Written evidence from Professor Peter
Mackie (HSR 101)
Declaration—I am a member of the HS2 Analytical
Challenge Panel. The evidence submitted is my personal opinion
only and not necessarily that of the ACP or HS2 Ltd. Several points
are in any case outside the remit of HS2 Ltd.
1. The HS2 project is going through various steps
in the feasibility study phase. There is further refinement required
of the modelling and appraisal. However, the work to date gives
a fair and reasonable indication of the benefit/cost ratio of
the scheme as assessed using DfT WebTAG principles. An appropriate
interpretation is that the BCR of the London-West Midlands section
assessed on a standalone basis is around 2—probably no worse
than 1.5 and probably no better than 2.5. Perhaps for a scheme
of this scale, such a result is not too surprising—if the
BCR were 10, there would be serious questions about why the scheme
had not been assessed years ago. However, and also given the sheer
scale of the public finance commitment, the scheme taken in isolation
is best characterised as moderate value for money in transport
appraisal terms. This is before consideration of the local environmental
impacts such as noise, visual intrusion, severance etc which lie
outside of the BCR.
2. In the cost-benefit analysis, the scheme depends
for its benefits on travel time savings for current and transferred/induced
users and on capacity relief benefits—reliability gains
and relief of overcrowding particularly on the West Coast Main
Line. Carbon impacts are small and benefits due to diversion from
air are small in the context of the scheme.
3. The value of business travel time savings
has been the subject of comment by critics of the appraisal. HS2
has followed the WebTAG guidance in this respect. I would argue
that there are two issues which need to be explored by DfT:
— Whether
up to date behavioural evidence on the value of travel time savings
for briefcase travellers in the course of work supports the current
values, and if not, how to handle benefits to transferred traffic
from road and air as well as existing rail travellers;
— Whether
for all journey purposes the average values of travel time in
the WebTAG are appropriate for relatively long distance trips.
Other countries such as Netherlands and Sweden recommend higher
values for time savings on long distance trips.
Taking these two points together, I conjecture that
the appraisal is not seriously over-egged in this respect.
4. The appraisal results are critically dependent
on the future trajectory of population, employment, GDP/capita,
energy prices and rail fares relative to other transport cost
trends. Also, the income and fare elasticities assumed and projected
far into the future are critical to the traffic forecasts. There
is a need for a full quantified risk assessment of the project.
5. There are various respects in which further
modelling work is required. Some of these may be to the advantage
of the appraisal case, others not:
— Modelling
of station choice especially between Euston and Old Oak in London.
— Modelling
of choice between reservation only (HS2) and walk up services
on WCML particularly between London and Birmingham.
— Further
work on interchange penalties and route choice to Birmingham for
traffic needing to interchange to regional services at New Street.
— Further
consideration of the potential for Old Oak to be a true London
Junction station with much better connections between London and
SE region south of the Thames and the Midlands and North.
— Consideration
of splitting the London-Paris/Brussels Eurostar service frequency,
running some services direct from Old Oak via Herne Hill to the
junction with HS1 as an alternative to constructing the link to
St Pancras.
— Further
assessment of the impact on Great Western Main Line passengers
of introducing a stop at Old Oak.
6. More broadly, the appraisal needs to be conducted
so as to:
— Distinguish
clearly the incremental value of the components of the strategy—for
example the incremental value of the link to St Pancras and of
direct service to Heathrow. These should not be bundled together
as a package, they are very substantial projects in their own
right.
— Be
explicit regarding the franchise territory assumptions, competitive
behaviour from existing franchisees or their successors, and use
of released capacity on WCML eg by open access operators. The
regulatory environment assumptions are important. All four long
distance franchises will be affected by HS2.
— Demonstrate
careful consideration of the best Do-Minimum alternative scenario
on the WCML. There are usually ways of coping with capacity and
options such as 16 coach trains with enhanced energy supply should
at least be considered against the status quo.
— Establish
what can be done to improve rail accessibility to Heathrow in
the interim. Construction of the west curve from the Heathrow
spur line towards Reading would permit, say, a train an hour from
Heathrow to Birmingham which would be better than waiting till
2026.
7. Overall it is quite likely that a decision
on phase one of the project (London—West Midlands) will
turn out to be contingent on the assessed value for money of the
entire Y network. This increases the importance of understanding
the technical, economic and environmental case for the upper arms
of the Y early. It could be that the true policy choice might
be an all or nothing one.
8. The HS2 will be one of the first major projects
to go through the five business case approach announced by the
Secretary of State on 27 April. The consistency of the economic,
commercial, financial and deliverability cases is going to be
crucial to the overall assessment. Specifically,
— The
appraisal currently assumes no fare premium for the higher speeds
and guaranteed seat offered by HS2. There is a need for further
consideration of the trade off between user benefits, fare revenue
and taxpayer support within the appraisal. At what rate can travel
time and quality benefits be converted into revenue through yield
management?
— The
appraisal results imply that if the HS2 infrastructure is publicly
funded and endowed to the rail system then the forward operating
costs of the infrastructure and services can be funded from within
the rail financial support envelope. This requires careful study—it
would be a mistake to accept the investment appraisal case on
the basis of an operating plan which then cannot be fully funded.
— The
tacit assumption is that the public finance for the HS2 infrastructure
is not going to displace the generality of transport sector schemes,
rather that it is going to be a strategic priority of Government
like HS1 and Crossrail and therefore additional to the normal
transport budget. If this assumption is wrong, it is necessary
to question the opportunity cost of the scheme in terms of investment
forgone elsewhere in the transport sector.
9. Turning to the wider impacts of the scheme
on the economy, it is important to recognise that the appraisal
has been conducted on a fixed land use pattern assumption. It
is quite plausible that the scheme will have land use impacts
in Central Birmingham, in the vicinity of the Birmingham Parkway
station and at Old Oak and Willesden and that there will be additional
benefits resulting. It is also credible that there are competitiveness
benefits to the UK from connecting several of the top conurbations
to each other more effectively. However, I do not think these
impacts can possibly be large additions to the direct transport
benefits in the CBA ; they are largely the same benefits converted
from the transport sector into the wider economy via the land
use and development pattern.
10. It is important, if the Government thinks
there is a strategic case for building HS2 which is above and
beyond the economic and environmental case, that there is clarity
on what that case is so it can be scrutinised. For various reasons,
HS2 is rather unlikely to make much difference to the North-South
divide. A spatial analysis would probably show London to be the
main benefitting region. That is NOT a reason for not doing the
scheme but claims of "strategic value" need to be capable
of interrogation.
11. Finally, given the population projections
for London and the South East, I find it bizarre that advantage
is not being taken of this piece of infrastructure to plan a new
city either on the HS2 centred around say Brackley or to take
advantage of the released capacity on the WCML. A true strategy
would place HS2 within a broader regional land use plan which
could address several deep problems simultaneously.
May 2011
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