Further written evidence from Transport
Watch UK (HSR 73A)|
In this note HS2 means the link from Euston to Birmingham
and the "Y" means the network out to Leeds and Manchester.
The headline costs at 2009 prices are £17 billion
for HS2 and £32 billion for the "Y". Those exclude
the trains and tax. Adding the missing elements yields £24
billion and £45 billion, amounting to £900 and £1,700
respectively for every household in the land.
The cash loss attributable to HS2 at the 2009 price
and discount base is £10.3 billion after accruing fares and
cost out to 2086. Rolling that up at the Treasury discount rate
of 3.5% to the opening year of 2026 yields £18 billion or
£700 for every household in the land.
The cash loss attributable to the "Y",
which has an opening year of 2032, and a last evaluation year
of 2092, is £17.1 billion again at the 2009 price and discount
base. Rolling that up to the opening year yields £37.7 billion
or £1,450 for every household.
HS2 is said to generate 40,000 jobs. However, circa
9,000 would be during construction, and 1,500 for operating the
line. Of the remaining 30,000 over 70% would be in London. Dividing
the £24 billion cost by the 30,000 yields an incredible £800,000
Worse still, many of these jobs may be relocated
from elsewhere, rather than new.
Nowhere is there an estimate of the number of jobs
that will be lost as a result of the vast public expenditures
and financial losses, summarised above, most of which will be
born by the taxpayer.
99% of the population will use the system less than
once a year. Furthermore, 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. Consequently the vast subsidies required
will benefit a minute proportion of the population and the better
off rather than the nation as a whole.
Optimism bias is applied to costs but not to the
passenger forecasts or to any of the other assumptions to do with
the schemes' benefits. If it were then benefits would be at least
halved and the projects would never be considered.
The need for such caution is obvious. After all,
the forecasts for HS1 were three times too high and the uncertainties
within the analysis are overwhelming.
One of the worst reasons for spending tens of billions
of pounds on an HSR network is that France, Spain and Germany
Firstly, the distances in Europe are much greater.
Secondly, there is no evidence, beyond the claims of politicians
and the promoters, that the vast expenditures have aided the economies.
Indeed it may very well be the reverse. After all,
Spain has the longest of the networks coupled with 20% unemployment.
As to France, it claimed the SNCF was running into
profit at a time when, according to Professor Remy Prud'homme
of Parris 12, the subsidy was actually approaching 1% of GDP.
It would be naïve to assume subsidies on that
scale did not destroy jobs in that part of the French economy
that makes a genuine profit.
Worse still, the pretence to profit in the face of
loss, sabotaged the development of sensible transport policies
and casts doubt upon any official statement about the SNCF.
The same tendency, namely to exaggerate benefits
and ignore losses, is, we submit, the generality among supporters
of UK rail and of the UK's high speed network in particular.
In purely financial terms the proposal makes massive
losses, see above.
In contrast the economic analysis compares costs
with the cash value of time savings, relief of overcrowding, improved
That analysis suggests that for every pound spent
by the Government there will between £1.6 and £2 of
benefit from HS2 and between £1.8 and £3.4 of benefit
from the "Y".
However, well known weaknesses and contentious assumptions
(1) Time is entirely wasted when travelling on
(2) The value of time will rise exponentially
at circa 2% for ever, an assumption that doubles the benefits.
(3) The evaluation periods end 60 years after
opening, far beyond the horizon at which any forecasts can be
made. If that were shortened to 30 years, which is still too long,
40% of the supposed benefits would be lost.
(4) The forecasts are unbelievable in that they
require a train every three and a half minutes in each direction
all day throughout the year.
Those forecasts depend largely
on assuming that growth in passengers is driven by growth in GDP.
However, between 1950 and 1995 GDP grew by 200% but there was
no growth in passenger rail whatsoever. In contrast, between 1995
and 2010 GDP grew by 36% and rail usage by 70%.
That suggests there is little
or no relationship between passenger growth and GDP. Instead the
recent growth is probably due to the short term razzamatazz of
(5) There is a fundamental flaw in the analysis,
namely fares are subtracted from costs when they should not be.
Such payments no more increase
wealth than would passing £100 to one's neighbour. The transaction
is of course of financial interest but has no place in an economic
analysis designed to compare the resource cost of a scheme with
the supposed social benefits.
Striking out the fares would
destroy the economic case.
The primary source for the data in this note is Department
for Transport's publication "Economic Case for HS2",
For Greater detail see items 6a and 6b here: http://www.transport-watch.co.uk/transport-committee.htm
(terms of reference and evidence accepted by the Transport Committee)
PRO-RATA COSTS AND LOSSES FOR METROPLITIAN
£(BILLIONS) 2009 PRICES
||The Y||HS2 (a)
||The Y (b)|
|Greater Manchester ||2,240,000
|Liverpool urban area||838,000
|Greater Glasgow ||1,770,000
|Sheffield urban area||1,000,000
|Tyne and Wear||1,119,500
|Edinburgh commuting area ||1,000,000
|Totals of above Metropolitan areas||13,118,500
|Rest of UK||38,881,500
(a) 2026 opening year discount base
(b) 2032 opening year discount base
(c) Very few people indeed living in "the rest of the
UK" will ever use the proposals. Even those from the key
metropolitan areas listed will seldom benefit personally. If the
regular users number as many as 1 million the cost is £24,000
per user for HS2 is and £45,000 for the "Y". The
corresponding present value losses at the named discount bases
are £18,000 and £37,700. In reality, or according to
the forecasts, in 2043 there will be only circa 70,000 daily arrivals
at Euston. Hence regular users are likely to be below 150,000.
The costs per regular user then spiral to the entirely unrealistic
levels of £160,000 and £300,000.