High Speed Rail - Transport Committee Contents

Written evidence from Stephen Plowden (HSR 166)

1.  This reply concentrates on HS2, but many of the points would apply to any HSR proposal for Britain. Because of the committee's and my own time and length constraints, the reply is not as full or as well referenced as I would like, but I would be happy to supplement it by answering any questions the committee may have.

2.  The committee asks for the main arguments for or against HSR. I doubt if there are any arguments of any consequence for HSR in Britain, and certainly there are none for HS2. HS2 will work against some of the most important objectives of transport or other policy. Even apart from that, the business case fails.


Carbon emissions

3.  Reducing carbon emissions should be a principal aim of transport policy. The government's calculations suggest that HS2 would be carbon neutral. That conclusion is too optimistic. HS2 would lead to an increase in CO2 emissions.

4.  The only way HS2 could lead to a more than trivial reduction in CO2 emissions would be if travellers who would otherwise fly on domestic flights to and from Heathrow switched to rail. But if that were to happen, the airlines would transfer the slots vacated by domestic flights to international ones, with a consequent increase in emissions. HS2 Ltd's December 2009 report High Speed Rail London To The West Midlands And Beyond acknowledges (para 4.2.25) that such a substitution might occur, and could lead to an increase in emissions, but these are not possibilities but certainties. It was precisely because the Conservatives, when in Opposition, were persuaded that HS2 would provide a way of increasing the capacity of Heathrow for international flights without having to build a third runway that they decided to support it. In a conference last autumn, BAA's chief executive, Colin Matthews, said "… BAA would like more passengers to arrive [at Heathrow] by train. High speed rail would attract people who currently arrive by short-haul flights, freeing slots for more long-haul flights" (page 34 of the November 2010 issue of Transport Times). As an indication of the effect on emissions, according to Climate Care, the carbon per passenger emitted in a flight from Heathrow to New York is 11 times that emitted in a journey from Heathrow to Edinburgh. Emissions per flight would be several times that (the capacity of a Boeing 747-400 is five or six times that of the Bombardier Q400, one of the most efficient short-haul aircraft).

5.  HS2 will also lead to more international flights from airports other than Heathrow. It is hoped in Birmingham that the increased accessibility of its airport will enable it to capture some business that would otherwise have gone to Heathrow. If the current plans to extend HS2 northwards go ahead, they will provide very good access to East Midlands airport and Robin Hood airport. Easier access will generate more air travel. The hopes that by linking HS2 to HS1 some short haul flights to the near Continent could be replaced by rail are unrealistic. It is very difficult for rail to compete with air on time and cost over the distances involved, and even if it could, the market is too small to support an acceptably frequent service.

6.  Even if the substitution of international flights for domestic flights could be avoided, HS2 is not a good way of dealing with carbon emissions from domestic flights, which in any case amount to a little less than 2% of those from road transport. Any reductions would be partly, perhaps largely, offset by emissions from the high-speed trains. In addition, most journeys on domestic flights are cross country and not susceptible to competition from HS2, even if it were extended to Scotland. According to HS2 Demand Analysis (HS2 Ltd, February 2010), HS2 would increase rail's share of the market for travel between London and Glasgow from 34% to 50% (para 10.2.8), with almost all the rest held by air, and would reduce the number of domestic air passengers by only 11% (para 10.6.13). Reducing domestic air travel requires measures that would impinge on domestic flights generally, not only on those between Scotland and south-east England. For example, landing charges could be related to the carbon emissions of each flight; the type of aircraft to be used on domestic air services could be regulated; possibly speed limits could be imposed.

7.  Everyone acknowledges that high-speed trains are less energy efficient, and so produce more carbon, than their conventional equivalents. It is also acknowledged that HS2 will generate some extra rail journeys. But another equally important effect, not allowed for in the calculations, is that HS2 will also lead to a lengthening of some of the journeys that would otherwise be made by conventional rail. For example, some people who commute to London would decide to live further out. People who without HS2 might have taken a city break in Eastbourne or Oxford might decide to go north instead. These longer journeys will produce more carbon. (Transport investment commonly leads to a lengthening of journeys through redistribution. The fact that this effect is not allowed for in the HS2 forecasts is a very serious defect which has other important implications.)

The north-south divide

8.  The predominance of London and the south-east vis-à-vis all other regions is a very serious national problem. It is bad for London as well as for the rest of the country. The coalition has rightly set itself the objective of rebalancing the economy with respect both to economic sectors and to geographical regions. That may explain why bridging the north-south divide seems to have become the centre piece of the government's case for HS2. In the Daily Telegraph of 25 November 2010, Mr Cameron is reported as saying:

"If we think about governments of all colours, they have all failed—over 50 years—to deal with the North-South Divide. With high-speed rail we have a real chance of cracking it … The most powerful regional policy is transport and the most powerful form of transport is high-speed rail."

9.  Regional benefits do not figure in the formal evaluation of HS2 in the report Economic Case for HS2 (DfT February 2011). When I asked the DfT where in the documents regional benefits were discussed, I was referred to paragraphs 4.4.9 to 4.4.11 of this report. But these paragraphs simply contain a general discussion, of rather a cautionary nature, of the circumstances in which a high-speed rail station could help local development. There is nothing in them which supports Mr Cameron's extreme claim.

10.  There is no need to dwell on this subject here, since I understand that it will be treated in other submissions, where it will be shown that HS2 would increase the present regional imbalance. This is hardly surprising, since it has been recognised for decades that improving connections between an economically strong region and a weaker one is at least as likely to suck activity out of the weaker one as to regenerate it. It is not clear that transport investment of any kind should be a major component of a policy to bridge the north-south divide. Education, the siting of universities, research centres and government offices, and all the traditional tools of regional planning may be much more important, But if transport investment does have a part to play, it should take the form of local improvements, or improving connections within and between the distressed regions, not their connections with London. To regenerate the north, invest in the north.

The countryside

11.  The protection of the countryside should rank very highly indeed as a national aim. The damage that HS2 will do is not, as Mr Hammond and Mr Cameron seem to think, of concern only to people living close to the route, nor is their concern only about property values. This is like saying that the demolition of Durham cathedral would matter only to the citizens of Durham and then only because of the loss of revenue from tourism. Other people will be telling the committee of the impact of HS2. Perhaps a slightly less damaging route could be found, but an acceptable route could not be.

The failure of the business case

12.  The case for HS2 is based on a completely inappropriate business-as-usual, trend planning approach. Even accepting that approach, other submissions will show that the likely growth of demand for rail travel has been exaggerated, and that if more capacity is needed, there are better ways of providing it. Even if the demand forecasts were correct, other ways of providing the desired capacity were not available, and the harmful effects discussed above could be set aside, HS2 does not give value for money.

13.  Table 10 of Economic Case for HS2 estimates the benefit/cost ratio (BCR) of HS2 at 1.6 if the claimed wider economic impacts are not included and at 2.0 if they are. According to NATA Refresh: Appraisal for a Sustainable Transport System (DfT, April 2010, paras 39 and 43), 95% of recent transport investments achieved a BCR of more than 2.0, and these schemes were split roughly equally between those with BCRs of more and less than 4.0. Schemes with BCRs of 2.0 or less would therefore need very large benefits of a kind not included in the monetary evaluation to deserve a place in a transport budget. But the environmental and social effects of HS2 are highly adverse, which raises the question of whether it is right to subsidise HS2 (see para 23 below).

14.  According to this table, the capital and operating costs of HS2 come to £24 billion but would be reduced by £13.7 billion by revenue from fares. The fare revenues come from the journeys that are predicted to transfer to HS2 from road and air and from the travel that HS2 is expected to generate. In cost benefit analysis the welfare gain resulting from a project is given by the increase in consumer surplus plus the increase in producer surplus. The revenue from new rail travel clearly contributes to producer surplus and should certainly be included in the appraisal, but two questions arise:

(i)  What allowance should be made for the loss in producer surplus of the firms which, if HS2 were not built, would be supplying goods and services to the people who would constitute the new rail passengers if it were?

(ii)  Should fare revenues be treated as a reduction in costs or as an increase in benefits?

15.  The DfT argues that the producer surplus of those suppliers who would lose revenue if people switched their expenditure to rail does not have to be included, since the loss would be spread over many firms who, over time, would be able to reduce their costs accordingly. It would be difficult to apply this argument to domestic air services, whose losses, according to these forecasts, would not be only marginal. It seems to me that some of the businesses who would experience proportionately smaller falls in income would also find it difficult to cut their costs accordingly. Even if they could do so over a 60-year period, as the DfT argues, their earlier losses should figure in the appraisal. (My correspondence with the DfT on this and other points can be forwarded to the committee if it would like to see it.) I believe that a significant part of the producer surplus predicted for rail should be offset by losses to other suppliers.

16.  Until last year, changes in indirect taxation were treated as changes in costs, but they are now, correctly in my view, treated as changes in benefits. I believe that the same considerations apply both to indirect taxes and to fare revenues, so that both should be treated in the same way. However, in a recent email to me the DfT gave the following argument for continuing to consider revenue from fares as a reduction in costs. "This is based on the reasonable assumption that fare revenue from operating rail services (after covering costs) is contracted to return to the Department for Transport and can therefore be offset against costs." This argument might have some force if the DfT, or a Railway Division within it, were a separate, self-financing organisation. In fact, however, taxpayers in general are being asked to pay for building HS2, even though very few of them will benefit from it as travellers, and even though its construction will also lead to a loss of tax revenue. As some compensation, they deserve to receive the benefit of the increase in fare revenues that HS2 is predicted to bring. The money could then be spent on whatever purpose seemed then, in the distant future, to be most worthwhile, rather than being automatically earmarked for transport. Reclassifying fare revenues reduces the BCR from 1.6 to 1.26 without wider economic impacts or from 2.0 to 1.6 with them.

17.  The appraisal period for HS2 is the construction period, which ends in 2025, and the following 60 years. Costs and benefits are discounted at 3.5% for the first 30 years from now and at 3% thereafter. The justification for looking so far ahead is that HS2 is expected still to be in good working order in 2084. However, I would have thought that the period should be determined by the working life of the facility or the length of time for which travel needs and behaviour can reasonably be predicted, whichever is shorter. The discount rate raises questions of our responsibilities to future generations. We have a duty to leave them a world in which they can live and which would be worth living in, but if, as the Treasury seems to think, they will be richer than we are, then in my view we have no other responsibility to them. The implication is that non-reversible environmental effects should not be discounted at all but narrower economic ones should be discounted very heavily. Such philosophical considerations apart, there are other very good reasons for reducing the appraisal period and increasing discount rates. Professor Peter Mackie, one of the architects of the DfT's New Approach to Appraisal (NATA) methodology, suggested last year that in present circumstances it would be reasonable to revert to the pre-2003 rules of a 40-year appraisal period and a 6% discount rate (Local Transport Today, 25 June 2010). This would greatly reduce the BCR.

18.  HS2 is predicted to reduce traffic on motorways between London and Birmingham by 1%, so bringing reductions in congestion worth £1.8 billion and savings in noise and accidents approaching £400 million (Economic Case for HS2, para 4.3.14 and Table 4). Traffic on these motorways over the next 74 years cannot be predicted to within 1%. If a significant reduction in congestion did come about, the eased conditions would generate traffic, which would negate the gain. In addition, it seems that the diversion from cars was calculated by a formula based only on travel time and cost. Even if, which is not clear, the number of people in the party, and hence the cost per person, was taken into account, such a formula is inadequate. Anyone now travelling between city centres by car probably has some wider reason for doing so. For example, the car is needed for further journeys at the destination end, it is carrying awkward luggage or equipment, someone in the party has physical difficulties in using trains or getting to or from the stations.

19.  Wider economic impacts are predicted to be worth £4 billion, £3 billion of which comes from agglomeration benefits. The figure of £3 billion is hard to reconcile with the caveats of the researchers at Imperial College on whose studies the estimate is based. In any case, everyone agrees that the benefits will not come automatically but depend on other actions being taken by the local authorities concerned. The cost of such actions is not included in the calculation of the BCR, but clearly it should be.

The values placed on business and commuting travel time

20.  The values of business time used in the BCR calculations assume that this time cannot be used productively. It is probably true that time spent getting to and from the station or changing trains cannot be used, but the train itself provides a very good working environment. If the train is not crowded, commuters, as well as business travellers, can make good use of this time. Of course, not all business travellers will choose to work in the train. For example, it is understandable that a London-based businessman who has spent a long day working away from his base may want to relax on the way home, but such time should be valued at no more than the commuting rate.

21.  It is argued in para 7.3.5 of Economic Case for HS2 that people transferring from cars to trains would not only gain a time saving but would also be able to do some work on the train, which would increase the benefits of HS2 to business passengers. This argument assumes, however, that it would not be possible to work when travelling on the classic railway. If that were possible, but some people chose to travel by car rather than taking advantage of this facility, it would be incorrect to increase the estimate of the benefits they obtain from HS2.

The alternative to business as usual

22.  The travel forecasts that underlie both the promoters' case for HS2 and the DfT's investment plans more generally are based on an extrapolation of recent trends. That approach makes sense only if those trends are desirable, or, whether desirable or not, nothing can be done about them.

23.  The worst problems arise in road transport and there is plenty to be done about them. But the same principle applies to rail as to road: ways of reducing demand should be examined before any expansion is planned. Advances in technology have opened up huge opportunities to substitute telecommunications for rail both for business travel and commuting. Reforms to the legal and fiscal framework governing road transport, especially the most important reform of all, lowering and enforcing speed limits, which, given the political will, could be done very quickly, would remove one major justification for subsidising rail, to encourage people to use the less environmentally damaging mode. The other justification for rail subsidies is social, but that does not apply to long distance travel. Under BR, Intercity was rightly required to be self-supporting. Without subsidies HS2 is clearly not viable. The scope for substituting motorway coaches for rail also needs to be very carefully examined. That would be cheaper than rail provision, since the infrastructure already exists, and would be socially desirable since fares are much lower.

24.  Of course, reforming the rules for the use of the roads would also boost the demand for rail and hence the case for investment in rail. It is hard to know what the net effect of all the reforms would be. But if more rail capacity did turn out to be required, that would not necessarily require building major new lines and it would certainly not justify HSR. The impact on the landscape, carbon emissions and the fact that HSR would lead to journeys becoming longer are sufficient to rule it out.


25.  The plans for HS2 have caused distress and anxiety to a great many people and have already involved considerable public expenditure, all in pursuit of a scheme which should not have been put forward in the first place, or at least should not have got this far. I hope the committee will tell the government to withdraw the plans immediately. If that is not possible, I hope that at least the committee will insist that the DfT's current inadequate and inappropriate consultation is scrapped and replaced by a proper inquiry, which, among other things, would allow objectors to cross-examine the promoters' witnesses.

26.  The fact that such a very bad scheme has progressed as far as it has, and would almost certainly now be implemented if it were not for the determined resistance of well informed people who feel threatened by it, casts a very disquieting light on the way that major proposals are formulated and scrutinised in Britain. I hope Parliament will now consider very seriously how such a thing could have happened and what must be done to stop similar things happening again.

27.  Crossrail is an example of a scheme which should not have survived but has because no one, or no well organised people, feels threatened by it. It contravenes the coalition government's objective of rebalancing the economy with respect both to economic sectors and geographical regions even more flagrantly than HS2—its whole raison d'être is to increase employment and productivity in London's financial districts. Its BCR is far below what is usually required. Although work is in progress, there is plenty of scope to modify the scheme. I hope the committee will look at this urgently.

28.  All the government's plans for transport, whether road, rail or air, rest on the same business-as-usual, predict-and-provide approach. The defects of this approach have been pointed out for 40 years or more. The urgent need to combat global warming makes them even more serious. This approach should be replaced by one which addresses all the current problems and tackles them by reforming the user rules—the legal and fiscal framework within which transport decisions are made. With some local exceptions, no expansion of the infrastructure should be contemplated until the necessary reforms have been implemented. I hope the committee will launch an inquiry into this alternative approach. If that happens, then some good will have come from the sorry saga of HS2.

May 2011

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Prepared 8 November 2011