Written evidence
from Janusz Rawicz-Szczerbo (HSR 195)
THE BUSINESS
CASE FOR
HS2
Perhaps I should start by explaining my competence
for criticising the business case for HS2.
Apart from my professional engineering qualifications
listed above,[467]
I started my industrial career as an engineering Apprentice working
on the factory floor, and retired as Chief Executive of a substantial
and successful Group of light engineering companies, having worked
in the North, the Midlands and London. Subsequently I held non-executive
directorships in two large quoted companies and acted as Chairman
of certain of their Subsidiaries, as well as being Chairman of
three management buy-outs and one buy-in. I also started and
still own a small private company.
One of the essential practices in all the companies
I managed and which underpinned their profitability and success,
was the securing of maximum value for money in product design,
manufacturing processes, purchasing and above all ensuring the
optimum value of our products and service for our customers.
Applying this principle to the HS2 Project shows
that it clearly fails in a number of areas.
VALUE FOR
CUSTOMERS
The "customers" in this case will be the
tax-payers who will be required to fund the £30 billion
cost of construction (estimated at £1,000 per household)
and subsequently subsidise the operation.
As clearly some 99.9% of them will never use it,
this is of no value to them.
Reading the revealed comments attached to the 46,467
people from the South coast to Scotland (so far, increasing daily)
who have signed the petition to abandon HS2, all object most strongly
to what they perceive as a colossal waste of money and resources,
which they wish to be put to better use.
THE NORTH-SOUTH
DIVIDE
Mr Cameron has claimed that a 250 mph rail link
with the North will reduce the "North-South Divide"
and has publicly asserted twice that "HS2 will go ahead",
and this first before the much publicised and highly expensive
(and unnecessarily complicated) Consultation process had even
begun and then in the middle of it. This, of course, begs the
question of its true purpose and validity. Unfortunately some
now begin to suspect it as a smoke-screen for a firm decision
already taken.
However, elementary common-sense suggests that if
you improve the communication between a smaller region and a much
larger one, the "gravity" of the latter will pull business
and people to it at the expanse of the former.
This has been amply demonstrated in practice by extensive
studies of the results in various countries of this effect. Interestingly,
DfT's own projections show that some 6 out of 10 jobs created
will be in London. And I suspect that is just another understatement.
Consequently the REAL effect will be to INCREASE
the North-South Divide by making commuting to London from, eg
Leeds, more attractive, thereby encouraging the most entrepreneurial,
ambitious and able to move and work in London, and so denude the
North of their capabilities and contribution.
JOURNEY TIMES
Is there a benefit to business travellers from a
20 minute shorter train journey time—as claimed for HS2?
The short and long answers are "No" and "Absolutely
Not" (see next section).
Even if there was—is an expenditure of £30,000,000,000
justified just to save 20 minutes to the outskirts of Birmingham
(then requiring a transfer to another link to the City centre,
taking how long? Not specified …)
As against a journey targeted by Virgin Trains to
be only 10 minutes longer direct to New Street Station (in the
centre) with a range of connections to other destinations on the
spot? Effectively a faster and more comprehensive service.
"WASTED TIME
ON THE
TRAIN?"
Mobile telephone technology now allows voice, messaging
and e-mail communication while on the train, as well as internet
access. So the time spent on a journey need not be wasted—thus
removing one of the main arguments in support of HS2 for business.
In addition, Skype software applications for iPhone,
iPad and iPod allow Skype-to-Skype voice and video calls, (using
Voice over Internet Protocol [VOIP]) enabling voice and even video
conferencing with several colleagues and business contacts.
(My son, who runs a high technology business, already
uses the train as an extension of his office by using these facilities.
He is not alone in this—everyone can do it.)
One can only conclude that the assertion by the DfT
that journey times are a waste and a hindrance to business is
either a result of profound ignorance of these capabilities or
deliberate obfuscation, thus inevitably casting doubts about the
reliability of any other of their assumptions and forecasts underpinning
their case.
Surely it makes much greater sense from a business
point of view to invest much more cheaply in more or longer trains
and make business use even easier by providing free internet connectivity?
Some trains are already internet enabled but at an extra price.
Also improve the interior design of carriages to make it easier
to set up and work with a laptop/iPad/iPhone?
HOW RELIABLE
ARE THESE
FORECASTS?
The preamble to the Consultation Document states
the following:
"While the Department of Transport (DfT) has
made every effort to ensure the information in this document is
accurate, DfT does not guarantee the accuracy, completeness or
usefulness of that information and it cannot accept liability
for any loss or damages of any kind resulting from reliance on
the information or guidance this document contains."
This really says it all. The business case for HS2
relies on forecasts of traffic and usage up to some 75 years ahead.
This is not only ridiculous, but thoroughly unprofessional, especially
as a close look at the DfT calculations and assumptions reveals
that the most optimistic scenarios have been chosen and the lesser
ignored. In fact, their estimate of future demand for travel is
several times higher than other rail industry forecasts, but these
have not been factored in to provide a balanced range of financial
outcomes.
In other words, the DfT presents a wholly unbalanced
prospectus, on the basis of which, and on the caveat about the
accuracy etc of the information in the above preamble, we are
as taxpayers asked to commit £30,000,000,000 to a wholly
unnecessary and useless project, whereas very much cheaper and
more efficient alternatives such as the RP2 progressive enhancement
to the current network, are available much more quickly and are
more socially, economically and environmentally sustainable. They
will also allow costs to be controlled in line with actual demand
and generate
much larger benefits for the costs incurred.
Throughout my long business career we exercised very
detailed budgetary control, with annual budgets and detailed monthly
management accounts. The budgets were both a performance target
and a cost-control mechanism. The target was developed after detailed
study of all relevant market conditions, and was intended to be
realistic. Only one thing was certain—it would prove to
be wrong—and we would perform better or not as well depending
on external and economic factors. But costs were controlled as
we went along and the results were always satisfactory.
We did once consider a five-year plan but dismissed
it as basically irrelevant. To base the DfT prospectus on estimates
of load and traffic factors and public travelling intentions some
75 years ahead in order to justify this expenditure and claim
that a good return on investment would be obtained is sheer fantasy.
A weather forecast would probably prove more accurate.
ARE THERE
VALID COMPARISONS?
We do not have to look very far. The original case
for HS1 has proved so far off the mark that it has recently been
sold at a fraction of the original investment, having consistently
made a loss. Why should we trust the same people to make a more
believable case for HS2?
The Dutch HS Rail is making losses and I understand
is liable to be declared bankrupt. Major problems have also been
encountered by HS Rail in China and Spain. All result from excessively
optimistic projections, not borne out in practice and with prosperity
increasing in the bigger cities at the expense of the smaller.
A third of France's existing high-speed lines lose money, and
as a result inevitably
less money is available to spend on maintaining the rest of the
railway system, which is degenerating.
Can we not learn from this?
HOW COMPLETE
IS THE
BUSINESS CASE?
The proposal to have up to 36 electric trains per
hour between 5.00 am and midnight travelling at 250 mph
will require a tremendous amount of power. This will not be available
from current generating capacity so additional capacity will have
to be provided. I have not seen any DfT estimates of the amount
and of the costs of building or extending power stations and these
presumably have not been taken into account. They could be considerable
and must be included in the assessment of the case for HS2. (Wind
farms will be irrelevant.)
I recommend that you should consider the summary
of an extensive assessment of the energy implications of HS2 on:
http://www.voxopp.org.uk/449/where-will-the-electricity-come-from/
I have also not seen a breakdown of the £30 billion
estimate. Is this only the cost of constructing the line? What
is the cost of all the trains and has that been included? What
are the running costs, namely payment for the electricity consumption,
staffing, maintenance of track and rolling stock (very high wear
at those speeds both of the track and the wheels, motors, brakes,
overhead cables, collectors etc) depreciation and so on? What
effect will these have on ticket prices at the DfT's expected
numbers of passengers per annum? Alternatively, how many passengers
will be required at the projected ticket prices, assuming these
will be competitive to attract the passengers in the first place?
And is this a realistic number? Will interest be paid on the money
invested or is this a write-off? How much subsidy is envisaged?
Will the sum of all these items make commercial sense?
WHY ARE
SOME BUSINESS
ENTERPRISES IN
FAVOUR?
Need one ask? A bite at the £30 billion
pie is irresistible to the construction industry, and the suppliers
of equipment, catering and even portaloos. It is significant,
however, that none of these self-interested parties are proposing
to contribute any cash or make an investment.
THE OBVIOUS
CONCLUSION?
From a business and any other relevant standpoint,
this gross expenditure is not in any way justified and the project
should be cancelled forthwith, thus saving the bulk of the HS2
Ltd development budget of some £1 billion currently
committed.
July 2011
467 Not printed. Back
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