Written evidence from Transport Watch
UK (HSR 73)
In this note HSR means the proposed High Speed line
from Euston to Birmingham, known as HS2, plus the extension to
Leeds and Manchester illustrated in the DfT's Consultation document.[91]
HS2 plus the extensions are known as the core network, or "the
Y".
1. What are the main arguments either for
or against HSR?
1.1 Without providing any real evidence the Consultation
document claims the proposal will transform the economic geography
of the nation, provide a once-in-a-generation opportunity, will
be a catalyst for growth, will cut the north-south divide, has
unique potential etc.
1.2 Part 1, under the heading "The Case
for High Speed Rail", carries the inspirational sub-heading
"The Fast Track to Prosperity". There follows a clarion
but baseless call that HSR can play a key strategic role in delivering
economic growth, creating the right environment for private enterprise
to flourish and rebalancing the economy. The propaganda is relentless
and typical of the railway industry—France, Spain, Germany
and Japan are called on in support—we must not be left behind.
"The central role played by the country's rail links cannot
be overstated" and so on without end.
1.3 However, the truth is that national rail's
contribution is trivial. It carries less than 2% of the nation's
passenger journeys and less than 6.5% of its passenger-miles.
The figure below, taken from the DfT's Transport Statistics Great
Britain, illustrates the point. Appendix 1 provides other devastating
comparisons which demonstrate the extent to which the nation's
belief in the efficiency of rail is misplaced.
1.4 Further the claim is made that the West Coast
Main Line is running out of capacity and that HS2 is the best
solution.
1.5 The arguments against are:
(a) The flamboyant claims cited above are unsustainable.
(b) The shortfall, if any, in capacity on the
West Coast Main Line could be made good at a fraction of the cost,
and incrementally, by Rail Package 2, RP2. That is one of the
options examined by the DfT. It delivers a better net benefit
ratio than HS2 (3.63) and costs about £2 billion instead
of £17 billion. It would have the advantage of delivering
the benefits incrementally and of enabling demand to be tracked
as it increases, rather than having to rely on long range forecasts.
(c) HSR would cost tens of billions of pounds
and would make a loss in the tens of billions.
(d) HSR would be used overwhelmingly by the better
off.
(e) The business case is deeply flawed, see below.
(f) The passenger forecasts are unbelievably
high, see below.
2. How does HSR fit into the Government's
transport policy objectives?
2.1 The Government's transport objectives should
be to benefit the nation as a whole, to maximize the benefits
per pound spent and to benefit the many rather than the few.
2.2 Trips by rail in excess of 100 miles amount
to only 5% of all rail trips and to less than one in a thousand
of all motorised trips.[92]
Optimistically, half of those rail trips may use the HSR.
2.3 Likewise, 50% of national rail journeys are
less than 20 miles long and, as above 95% are less than 100 miles
long. The corresponding distances by car are 6 miles and 20 miles.[93]
It is those relatively short journeys that support the nation,
not the one in 2,000 that would use HSR. It is not the distance
travelled that matters. Instead it is the action or production
achieved on arrival.
2.4 Against that background it seems extraordinary
that HSR has been seriously considered.
3. Business case
3.1 The construction cost of HS2 plus the first
cost of the trains is £19.6 billion.[94]
That should be inflated by the market prices adjustor of 1.209[95]
yielding £23.7 billion. The £23.7 billion is equivalent
to £900 for every household in the land. The loss to the
government, after accruing fares and costs over a 60 year evaluation
period ending in 2085, is £10.3 billion at the 2009 price
and discount base.[96]
Rolling that up at the Treasury discount rate of 3.5% to the opening
year of 2026 provides £19 billion, or over £700 for
every household in the land, yet it could only be those within
reach of the stations in Birmingham, Manchester, Liverpool and
Glasgow who could possibly benefit.
3.2 The "Y" is to cost £37.5 billion
including the trains.[97]
Multiplying by the market prices adjustor of 1.209 yields £45.3
billion, equivalent to over £1,700 for every household. The
financial loss, after 60 years ending in 2092, is £17 billion
at the 2009 discount base.[98]
Rolling the latter up to the 2030 base (the Extension is to open
in 2032-33) yields £37.5 billion, or £1,440 per household.
3.3 Nobody denies that the HS2 and the "Y"
will make losses in the tens of billions of pounds. Nevertheless,
the economic analysis shows that the social benefits, in terms
of time savings etc., outweigh the costs to the Government by
a factor in the range 1.5 to 3.5 according to whether wider economic
benefits are included and according to whether it is HS2 or the
"Y" that is considered.
3.4 However, that analysis contains a fatal and
fundamental flaw, namely: it is the loss, instead of the resource
cost, that is compared with the supposed benefits. The loss amounts
to the cost minus the so called incremental rail fares. Those
incremental fares are the HSR fares minus those lost by the rest
of the railway. However, the theory reduces to the absurd when
it is realised that the incremental fares can be varied by arbitrarily
altering the economic boundary.
3.5 For example, widen the boundary to capture
the losses to the airlines and filling stations and the incremental
fares fall correspondingly. Alternatively, presume the railway
is privatised. The losses to rail would then be ignored, as are
the losses to airlines today. The fares revenue subtracted from
costs would then be the full fares taken by HSR, thereby greatly
reducing the "loss" and improving the "economic"
case no end. I comment, an analysis that produces a different
answer every time an administrator strokes his pen is indeed absurd,
but it is just such a system that supports HSR and other rail
expenditure.
3.6 The correct place to draw that economic boundary
is not round the railway, or the Government, but around the nation
as a whole. When that is done the incremental fares fall to zero
and the economic case collapses.
3.7 Putting it otherwise, the mere transfer of
fares from customer to the railway does no more to create wealth
than if the reader were to give a £100 note to his neighbour.
Instead there is a zero sum transfer that has no place within
an economic analysis.
3.8 The present theory, known as the "willingness
to pay calculus", is the child of Professor Sugden of the
University of East Anglia. I comment, if customers were "willing
to pay" then rail as a whole, and HSR in particular, would
make a profit in the financial sense of the word. Probably this
"willingness to pay" theory has been cooked up because,
without it, and in Phillip Hammond's words, "no railway scheme
would ever see the light of day".
3.9 All that is before considering the cascade
of improbable assumptions to do with the value of time and its
exponential growth, the 60-year evaluation period and above all
the passenger forecasts which underpin the business and economic
case. For example:
(a) The forecasts for the year 2043 with the
"Y" in place require a train every 3 minutes 20 seconds
in both directions all day throughout the year. That is four time
as many as those currently using the railway and who would use
HSR if it existed now. The number seems entirely unbelievable.
Probably it is on target to beat the forecast made for the channel
tunnel rail link. That forecast was three times too high.
(b) The forecasts depend largely on assuming
that growth in rail use will continue exponentially until 2043
and that that growth is driven by growth in GDP. However, between
1950 and 1995 GDP grew by 200% but there was no growth in passenger
rail whatsoever whereas between 1995 and 2010 GDP grew by 36%
and rail usage by 70%. That suggests that the relationship between
GDP and rail use is weak or non-existent. Instead the growth since
1995 is probably due to improved services. It follows that rail
use may well flat-line rather than continuing to grow. The consequence
for the HSR business and economic case is dire.
(c) The value of time is inflated exponentially
within the analysis, which spans the 60 years ending in 2085 for
HS2 and the period ending in 2092 for the remainder of the "Y".
If that growth is set to zero then the supposed benefits are nearly
halved.
(d) If the evaluation periods were shortened
to 30 years then 40% of the computed benefits would be lost. Even
a 30 year time horizon takes us to a future which we can only
guess at.
(e) Whereas costs are inflated for risk and optimism
bias no such factors are applied to the passenger forecasts or
to the benefits computed. Prudently those should be divided by
at least two.
3.10 Any of the above would see HSR abandoned.
Taken together they are overwhelming. If the nation continues
to pour tens of billions of pounds into loss making projects on
the basis of such analyses then the economy will be weakened and
employment in that part of the economy that makes a genuine profit
will be lost.
3.11 As for the European comparisons, France
and Spain have higher unemployment than the UK and Lille and Marseille,
both served by High Speed rail, have higher unemployment rates
than France as a whole. Perhaps those countries would have done
better if they had left the vast resources required to fund HSR
projects in private hands.
4. Economic rebalancing and equity
4.1 The costs and losses set out above have to
be borne by the taxpayer. Nowhere in the analysis is any reference
made to the number of jobs that such vast financial losses will
destroy. Instead there is the unsubstantiated claim that the "first
phase" may create over 40,000 jobs[99]
and that HS2 alone will create 22,000 jobs in London and 8,000
in the West midlands,[100]
a total of 30,000. These are trivial numbers compared with the
costs. For example, dividing the cost of HS2, £23.7 billion,
by the 30,000 jobs yields over £800,000 per job—perhaps
the most expensive job creation scheme that can ever be conceived.
4.2 Furthermore, since most of the "created"
jobs would be in London it is difficult to maintain that the proposal
would reduce the north-south divide. In fact the data suggests
precisely the reverse. Worse still, the jobs may in fact be relocated
from other areas rather than wholly new ones.
4.3 As to the passengers, (a) 99% of the population
will use the system less than once a year[101]
and (b) those from the top quintile of household income travel
four times as much by rail as do those from either of the bottom
two quintiles.[102]
Consequently the vast subsidies required will benefit a minute
proportion of the population and the better off rather than the
poor.
4.4 Hence, far from rebalancing the economy,
promoting equity and generating jobs this project will achieve
precisely the reverse.
5. Impact (Emissions)
5.1 Even on the optimistic assumptions of the
proposers HSR would be carbon-neutral. Nevertheless, on the basis
of attracting 6% of its passengers from air and 7% from cars,
the pretence is made that the proposal is indeed green or supportive
of cutting carbon emissions. Worse still, if HSR reduced the demand
for domestic flights the slots vacated at airports would be taken
by the international ones of longer distance, thereby increasing
rather than decreasing emissions.
5.2 If large-scale electricity consumption extends
the life of coal-fired generation then the emissions from the
coal-fired should be used in calculations rather than the industry
average. Subject to carbon capture, coal-fired generation emits
double the industry average. If that point is taken then HSR would
be an "emissions disaster".
5.3 The truth is that the continued pretence
and appeal to the Green lobby is shameless propaganda with no
basis in fact.
6. Conclusion
6.1 The case made for HSR by the railway lobby
is a marketing exercise masquerading as an in-depth analysis by
parties acting in the interests of the nation as a whole. Not
only do the underlying principles of the economic analysis lead
to absurdities but (a) the passenger forecasts upon which the
supposed benefits depend are unbelievably high and (b) the underlying
assumptions to do with the value of time and the evaluation period
are difficult to defend.
6.2 The truth is this project can do nothing
for the nation beyond satisfying vanity. If built it will be a
millstone round the necks of taxpayers for ever, destroying jobs
in that part of the economy that makes a real profit and doing
nothing to reduce the North-South divide and nothing to reduce
carbon emissions.
6.3 The alternatives to HSR is Rail Package 2
or to raise fares. The latter would balance supply and demand
whilst reducing subsidy enjoyed by the better-off. Rail package
2, would be far less costly than HSR and would allow an incremental
approach that would greatly reduce risk.
6.4 At a more general level the Government should
shed itself of the sentimentality that is used to support rail.
Only then will a sensible Transport Policy emerge.
6.5 Appendix 1 illustrates that the gap between
reality and the railway myth is so large as to beggar belief.
For that reason the truth is ignored. The consequence is nowhere
more apparent than in expenditure on safety where over 50 times
as much may be spent to save a life on the railways as is spent
on the roads. The consequence for the nation is misplaced expenditure
in the tens, if not hundreds, of billions of pounds.
May 2011
APPENDIX 1
DIAGRAMS AND COMMENT WHICH SPEAK FOR THEMSELVES
MODAL SPLIT DATA
USE OF TRACK
PROFITS AND LOSSES
Sources are Transport Statistics Great Britain and
related Government publications.
FURTHER
— The
strategic road network uses its resources five to six times as
intensively as does rail. The aptly named professor Remy Prud'homme
of Paris 12 found similarly for France. The calculation which
demonstrates the fact is to divide the capital or maintenance
costs for rail track by the passenger-km or tonne-km carried and
to do the same per lane-km for the strategic road network. The
unit costs for rail turn out to be five to six times those for
the strategic road network—and that is before taking account
of the relatively low value of rail freight, most of which is
bulk raw materials.
— In
central London and in the peak hour the surface rail network is,
in highway terms, used to between only one fifth and one seventh
of its capacity. The calculation is simple and impossible to overturn:
500,000 surface rail passengers alight at central London terminals
in the three hours 7 am to 10 am. Hence 250,000 is a generous
estimate of the peak hour arrivals. There are 25 pairs of tracks.
Hence the peak hour passengers per track number 10,000. They would
all find seats in 200 50-seat coaches or in 150 75-seat coaches.
The capacity of one lane of a motor road is at least 1,000 coaches
per hour (at 60 mph, 100kph, the headways would average 100 metres).
A practical example is the contra flow lane serving the New York
bus terminal. It carries 700 45-seat coaches in the peak hour,
offering over 30,000 seats. In comparison the trains carrying
the 30,000 crushed rail commuters that arrive at Victoria Main
Line in the peak hour require four inbound tracks.
— To
appreciate the inefficiency of rail consider the motorway and
trunk road network paved with railway lines. The place would be
at a near standstill as is the railway in highway terms.
91 High Speed Rail: Investing in Britain's Future,
February 2011 DfT Back
92
National Travel Survey Back
93
Op cit Back
94
Tables 7 and 8 of The Economic Case for HS2: The Y Network and
London - West Midlands Feb. 2011, DfT Back
95
Paragraph 4.2.5 of the WEB TAG http://www.dft.gov.uk/webtag/documents/expert/unit3.5.9.php Back
96
Table 10 of The Economic Case op cit Back
97
Paragraph 2.2.6 op cit Back
98
Table 2 op cit Back
99
Page 7 of the Consultation document, High Sped Rail: Investing
in Britain's Future February 2011 Back
100
Page 22 op cit Back
101
National Travel Survey data shows (a) 45% of people use rail less
than once a year (b) 5% of rail journeys are over 100 miles long.
The implication is that 2.3% of people use rail for the longer
journeys more than once a year. Optimistically half would use
HS2 and the extensions to the north. Hence circa 99% will use
the system less than once a year. Back
102
National Travel Survey. Back
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