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.
THE HARM
THAT HS2 WILL
DO
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.
RECOMMENDATIONS
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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