High Speed Rail - Transport Committee Contents

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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© Parliamentary copyright 2011
Prepared 8 November 2011