northern Hub and the crossPennine rail links. They are critically important, but links between Birmingham and the northwest and Birmingham and Yorkshire and the northeast are also critically important as well. So all of those things build the picture.

Finally, I would say that the released capacity on the existing main lines and the ability of that released capacity to absorb additional freight paths is hugely important. There is going to be continuing pressure for more freight paths, particularly on the West Coast Main Line, freight paths that simply cannot be accommodated at the moment. For businesses that are in the business of making things and shipping them to ports, rail freight capacity is crucially important. When we talk to businesses, particularly in the midlands, the northwest, the northeast and Yorkshire, the ability to accommodate their needs for reliable low cost, high volume rail freight in the future is going to be crucial to maintaining the attractiveness of those areas to many manufacturing businesses. I am not suggesting for a minute that the future of cities like Manchester lies only in manufacturing businesses but that will certainly be an important part of the equation. So all three of those things-better connectivity for passengers, released freight capacity and the greater connectivity with London and between the cities-are crucial.

Q530 Kwasi Kwarteng: There is a perception that London is going to benefit. What do you say to the people who say this is all very well but it means that London is going to benefit disproportionately to the provinces?

Mr Hammond: Of course London will benefit. We are a single economy, as I said at the beginning. It is inconceivable to me that we can have a situation where London and the southeast goes on growing 2% to 3% a year once this current period is over, and the economies of the northern cities grow at a slower rate, and in 10, 20, 30 years’ time that still allows us to be a globally competitive economy. I just do not believe it will happen.

On your point about the distribution of benefits between London and the regional cities, we believe that London will benefit. It may be the largest beneficiary in absolute terms because, obviously, London is a very large city, but the greater proportion of the benefits, according to the model, will accrue to cities outside London. So, yes, London will benefit but others will also benefit and that is the crucial thing.

Q531 Paul Maynard: Given the importance of the capacity challenge that you referred to earlier as being the key driver for much of this project and given that the construction of a new line increases capacity by an order of magnitude, would you agree that there is surely some leeway in terms of assessing routes, corridors, stops and number of trains per hour that none the less allows you some headway in terms of that increase of capacity because you are so increasing capacity that there is some flexibility at the top end for tweaking where the route goes?

Mr Hammond: That may very well be the case once we get north of the west midlands. On the spine of the route, London to the west midlands, the capacity of 18 train paths an hour in each direction will be needed. The reduction in capacity that would be introduced by additional station stops, for example, would erode the benefits that were delivered by the railway. I think it depends what part of the railway you are talking about. Once we get north of the west midlands, the ability to flex the offer within the headroom may be there in a rather more significant way, yes.

Q532 Paul Maynard: Why are 18 trains per hour so critical, compared to 16 or 17, just to be clear?

Mr Hammond: In modelling the economic case, clearly there had to be an assumption made about how many train paths would be needed. The model has looked at the current patterns of demand, the likely growth in those patterns of demand and how we would serve different cities in different regions. 18 trains per hour is the pattern on the spine from London to the west midlands that was selected as the modelling base case. It is also well within, we think, the technical capabilities of the line to deliver; so it is not stressing the capability of the line to its absolute maximum. Therefore, that was the modelling assumption that was used.

Q533 Mr Leech: We have heard this afternoon that you are absolutely committed to Manchester and Leeds and not just the west midlands. Why has the decision been made to have a hybrid Bill only to the west midlands?

Mr Hammond: Let me explain because that is a very good question and I understand that it sets some hares running. If we decide to go ahead, I will make the announcement in December. We have, as you know, already started a process to procure the technical support that would be needed if that decision is positive simply because the time scale is so critical that, if we do not do that now and we started that process in January, we would derail, if you will pardon the pun, the process.

On that basis we will have the technical work, the environmental appraisal and the design engineering work that has to be done on the London to Birmingham route ready for the hybrid Bill to be introduced in 2013. Because of the nature of the hybrid Bill it is necessary to complete the design engineering work, as well as all the other supporting stuff like the environmental appraisals, before the Bill is introduced. If we were to seek to include in a single hybrid Bill Manchester and Leeds, we would not be able to introduce the Bill until we had also carried out a formal consultation on the route options for Manchester and Leeds, made a decision on the preferred route and then commissioned and executed the design and engineering work for both of those routes.

If we look at the time scale for phase one, that process started in March 2010 when my predecessor published the preliminary route options for London to Birmingham and will conclude, on a tight timetable, in 2013 when we introduce the Bill. If we now started the London to Manchester and London to Leeds process in early 2012, we would need three years to get to the point where we were able to incorporate those parts of the route into a hybrid Bill. That would mean the hybrid Bill would not be introduced in this Parliament and construction would be delayed well beyond the current planned date. That is not what we want to see.

We also think that the Bill would be massively indigestible. Remember, there will be a Select Committee process around a hybrid Bill that involves individuals who are affected being able to petition the Committee directly. We anticipate that there will be a large number of people wishing to do so. If this Bill were to cover the entire Y network, we could envisage that the Committee might be sitting for two years on its work. It may be difficult to find Members willing to serve on that Committee who are not directly interested in the project. Of course they would have to be people who are not directly interested in the project. So the parliamentary handling and the delay in being able to introduce a Bill make it simply not practical to deliver a single hybrid Bill.

The commitment I have given to Mr Stringer and to various other people who have expressed this concern, my predecessor among them, is that in the first Bill we will make a clear commitment placing obligations on the Secretary of State to bring forward the necessary steps in the future process within a time scale, to provide the maximum possible reassurance that we can to those who remain of a suspicious nature. But I have to say I still think the strongest-

Q534 Chair: They may be realists.

Mr Hammond: The strongest reassurance lies in the business case. If you look at the business case, the benefit-cost ratio with wider economic impacts, it is 2.6 for the overall project. If you only do London to Birmingham, it drops to 2. Once you have built London to Birmingham, you have put in the most expensive bits of infrastructure, the tunnels at the London end, the station remodelling at Euston and the Old Oak Common interchange station. Once you have built that, the pure economic logic drives you to extend the network. Even if you did not have a political commitment, economic logic would get you there.

Q535 Mr Leech: You said to Alan Whitehouse on Look North that you would then build out Manchester and the Leeds branches simultaneously rather than just Manchester and then Leeds or Leeds and Manchester. What will the impact be on cost and what will the impact be on time scale for the completion of the full Y?

Mr Hammond: We have said that we expect the full Y to be delivered in the early 2030s. 2032 is the target date. The cost for the project assumes that we will build the Birmingham to Manchester and Birmingham to Leeds section simultaneously.

Q536 Mr Leech: The estimate of 2032 was based on both lines being done simultaneously.

Mr Hammond: Yes. I was not making an announcement on Look North, I was simply stating a fact about the way the project is envisaged going. This is partly about supporting the UK supply chain, a subject which is topical at the moment, but also by structuring the project in two phases so that there is going to be 15 years plus of work for the civil engineering contractors, the rail engineering contractors and the rolling stock manufacturers, for which they can see they can plan, in which they can invest and that they can skill up for, and which will allow them to participate in this project in a way that they might not otherwise be able to. The clear intention is that we build phase one and, as phase one comes to a completion, we roll in to phase two. Once the rail engineering part of phase one is completed, then we will move into rail engineering on phase two. It will start construction in the mid-2020s and conclude in the early 2030s.

Q537 Mr Leech: We had Keith Brown MSP, the Transport Minister from Scotland, in front of the Committee. He said that he had received assurances from you that DfT would fund the route from Manchester to the Scottish border. Can you confirm that that is the case and in what sort of time scale would you expect to see high speed rail clearly going all the way through to Glasgow and Edinburgh?

Mr Hammond: He may have extrapolated from a conversation we had. The Government have made it clear that their longterm commitment is to a truly national high speed network. We have discussed with Scottish Government Ministers the continuation of the dedicated high speed line to Scotland, and we have made a commitment to them that, once we have got the second hybrid Bill into Parliament, we will then start serious work with the Scottish Government.

Q538 Chair: What year is that likely to be if the project went ahead?

Mr Hammond: That would be in the next Parliament. We would expect the second hybrid Bill to be in Parliament during the next Parliament from 2015 to 2020 and substantive discussions on the business case for a route to Scotland during that time. I should stress that there are a range of options in relation to Scotland. There will be options around enhancing the existing West Coast Main Line north of Manchester, to improve journey times to Scotland. These are not necessarily either/or. It may be that there is a step in between, which is enhancement of the West Coast Main Line to improve journey times to Glasgow, but there may still be a case for a dedicated high speed route to Glasgow further on.

The conversation that I had with the Scottish Transport Minister was along the lines of reminding him that under the devolution settlement the Scottish Government are responsible for funding infrastructure investments north of the border and that, if a dedicated high speed line or, indeed, West Coast Main Line enhancements were made, they would fall to us to fund south of the border but to the Scottish Government to fund north of the border.

Q539 Mr Leech: Would there be any expectation that the Scottish Government would be expected to fund part of it from England to connect maybe Carlisle up to the Scottish border?

Mr Hammond: No. The devolution settlement is clear. Network Rail or rail infrastructure investment in Scotland is funded by the Scottish Government. In England it is funded by the UK Government.

Q540 Graham Stringer: Just following up on what Mr Leech was saying in our previous conversations, you can understand why people in Manchester are suspicious because during the passage of the Channel Tunnel Bill the kind of commitments that you have just given to this Committee were given about trains going straight through the tunnel to Manchester and they were not carried out. Can you be more specific about what commitments and work can be done in the immediate future to reassure those others who have longer memories?

Mr Hammond: I am pleased that if this project goes ahead we will be able, finally, to deliver on that commitment of trains that can run straight through the tunnel from Manchester, Birmingham and Leeds. The timetable that we have set out is that HS2 is tasked to report to Ministers on proposals for routes to Leeds and Manchester in March 2012. The Government will respond pretty much immediately to that report, and an informal consultation on the Leeds and Manchester routes will begin in mid-2012. In late 2013 or early 2014 there will then be the beginning of a formal public consultation, a matching exercise to the one that we have just done with road-shows and so on, on the Leeds to Manchester routes, leading to a decision on which routes to choose, exactly mirroring the process that we have done for the London to Birmingham section.

I have given a commitment, as I have said to you directly, that I am very happy to sit down with representatives of the areas where most of the concern is being expressed-I think that is Manchester primarily-and look at what language and what structures we can put into the first hybrid Bill. I want this suspicion and concern to go away. Some of the strongest supporters of the project are in Manchester and I want to reassure them about the plan for the overall project. We have to be guided by parliamentary process and legal advice, but I am willing to build into the first hybrid Bill whatever we lawfully and properly can to give that reassurance and I am willing to see the Secretary of State committed to carrying out these steps to a timeline in order to make sure that the project keeps moving forward.

But, again, I come to the critical point. Once you have built London to Birmingham, the marginal cost-benefit ratio of then building a line on to Manchester and a line on to Leeds becomes very attractive indeed because the infrastructure is relatively lower cost for some very significant additional benefits that accrue.

Q541 Graham Stringer: That is very helpful, Secretary of State, because most people in Manchester agree with you that the economic case is very persuasive and I understand the parliamentary timetable. Given that two hybrid Bills go through, and we both know they are extremely complicated beasts, is there any possibility of speeding up the building phase of the scheme, because, again, you spoke persuasively about changing the economic geography of this country and that is welcome, but let us change it a bit quicker. Is it possible to do that any more quickly?

Mr Hammond: I fear this is where we have to be frank about the tension between maintaining investment in other transport infrastructure projects and pouring money into HS2. We have concluded that a pace of work of about £2 billion a year-it will fluctuate a bit but over a spending review it will represent about £2 billion a year-is deliverable without undermining the needs for investment in the wider railway. If we tried to go faster, depending on the economic circumstances, depending on the Treasury’s position at the time, there would be a risk of undermining investment in other projects and I am not prepared to do that. What we have done, setting out a path which is clearly achievable, based on the current rates of spend on Crossrail as the current strategic infrastructure project in which we are investing, is the right way to go. It also provides a much better proposition for the UK infrastructure industry that this will be a project that builds out over a number of years. If we were to throw money at it and say we are going to build it very quickly, I think we would be likely to undermine the ability to participate of the UK-based supply chain.

Q542 Graham Stringer: I understand those arguments, and the implied commitment of continuing the funding into the rail system of the £2 billion that is going into Crossrail is very welcome as well. This question may surprise you. Given that Network Rail costs more than any Government considered it would-I know it was Railtrack before under the Conservative Government, but it costs much more than the Labour Government expected it to cost-is it not possible to take money out of that cost base and speed up the second part of High Speed 2 from that source?

Mr Hammond: We will have to take cost out of the railway. We have made it clear that that is our intention and we have in front of us the McNulty report, which provides at least some suggested routes forward, and we have made a commitment to respond to that with a Government strategy paper on the future of the railway. It is tempting to look at ways to accelerate the project. I certainly would rather be able to walk on to the first train rather than be pushed on in my wheelchair. But the reality is that, if we are going to do this in a way that is robustly deliverable and that does not undermine other demands for investment in the rail network, then, on the projections we have, passenger demand is going to go on rising across the network not just on the inter-city lines. You are going to be asking for upgrades of the TransPennine route to provide passing loops and so on to allow much greater frequency and faster journey times on routes like that. There are similar demands across the country and they reflect rising passenger demand and we have to be able to deal with that, as well as the strategic high speed rail project. If I were to be tempted to go down the route you are inviting me to follow, I would rightly be challenged by others saying that what I was doing might put at risk investment in the conventional railway.

Q543 Chair: You did tell us before that you would not take money away from other routes to put it into High Speed 2. Are you confirming that or are you wavering from that?

Mr Hammond: No. What I have said is that we are currently investing £2 billion a year in Crossrail as a strategic London-focused project. As Crossrail comes to an end, that £2 billion a year will be redeployed and that is the rate of investment in the strategic rail project. Investment in the business as usual railway will continue. Obviously, I cannot pre-empt the next spending review and the Chancellor would not appreciate me suggesting what he is going to make available for transport investment or specifically for rail investment in the next spending review. That will be a separate issue and we are clear that investment in the railway needs to continue because demand for the railway is continuing to rise.

Q544 Chair: What exactly is the Treasury’s commitment to funding this scheme?

Mr Hammond: Within the spending review we have a commitment. I cannot remember the precise figure but it is some hundreds of millions of pounds that takes us through the design engineering stage and deals with the costs involved in the statutory process, preparing a Bill to go to Parliament and taking the Bill through Parliament.

Q545 Chair: What about beyond that?

Mr Hammond: Beyond that, of course, you know the Treasury funds capital projects in tranches and the funding for the next spending review would be delivered when the next spending review settlement is made, assuming the Government have made the decision to go ahead with the project.

Q546 Chair: Are you looking at private finance being involved, if the project goes ahead?

Mr Hammond: Yes. What we have said is, if the decision in December is to go ahead with the project, then we will focus on the financing options that are open. We will obviously do that in consultation with the Treasury and with Infrastructure UK and the Major Projects Authority, all of which will be involved. The working assumption is that this will largely be financed by public capital and that we will explore the options for the sale of a concession once the railway is complete and operating, in other words, mirroring the approach that was taken on HS1. There may also be possibilities of bringing some private capital into the provision of stations, depots and similar ancillary infrastructure, reducing the outlay of public capital required at the outset. But we will explore all of those models and we will look for the one that delivers the best value for money within the constraint of available public sector capital cash spend.

Q547 Steve Baker: Secretary of State, from what you have just said, is there a danger that we could end up socialising losses and privatising profits?

Mr Hammond: We have to see this as a strategic infrastructure investment that will never be made by the private sector on its own. The experience of high speed railways everywhere is that the public sector has had to be involved in mandating them and usually in financing them. The experience of High Speed 1 was that a substantial capital receipt was delivered by the sale of a 30-year concession, while retaining in the public sector the freehold ownership of the asset. That is an attractive option, but I do not think we should shy away from or seek to conceal the fact that it is probable there will be an amount of trapped public capital in a high speed railway that has been invested there because we believe there is a strategic economic benefit to the UK that cannot be captured by a private concessionaire or a private train operator in the form of fare box and profits.

Q548 Steve Baker: HS2 Ltd has a number of external challenge groups. Could you just characterise how successful those are?

Mr Hammond: Do you mean the challenge groups that HS2 Ltd has set up?

Steve Baker: Rather than within itself.

Mr Hammond: That is probably a question that would be better directed to HS2. It is my understanding where I have probed specific issues with HS2 on very many occasions that part of the answer back has been that the external challenge groups have already looked at precisely the question and have deemed the HS2 solution robust or have suggested a way in which HS2 can make their position more robust. I think those have worked well. I am very happy to write to the Committee with more detail or to ask HS2 to write to the Committee with more detail if you want to know specifically how those challenge groups have worked and the kinds of things that they have looked at.

Q549 Steve Baker: Do you have any similar arrangements within the Department?

Mr Hammond: We do not have external challenge arrangements within the Department, no.

Q550 Steve Baker: Would you consider accepting offers from a number of groups who would, I am sure, be prepared to offer external challenge?

Mr Hammond: There will clearly be external challenge. I have no doubt about that. I am not sure that any purpose would be served in duplicating the process that HS2 already has in place. Perhaps I should just backtrack on saying no external challenge groups. We have Infrastructure UK, HM Treasury spending teams, the Major Projects Authority, and we have Ministers, all of whom are routinely challenging, probing and kicking the model that HS2 is producing. HS2 officials, in turn, are having to explain what they are doing to their departmental counterparts, so there are a series of processes within Government that are already challenging what HS2 is doing and I like to think sometimes getting them to look again and think again about the way they are doing things.

Q551 Chair: The business case does not include the environmental assessments. Does that mean that the environment is seen as less important?

Mr Hammond: No. It means that the business case includes the things that can sensibly be monetised. The things that can be monetised have been monetised.

Q552 Chair: Do you monetise loss of beauty?

Mr Hammond: No, you do not, and that is why the environmental impacts-the landscape impacts, for example-have not been monetised as part of the economic case. The economic case is only part of the case for high speed rail, as you know. The Department has an approach which considers five separate cases, of which the economic case is one and the environmental case is another.

Q553 Julie Hilling: One of the criticisms that people are making is that this is just going to be a rich person’s toy and people of low or moderate means will never be able to travel on this. Can you reassure people that it is going to be a railway for everybody and what will happen about regulating fare prices, etc.?

Mr Hammond: Uncomfortable fact perhaps No. 1 is that the railway is already relatively a rich man’s toy-the whole railway. People who use the railway, on average, have significantly higher incomes than the population as a whole. That is a simple fact. The assumptions underlying the pattern of use of HS2 assume similar pricing to the West Coast Main Line, which, as I have said before, ranges from eyewateringly expensive to really quite reasonable if you dig around and use the advance purchase ticket options that are available. Therefore, the assumption is that the socioeconomic mix of passengers will be broadly similar to those currently using the West Coast Main Line.

There is another point here which I think we have to be absolutely clear about. If you are working in a factory in Manchester you might never get on HS2, but you will certainly be benefiting from it if the salesman and sales director of your company is routinely hopping on it to go and meet customers, to jet around the world from Heathrow in a way that brings in orders that keep you employed. So the benefits of greater connectivity, the benefits of bringing businesses closer to their markets, the benefits from released freight capacity and moving goods efficiently around the country, do not only accrue to the people who will actually use the railway. They accrue to some people who will never even get on the railway. They certainly accrue to people who will use services on the West Coast and East Coast Main Lines that would not have been able to be provided if we had not been able to move the long distance city to city traffic on to a high speed railway. It is a complicated model and the ripple effects will spread across the whole of the economy in ways that it would be foolish to even try and pretend we can wholly predict and quantify at this stage.

Q554 Chair: How much would the benefit-cost ratio have to fall before you or the Chancellor decided that this scheme was not good value for money?

Mr Hammond: I have a general principle that I do not allow the Department to consider projects with a benefit-cost ratio that is negative, i.e. "Let’s spend £1 to get 90p." You might think that is obvious, but that has not always been the practice in the past and projects have been approved that have benefit-cost ratios below 1. We have taken the view from last May that we will not consider projects of that nature, however attractive they may be for other reasons. Rail projects do not offer benefit-cost ratios as attractive as road projects typically, but in the interests of modal balance we have taken the view that it would not be appropriate to rank projects simply by BCR, but that it would be appropriate to look at some modal spread as well. As rail projects go, a BCR of 2.6 is quite reasonable. If it were to fall much below 1.5, I would certainly be putting it under some very close scrutiny. But, as I said earlier, the economic case in the BCR is only one element of the appraisal that we will do. We will look at the strategic case, we will look at the managerial case-the deliverability of the project-and the environmental case, as well as the economic case.

Chair: Thank you very much for answering our questions.

Prepared 18th November 2011