House of Commons - Transport Committee

High Speed Rail - Transport Committee Contents

Written evidence from HS2 Action Alliance (HSR 153)

1. What are the main arguments either for or against HSR

HS2 (and probably HSR in general) offers "poor" value for money in the UK because:

— Benefits rely upon an exaggerated value of journey time savings, as time on trains is not wasted (section 3.2), this also has implications for DfT's system of valuation (section 4).

— Demand modelling has substantially overestimated rail demand growth (section 3.4).

— Use of an unrealistic "do minimum" case causes HS2 to have artificial benefits (section 3.5).

— Failure to consider competition overestimates revenues and understates overall costs.

Improving the existing rail network is a better alternative (section 3.6):

— Alternatives can deliver all the forecast demand required.

— It is cheaper and better value for money.

— It can be implemented in stages and quickly when required, avoiding crowding and the risk of over-provision from relying on long term forecasts.

Technical uncertainty (section 3.3) with HS2:

— DfT do not acknowledge or explore issues of deliverability of the Y "stem" train frequencies.

— No adjustments are made to the forecast benefits to reflect the risk of undeliverability.

— Capacity on HS2 trains running on the classic network is insufficient to carry forecast traffic.

Specification and route (section 4) choices:

— Journey time savings being worth much less removes the rationale for very high speed, with the trade-off between the benefits and disadvantages of speed needing reappraisal.

— Route selection and station decisions are similarly in need of revisiting.

Environment (section 6):

— Carbon impacts are higher than DfT suggest in particular because of the re-use of runway capacity and the carbon intensity of the electricity generation HSR requires.

— High speed is destructive of the countryside as it departs from existing transport corridors.

— HS2 can have only a limited impact on domestic aviation, as it is relevant only for the London - Scottish lowlands routes.

— HS2 cannot successfully compete with short-haul European services, as the market is too small for trains to provide a service frequency that can match smaller capacity aircraft.

Priority:

— HSR should not be a UK priority as we already have fast frequent intercity rail services,[175] and HSR time savings do not provide the step change typical of overseas HSR experience

— HSR is a curious target for subsidy, as it encourages additional travel and is regressive because the affluent are the main users of long distance rail (section 5)

HSR is unlikely to rebalance the economy:

— Faster connections between the regions and London are, on balance, more likely to favour the economic development of London over the regions (section 5).

It is not practicable to discuss all these topics in this submission. A fuller discussion can be found at "Review of February 2011 consultation business case for HS2", HS2AA, May 2011.

3. Business case

3.1 Robustness of assumptions and methodology:

There are a number of serious methodological errors and omissions in DfT's assessment of HS2. When these are corrected, the economic case for HS2 disappears, with both the London to West Midland phase and the full "Y" network becoming poor value for money (with benefits less than the subsidy required). Annex 1 provides a reworking of the benefit cost ratios (BCR).

DfT's assessment of HS2 is a form of social cost benefit analysis. It is not a commercial business case, and accepts that HS2 requires a subsidy. The revenues generated involve substantial abstraction from the existing network revenues (as most passengers are expected to transfer), resulting in the incremental revenue unable to cover the cost of the investment.

This means that economic and welfare benefits are needed to justify the subsidy. In the case of HS2, for the full "Y" £44 billion of social benefits are claimed against a subsidy of £17 billion. However there are serious issues with:

— The value given to the journey time savings from higher speeds, and the consequence this has for the best approach to HSR.

— The technical delivery of the service pattern and the absence of any mention of this issue, or its implications in the case for HS2.

— The level of rail travel forecast and the manner in which this forecast was derived.

— The failure to develop a best alternative to HS2, and use of an unrealistic "do minimum" that implies there is no real alternative to HS2 and artificially inflates its benefits.

— Ignoring competition with the existing rail network.

3.2 Benefits

The largest benefits of HSR are on-board journey time savings: 40% (£18 billion) of HS2's £44 billion.

Productivity: DfT's benefits appraisal framework ignores that mobile technology is transforming the productive potential of travelling on trains. This is important as £14 billion of the £44 billion (see Annex 1) relates to the productivity benefit of reducing journey times: DfT assume that every minute taken off the journey time creates an extra minute of productive time.

The process of time on trains becoming productive (and more enjoyable) is an on-going one. Currently there are weaknesses in radio coverage (that reduce efficiency), and while market penetration has proceeded beyond early adopters, it is not complete especially for mobile internet and ultra portable systems. But when considering the benefits of a project starting more than 15 years hence, it would be expected that all travellers would have access to such advanced technology as they need to be able to spend their time effectively.

Of course not all time on trains is or will ever be fully productive. People need to find there seats, unpack, pack up again and get ready to disembark. But journey time savings do not effect such unproductive time, rather the duration of the time in the middle.

Some business travellers on long distance trains also use their time to take refreshments, a cup of coffee or a meal. Such time is not productive, but reducing the journey time does not generate productive time unless the coffee or meal is forgone.

DfT correctly observe that the value of time should not be altered in isolation,[176] and there are consequential adjustments that need to be made. What is required is an extensive re-think on the values of time saving and the costs of crowding from those settled a decade ago on even older data. It is clear that crowding can result in rendering time unproductive and materially less enjoyable, hence crowding values should be changed.

However DfT are mistaken about the specific implications of these changes for HS2:

— HS2 only appears to relieve crowding against an unrealistic comparator. It has no crowding benefits compared with the best alternative which is its proper comparator (see section 3.5).

— Adjusting the value of time for journey time reductions also has serious implications on decisions about how fast high speed railways should be designed to go, and the trade offs inherent in this and route choices. This is discussed at section 4.

— DfT suggest that modal transfer from air and car would restore the benefits, as those swapping would gain productive time. But air will shortly have facilities for full use of mobile technologies.[177] And for car, the 7% of HS2 passengers transferring from car could not possibly off-set the loss of benefit from the others. DfT's methodology (with some logic) attributes new rail passengers with half the value of benefits of existing rail passengers swapping from classic rail to HS2. This implies the new passengers gain no value from productivity, if HS2 has no productivity benefit over classic rail.

— DfT offer an alternative defence. They claim that decisions made by business travellers maximise their overall productivity and reveal the value business travellers actually place on time savings. They claim this indicates even higher values for time savings. But such decisions may reveal many things quite unrelated to productivity: business travellers generally do not bear the cost of their travel and so their choices may be driven by other motives than business efficiency. Their decisions may relate to matters of minor personal convenience or prestige, and reflect the extent to which business travel is managed within their organisation. It is hardly reasonable to base a £30 billion investment on speculation on what business travellers' choices may or may not reveal without any systematic analysis.

DfT's case for HS2 relies on valuing time savings in a manner that is now outdated. They have failed to appreciate that it makes a material difference to how they should assess HSR.

It is not satisfactory to justify public subsidy on a benefit that there can be no confidence will exist when HS2 commences services. DfT cannot rely on an increasingly outdated view of how people can work or on speculation that time savings may yet be highly valuable if assessed in some other as yet undeveloped manner. This is an issue for any high speed railway that needs to be justified on productivity and welfare benefits.

Unit value: DfT use a value of business time that relates to 10 year old data. The earnings relate to a very high point in the earnings distribution, equivalent to about £70,000/a in 2009. It is 40% more than the figure for car drivers and 96% higher than for car passengers.[178] DfT escalate the value of business time by the expected increase in real earnings throughout the appraisal period, and so assume that business travel remains the preserve of the earnings elite.

Given that long distance rail travel has increased by 60% since 2000, and the forecasts for HS2 project a further quadrupling (against a population increase of only 22%), DfT expect about a six-fold increase in business demand over when the original data was collected.

The major increase in the use of rail for long distance business trips means it is not credible that all the journeys could be made by such elite earners. Nor is the rail earnings differential above car drivers credible given that this growth will mainly be by modal shift from cars. If we assume that the relative earnings of rail business travellers reduce to the average (mean) of "managers and senior official" this reduces earnings by a third, but this figure is still in the top decile of earnings.[179]

This in itself would materially reduce expected benefits (by £7 billion out of £44 billion as it affects all time savings and reliability benefits, see Annex 1), but many of these benefits are also subject to downward adjustments for other reasons.

3.3 Technical deliverability

The service pattern assumed for the "Y" Network requires running 18 trains/hr on the Y "stem" (London West Midlands section) in the peak, but:

— No services to Heathrow or running onto HS1 have been included in the 18 train paths.

— 18 is problematic as it seems that with existing technology 15 trains/hour is the maximum.[180]

If some of these services cannot be run, then the assumed passenger numbers, revenue and social benefits (including reliability) will be unobtainable. If new technology needs developing rather than buying standard equipment, then the costs may prove higher.

This is unsatisfactory in several respects:

— Risk: no consideration is given to the risk to delivery or discount applied to the potential benefits. No sensitivity tests reveal what happens if the Y is limited to 15 trains/hour.

— Solutions: DfT have presented no evidence that it will be technically achievable. There is a report[181] suggesting that HS2 Ltd do not expect that there will be a technical solution, so that the projected benefits will only be obtainable at the cost of building another HSR line.

The issue has been known for a long time eg work for Greengauge21 drew attention to it in 2009[182]. The March 2010 documentation[183] and Autumn 2010 Technical seminars both acknowledged that new technology would be required. But the May/June 2010 workshops (attended by DfT, HS2 Ltd and technical experts) concluded:

"So, the better approach, as anticipated by HS2 Ltd, would be to presume that there will need to be a second north-south high-speed line in due course and plan accordingly. While this creates a fresh set of planning challenges, it has a demonstrable business case, and resolves the problems associated with the thinking in Cm 7827."

A suggested solution was that HS2 trains would operate under computer control, but it was recognised that this is unlikely to be viable given the interfaces with the existing network (that HS2 would have).

— Misinformed: despite the previous documents the public consultation materials contain no reference to these technical uncertainties. Indeed DfT suggest[184] the opposite:

"Any new high speed lines would also be based on proven European standards, technology and practices, reducing the risk of unanticipated technical problems."

Heathrow spur: The decision in December 2010 to include a spur to Heathrow further worsens the line capacity problem, because Heathrow services would need to take the paths of some of the 18 services in the "Y" specification, and the junctions will also reduce capacity

Phase 1: The London-West Midlands phase of HS2 is not so reliant on new technology, with only 14 trains/hour in the peak, albeit within this 14 none are included for services onto HS1 and through to the Continent. However, with a benefit cost ratio of only 1.6 (or 2.0 with Wider Economic Impacts (WEI)) and the same vulnerability to benefit, demand and comparator issues, a case for Phase 1 alone is not sustainable. On DfT's own re-working of the economic analysis of the alternatives of upgrading the WCML, "Rail Package 2" (RP2) has a better benefit cost ratio 1.9 (without WEI) - and DfT acknowledge that this underestimates its benefits.

Reliability: HS2 is assumed to deliver improved reliability, contributing almost £6 billion of the £44 billion benefits (see Annex 1), as each minute of improvement is taken to be worth three minutes of on-board journey time.[185] A self contained new railway running trains of the same type is expected to achieve high levels of reliability. However, HS2 is not an isolated railway, as classic compatible trains are planned to run services from the classic network with mixed traffic, where it can be expected to experience delays. Because HS2's service pattern requires intensive usage, with no proposed means of isolating itself, it can be expected to import unreliability. This makes the claimed reliability improvements unrealistic.

Insufficient capacity on classic network: the HS2 trains that will run onto the classic network will have fewer seats than those they replace, and hence be incapable of handling the increased growth. It is understood there are difficulties in how to run more than one train per hour to Scotland. HS2 is therefore unlikely to be capable of carrying the passengers forecast for it.

3.4 Demand

DfT forecast rail growth doubling on WCML by 2043 (102% increase over 2008, an annual growth rate of 2%) to just over trebling with the HS2 uplift (219%).

But their approach to demand forecasting is unsound because:

— Link between wealth and travel decoupled: DfT assume a relationship between economic growth and long distance domestic travel for 35 years into the future, despite evidence that the relationship has already weakened, if not expired entirely (see Figure 1).

— Sensitivities: DfT fail to show that the investment in HSR is robust to a lesser or less enduring linkage with economic growth - including not following their own (webtag 3.15.4) guidance on conducting sensitivities that would have shown the fragility of the case for HS2.

— Outdated model: DfT continue to employ a version of the forecasting model that exaggerates growth in longer distance journeys, failing to adopt their own draft guidance, the latest version of the model, or heed the results of research that they commissioned that show that their approach on this specific issue (use of a distance addition) is now wrong.

— Long term 35 year forecast: DfT use the forecasting model to predict rail demand over far too long a period in order to "justify" a demand increase (a "doubling") that they determined independently. If they had retained the 25 year cut off they used in their own 2010 forecast, then their own analysis shows HS2 would be "poor" value for money (ie BCR below 1).

— HS2 uplift: this depends on journey time relationships from the rail model that pre-date making time on trains productive, and hence over values reducing journey times.

Link between wealth and domestic travel: DfT assume a continued link over the 35 years that they forecast demand increases. This is surprising as there is already evidence that for both domestic travel (as in Figure 1) and long distance domestic travel that this linkage has weakened and may have ended. This decoupling of economic growth and domestic travel has also been observed in other European countries.[186]

Figure 1

TRAVELLING TIME, TRIPS AND DISTANCES PER PERSON (COMPARED WITH REAL GVA/CAPITA[187]

The trips per person have been constant (see Figure 2), but the DfT forecast assumes the over 100 mile trips will increase from 7 to 9.5 by 2043 (by 36%).

Demand has grown with population. However, population growth has been and is forecast to be relatively small (22% to 2043), explaining only a fifth of DfT's rail forecast (of 102% to 2043).

With overall long distance demand showing saturation, rail has grown strongly since privatisation in the mid 1990s. But this needs to be put in context:

— While rail demand grew strongly from 1995, there was no growth from the early 1950s to the mid-1990s at all.

— There are specific reasons that favoured rail growth (increased investment, improved services, airline style pricing and mobile technology making time on board more useful and enjoyable). But rail's modal share cannot expand indefinitely.

In this situation, at minimum DfT should be concerned that a major investment such as HSR is robust to the possibility that long distance travel demand will cease growing with the economy much earlier than 2043. In fact they fail to even consider the lesser gearing of demand on economic growth that is required by their own guidance.[188] What DfT do show is that should demand stop growing at 2033, the subsidy exceeds the benefits.

Out dated rail model: DfT used an old version (PDFHv4.1) in which the "income elasticity" factors forecast longer rail journeys to grow more quickly than shorter ones. National Rail Trends data in fact shows the reverse: the average long distance rail journey is now 16% shorter than in 1995. PDFHv4.1 also has larger values for journeys to London than those originating in London. For 1% more income, people in Birmingham are expected to spend 2.48% more on travel to London, whereas in Glasgow it is 2.80% more. This issue is recognised as a problem:

— DfT issued Draft Guidance (but still to be adopted) which imposes a cap (at 2.5%).

— The current model, v5.0, which was adopted in August 2009, removes the distance factor eg an elasticity of 1.9% applies to both journeys, but the HS2 forecast still used PDFHv4.1.

The recent research (for DfT and others) has now confirmed that no distance addition is appropriate for longer rail journeys,[189] yet it has still been used to produce the DfT forecast.

Sensitivities: It has already been noted that DfT require in their webtag guidance that different elasticities be used as a sensitivity test. These are substantially lower than not just v4.1 but also the latest PDFHv5.0 values. These tests were not conducted.[190]

Projecting demand increases too long: The demand model used is inherently best suited to making short to medium term rail forecasts. This is because it is a fixed elasticity model that assumes people spend ever increasing proportions of income on travel. It is normal to cap the period to reflect market saturation. The use of a 35 year growth period is hard to reconcile with:

— DfT's normal horizon for growth increases of 2026[191] ie 18 yrs (2008-26)

— Sir Rod Eddington's view that a 10 year period was long enough.[192]

— Network Rail who see a cap as essential,[193] although express concerns about using PDFH for long term forecasts. PDFH was calibrated during a period of rapid rail growth, and has been amended five times to reflect behavioural changes

— DfT who used a 25 year period (to 2033) for their March 2010 forecast, justified on the HS2 completion date, rather than the capabilities of the model.[194] Given the cap concerns the "background growth" (not induced demand), and the project's completion date does not effect the durability of the current elasticities,[195] this extension is difficult to understand

— If rail growth is considered over the preceding 35 years (ie from 1974, see Figure 3), only the last 15 years show any growth in rail travel at all.

In fact DfT admit that they do not use the demand model to forecast demand, but to estimate how long it would take to double.[196]

"……..For our earlier work we capped growth of rail demand in 2033, at a level of demand in the WCML corridor that is slightly more than double current levels. With the lower current GDP forecasts, this cap would now be hit later, in 2043."

The "doubling" in demand has been preserved, despite it having no basis in the 2011 analysis.

DfT do consider the effect of growth finishing earlier (albeit in the context of it stopping both later and earlier than 2043), and say that growth is needed until 2034 before Phase 1 has benefits greater than the subsidy. So if DfT simply reused the same 25 year cut-off as in the 2010 forecast (ie 2033) they would have concluded that HS2 is "poor" value for money (BCR under1).

Induced travel: HSR is expected to induce additional travel and modal shift because journey times are shorter. The uplift forecast (for HS2 (Phase 1) represents a 54% increase over those transferring from classic rail. This is likely to be overestimated:

— PDFHv4.1 is used to make the forecast, and it is based on journey time relationships that pre-date the new technologies making time on trains more productive

— DfT say that there was a 36% increase in demand for an average 34 minute reduction in journey time[197] for WCML. HS2 journey time saving will be on average smaller for the first phase of HS2. WCML could only partly reflect the reducing value of journey time savings. Even 36% is therefore a high estimate of uplift.

An "indicative revised forecast". Tables showing the consequences of adjusting the demand forecast to be based on more realistic assumptions are included at Annex 1. For demand we assume PDFH5.0 income elasticities, demand growth capped at 25 years (2033), and the same level of uplift from HS2's shorter journey times as that reported for WCML by DfT (36%).

This produces an "indicative demand forecast" of 81% increase over 2008 for WCML for 2033 and staying at this level (compared to DfT's 209% for 2043). Annex 1 col 8 shows this reduces the BCR for the full "Y" to just 1.0 (including WEI), and less for phase 1.

3.5 Comparison basis

The "do minimum" comparator assumes no improvement in capacity or services beyond those already committed.[198] It is unsuited as a basis against which HS2 can be assessed:

— There is no pretence that the "do minimum" case is realistic, the forecast demand growth could not be sustained without capacity development. Demand is forecast without regard to supply, with the result that the capacity of the "do minimum" case is insufficient.[199]

— The £5.1 billion benefits from relieving the high levels of crowding in the "do minimum" case are entirely artificial and result from its unrealistic nature (which is recognised by HS2 Ltd),[200] with realistic alternatives having lower crowding than HS2 (as discussed at section 3.6)

— Proper assessment needs to be based on comparing HS2 with the best alternative.

— DfT failed to develop a best alternative, making no attempt to produce an optimised case.[201]

Using a "do minimum" case for reference may be reasonable for short lead time projects, where little else may happen in the timeframe. But to assume that the railway network will be effectively unchanged for a period of over 30 years is unreasonable and unrealistic. It also implies ignoring all the opportunities for improvements that extensive renewals would offer.

Comparison with the best alternative potentially increases some benefits because of how DfT value the benefits from induced demand. But this effect is diminished by the reduction in value of journey time savings and the questionable basis for anticipating reliability improvements.

3.6 Alternatives

DfT fail to properly consider the alternatives to a new railway, making no attempt to produce the best options that match demand in terms of quantum and when it occurs and at minimum cost.

The best alternative to the London-West Midlands phase that was developed (RP2) has been repeatedly misrepresented,[202] although it produces all the capacity needed (151% on DfT's numbers over the 2008 base) and with a better benefit cost ratio.

In fact it is possible to develop a better alternative than RP2, which requires less work on the track and is considerably cheaper. Similar low cost solutions are available for the Midland Main Line and ECML, which make up the suite of alternatives to the full "Y" network.

The table is based on work by Chris Stokes[203] that develops best alternatives to HS2 for WCML, Midland Mainline and ECML. The table below gives the case for WCML (ie against the London-West Midlands phase of HS2). It shows that greatly more capacity is provided than is required on DfT's demand forecasts (with a 102% increase to 2043), through various rolling stock changes, and minimal investment in infrastructure.

BEST ALTERNATIVE FOR WCML

Interventions	Daily trains	Daily standard class seats	% increase above 2008 base		Comments
			Standard class	total
Train investment with no/little infrastructure investment
HS2 2008 Base		59,298			Base used by DfT for evaluation of HS2. Predates full WCML upgrade timetable.
Current timetable	286	81,924	38%	36%	Includes Voyager services (30 daily)
Evergreen 3	[68]	[28,900][204]			Committed scheme - complete in 2011 Illustrative numbers -excluded from totals
Committed lengthening project	286	105,924	79%	63%	Committed scheme - implemented from 2012
December 2013 additional services	306	113,769	92%	75%	Additional hourly off-peak train each way
First class reconfiguration	306	134,379	127%	84%	One car converted from first to standard
12 car sets (except Liverpool)	306	166,908	181%	121%	Major physical constraints at Liverpool
Infrastructure investment
Additional services	336	184,326	211%	144%	30 additional daily trains following investment to relieve pinchpoints

Eddington[205] referred extensively to the advantages of improving existing infrastructure noting:

"… Upgrading rolling stock and lengthening trains on congested rail links, combined with changes to timetables to increase frequency can significantly increase the effective capacity of existing rail lines. Evidence of illustrative interventions to increase variable capacity on inter-urban links into London by investing in new rolling stock, for example, suggests strong returns are possible from well-targeted interventions, with wider BCRs ranging between 1 and 13 and costs between £50 and £500 million but more typically between1 and 3.28. The higher returns are largely driven by the ability to add variable capacity with minimal infrastructure requirements….."

The main advantages of the upgrade approach are:

— Crowding: because of the incremental character and short lead times, upgrades can be made that prevent serious crowding from developing. It has been repeatedly asserted that WCML will be full by 2020 - only upgrading the existing services can address this problem.

HS2 has a loading factor of 58% which is higher than DfT's own RP2 alternative (52%) or the best alternative shown in the table (also 52%).

— With a new recognition that crowding may stop time on trains being productive (or enjoyable) - rather than being a minor annoyance as DfT currently assess it - the benefits of preventing crowding are much more important.

— Cost: the best alternative described above is considerably cheaper than HS2, with an infrastructure cost of £2 billion instead of £18 billion for the first phase of HS2. It is likely that demand to 2043 could be entirely satisfied by rolling stock measures avoiding the need for infrastructure investment.

— Value for money: most of the additional capacity is achieved through more rolling stock and extra seats per train. It is likely that the changes could be made on a fully commercial basis, where the additional fares will pay for the investment. If a subsidy is required it is likely to have a very high benefit cost ratio.

— Fast and Incremental: upgrades remove the risk associated with needing to forecast demand for long periods as upgrades can be done in stages and relatively quickly.

— Capacity: Despite assertions to the contrary, upgrades of the existing network have massive potential to increase capacity (as shown in the table above). These increases are larger than that DfT's forecast for demand to 2043 (102%). This means that upgrades can meet capacity requirements for at least the next 35 years, on DfT's forecasts. With more realistic forecasts they would meet demand indefinitely.

— Connectivity: Unlike new HSR, the existing long distance rail network is highly integrated with local transport. This is a major advantage over HSR, as parkway stations have little or no existing connectivity with public transport, new city centre station like Birmingham Curzon Street are also remote from the existing transport hubs, while connection into the existing networks are highly disruptive, as with the approach into London and the rebuilding of Euston Station needed for HS2.

Unlike HS2, uprating the existing network does not bypass many major cities, with a resultant worsening of their rail services. Despite statements implying the contrary, the case for HS2 involves £5.4 billion saving from reducing existing rail services. The effect of most passengers migrating to HSR creates spare capacity (because existing services will reduce), but any additional local services would be likely to require additional subsidy.

— Disruption: despite assertions to the contrary, the best alternative would result in very little disruption. Even RP2 which is more reliant on infrastructure improvements than the best alternative, would be far less disruptive than HS2

— Environmental impact: upgrades are environmentally preferable, the lower speeds give rise to lower carbon emissions, they follow existing rail corridors and so do not require the sacrifice of an AONB or tranquil countryside.

The disadvantages that are often cited:

— Less benefits: the journey time savings will be less than HSR, but they are also considerably over valued. It is suggested it will achieve less modal shift from air However, HS2 is unlikely to result in much shift, as the only domestic routes susceptible to switching are the London - Scottish lowlands routes. There are no air services between London and Birmingham and Leeds. Rail already has 79% of the Manchester market, HS2's journey times for 2033 to Newcastle will not improve on the fastest train to London in the summer 2011 timetable. It is unlikely that the lowlands of Scotland will have sufficient traffic to represent as large a shift as DfT predict (equivalent to 95% of the Heathrow/Scottish lowlands market for phase 1 and double for the full Y) especially as the market is declining.

— Worse reliability: DfT strongly emphasise that continued increases in services on the existing rail network will result in deterioration in reliability. Lengthening trains is unlikely to have such an effect, and addressing pinch points tends to improve journey times and improve reliability. The evidence is that as the railway has become busier, reliability has actually been improving since Hatfield, with Network Rail hailing the Public Performance Measure exceeding 90% for 2009, reaching the highest level achieved.

— Not practical: RP2 has been said not to be practical, as it involves intensive all day operations, rather than just peak. This is an unsatisfactory argument as:

— RP2 was developed for the 2010 White Paper by Atkins and timetabled by Robert Watson Associates, both reputable consultancies, and signed off by DfT.

— RP2 was again included in the February 2011 consultation materials as the WCML element of the upgrade alternative to HS2 Scenario B, which indicates that DfT continue to believe it is a viable option.

3.7 Lessons learned from previous projects

WCML Route Modernisation Project was originally specified to deliver a new signalling system that allowed higher speeds, more capacity, and lower costs than conventional signalling. It eliminated lineside signalling equipment and was to use a yet to be developed radio controlled moving block signalling system. The new system has still yet to be developed, and the route modernisation had to be successively respecified and de-scoped, eventually being completed with conventional signalling and a lower top speed than originally intended.

The delivery of the "Y" Network service specification requires 18 trains/hour in the peak. The specification has no trains available for Heathrow or HS1, which requires either more train paths or fewer London services. 18 trains/hr is apparently not achievable with current technology, as HS2 Ltd admit. It seems that HS2 Ltd believe that it will be achievable with new technology, although expert advise seems to be that HS2 should not in prudence be assumed capable of more than 15 trains/hour.[206] If HS2 needs to be de-scoped, even on DfT's assessment, the "Y" Network would not be viable.

The Eddington Transport Study[207] 2006 noted:

"history has shown that for large-scale infrastructure projects that rely on emerging technological solutions, costs tend to increase by an order of magnitude against original estimates."

4. The strategic route

DfT's failure to adjust their evaluation framework to recognise that time on long distance trains has been becoming useful is important in the context of specification. While greater speeds bring shorter journey times, they also bring disadvantages:

— Higher capital costs.

— Higher energy consumption (and carbon emissions).

— Higher maintenance costs.

— Inability to follow existing transport corridors (greatly increase the adverse effect on landscape and local impacts).

— Greater noise pollution.

The decision on the optimal speed is therefore the result of a trade-off between the benefits from journey time savings and the adverse impacts. If the value of any given level of journey time saving is substantially reduced, the best balance is likely to favour a lower speed. To illustrate, if there are no productivity benefits from the reduced journey time, and all travellers value journey time savings at half the level leisure travellers did before their time became more useful, the time saving is worth only about 15% of its previous value.[208]

While revaluing time savings does not necessarily change the preferred speed, the substantial reduction in value calls into question decisions made on the previous basis. It also invalidates the route selection process that HS2 Ltd have operated, as this too involves trading-off journey time savings against other factors. The likely effect of a revised approach is:

— To prefer a speed specification more able to conform to existing transport corridors.

— Make station stops more attractive.

— Make uprating existing infrastructure more attractive, as the inability to deliver large journey time savings becomes a smaller consideration.

Case for HSR: Without a high value of time savings for social benefits, the case for a subsidy to build a HSR is likely to be weak. While this does not affect a commercial case, a commercial case for a HSR is unlikely to work in the UK, due to the existing fast and frequent train services that would compete. While it is conceivable that a case for a new railway could be made on the grounds of capacity, in practice there are plentiful opportunities to increase the capacity of the existing infrastructure at much lower cost, effectively for the indefinite future.

Building from London: Building HS2 in stages from London is likely to be best in that it services the greatest potential demand first. However, as the work on a possible Maglev study showed,[209] this is likely to direct the economic benefits to London and South East, compared to building from the north first.

Connections to Heathrow and HS1: There is insufficient demand to justify frequent rail services to Europe, without which HS2 could not successfully compete against air (which with small planes can have frequent flights that are near to full). This position is demonstrated by HS2 Ltd work of 2010, summarised and extended in the work for 51M work (by Chris Stokes)

5. Economic rebalancing and equity

While strong claims have been made about the benefits of HSR in stimulating regional economies, there is no good evidence that HSR will help bridge the North South divide.

HSR supporters (eg Greengauge 21) have commissioned studies that purport to demonstrate large economic benefits for the regions.[210] However the methodology has problems that cause the results to be overstated, according to a review[211] by leading academics in this area. Similar criticism of the methodology were raised in a review of the literature on the economic impacts of HSR by Professor Tomaney.[212]

It seems that the balance of evidence suggests that improving north south connections tends to favour London and the South East, because of the draw of London and its greater efficiency in financial services. To quote the Tomaney work:

"Overall, the report suggests that the impacts of high speed rail investments on local and regional development are ambiguous at best and negative at worst. It is very difficult to find unambiguous evidence in support of the contentions that are being made by the government about the potential impacts of HS2 on the cities and regions of the UK."

This was also the conclusion of the Eddington Transport Study[213] after extensive review and discussion that "…..The evidence for transformational benefits is at best unproven. .."

As there is only weak evidence of benefits, regeneration should be a secondary consideration in route selection. If the objective is to achieve regeneration, addressing the primary impediments to growth - eg lack of skills, will be more relevant. If the objective is to achieve regeneration through transport, local and intra-regional schemes that improve the efficiency of local economies would be more attractive.

Locations and socio-economic groups benefiting: The places most likely to benefit are London and the South East as HSR will giving improved access to Midlands and Northern markets for financial services. The evidence suggests:

— Station sites and their immediate vicinity are likely to benefit from redevelopment because they will become attractive as retail and office locations. This is demonstrated by the work done for HS2 Ltd.

— DfT figures state of the 30,000 new jobs around stations, 73% are in London. It seems generally accepted that such jobs are mainly relocations rather than net additions, with the gains balanced by losses in the station's hinterland.

— HS2 Ltd's demand model implies leisure trips to London will outweigh those starting in London - tourism can therefore be expected to benefit London rather than the regions.

In regard to the potential beneficiaries, the main beneficiaries will be the traveller or their employer. Assuming that HS2 users will be similar to the long distance rail users of today, the travellers will be predominantly drawn from the most affluent sections of society (see Figure 4).

However, the productivity benefits to business would be modest, because business travellers can be expected to be fully productive on long distance trains well before HS2 is built, so the reduced journey times would not represent a productivity benefit. But businesses whose employees travel on HS2 would benefit from the fares being below the full cost.

Beneficiaries contributing to costs: The issue of getting beneficiaries to contribute to costs, thus reducing the burden on tax payers who will not benefit directly, is appealing. The presumption that there are large benefits that will, without special measures, arise as significant windfall gains to specific groups is incorrect, if those benefiting from the line's construction and supply of the trains and equipment are excluded.

Even local authorities benefiting from the new stations may suffer counterbalancing detriment, as the new shopping centres and offices will draw jobs from nearby but less favoured locations rather than generate truly additional jobs.

An effective means of making those who benefit contribute more would be to charge higher fares. But, while premium fares might get those gaining the benefit to contribute more to the cost, it would further concentrate users into the higher income groups. Additionally, this may worsen the overall economics, with high speed trains quite empty and the competing classic services retained to carry those unwilling to pay higher prices.

6. Impact

Are the environmental costs and benefits correctly accounted? The NATA framework quantifies those costs and benefits suited to be monetised and includes them in the calculation of the benefit cost ratio - other dimensions are assessed but not reduced to a money value.

For HS2 there are several unsatisfactory features in the accounting of environmental impacts:

— Despite the assumption that runway capacity will be constrained for London, the carbon consequences of re-use of freed-up runway capacity is not assessed or included in the quantified assessment - this greatly understates the potential for increasing emissions.

— The potential reduction of aircraft emissions is unchanged from the White Paper assessment, despite fewer passengers transferring from air to HS2 and despite (by implication) some of air's demand being suppressed demand.

— The emissions from electricity generation are stated to be the annual all generation average, despite HS2's electricity requirements being day time and peak.

— The spoil calculations greatly underestimate the volumes of spoil[214] excavated from tunnels and cuttings in the Chilterns, causing construction traffic to be similarly underestimated.

Annex 1

ECONOMIC SUMMARY TABLES

ADJUSTED DFT RESULTS FOR LONDON -WEST MIDLANDS (PHASE 1): REVISIONS TO BENEFITS ONLY, DEMAND ONLY AND EFFECT OF REVISING BOTH

All £bn NPV at 2009 prices	DfT Feb 2011 (Phase 1)			Revisions to benefits only (see basis in table below)			Revised demand only	Revisions combined
Col 1	2	3	4	5	6	7	8	9
	Business	Leisure/ commut	Total	Business	Leisure/ commut	Total	Total	Total
1.1 Rail journey time saving	5.7	1.7	7.3	0.4	0.8	1.2	4.5	0.7
1.2 Improved reliability	1.8	0.5	2.3	1.2	0.5	1.7	1.4	1.0
1.3 Reduced crowding	0.7	1.9	2.6	0	0	0	1.6	0
1.4 Waiting time	1.4	1.4	2.8	0.9	1.4	2.3	1.7	1.4
1.5 Other impacts eg access	0.3	0.4	0.6	0.2	0.4	0.6	0.4	0.3
2. Road decongestion	1.2	0.6	1.8	1.2	0.6	1.8	1.1	1.1
3. HS1 link			0.4			0.4	0.2	0.2
Total transport user	11.1	6.4	17.9	3.9	3.7	8.0	10.9	4.9
Reduced tax			-1.3			-1.3	-0.8	-0.8
Net transport benefits			16.6			6.7	10.1	4.1
4.1 WEI - agglomeration			3.0			3.0	3.0	3.0
4.2 WEI - imperfect competition			1.0			0.2	0.6	0.1
Total WEI			4.0			3.2	3.6	3.1
Total net benefits incl WEI			20.6			9.9	13.7	7.2
Additional revenue			13.7			13.7	8.4	8.4
Capital and operating cost			24.0			24.0	24.0	24.0
Net subsidy			10.3			10.3	15.6	15.6
Benefit cost ratio (excl WEI)			1.6			0.6	0.6	0.3
Benefit cost ratio (incl WEI)			2.0			1.0	0.9	0.5

Basis of revisions to benefits (col 5-7), to demand (col 8) and combined effect (col 9)

1.1: Business: productivity gain from shorter on-board journey time reduced to zero. Time savings valued at the adjusted leisure value. Leisure: time savings value is halved to reflect the usefulness of on-board time.

Business time unit value is reduced by one third to reflect less elite nature of rail business travellers with the major increases in business volumes. Affects items 1.1, 1.2, 1.4, 1.5 and 4.2.

1.2: Reliability benefits for phase 2 assumed to be halved due to issues about achievability of 18 trains/hour. No adjustment is made to phase 1 (when 14 trains/hour).

1.3: Crowding benefit removed: realistic comparator of uprating WCML eg RP2 is less crowded than HS2.

1.4: Waiting time is not reduced although a realistic comparator would have higher train frequency than "do minimum", as RP2 does.

4.2: This item reduces automatically as valued at 10% of all business time savings and reliability benefits.

Benefit adjustments (col 5-7): DfT demand forecast unchanged (ie +209% increase); effect of applying revisions to basis of benefits is pro rata to DfT demand for all items except 1.6, 4.1 and costs.

Demand adjustments: (col 8): DfT benefits basis unchanged; uses an "indicative revised forecast" of 81% increase over 2008 base (incl. *background growth and **HS2 uplift), instead of DfT forecast of + 209%.

Revisions combined (9): the effect of revising the basis of both DfT benefits and DfT demand forecast.

*"Background growth": 38% at 2033 and remaining at this level (compared with DfT 102% at 2043); based on PDFHv5.0 income elasticities; DfT 2011 annual growth rate capped at 2033. **With HS2 uplift: 38% is increased to 81% (with HS2 uplift) at 2033 and remaining at this level (compared with DfT 209% at 2043); based on WCML uplift of 36%.

ADJUSTED DFT RESULTS FOR FULL "Y" NETWORK: REVISIONS TO BENEFITS ONLY, DEMAND ONLY AND EFFECTS OF REVISING BOTH

All £bn NPV at 2009 prices	DfT Feb 2011 (full "Y")			Revisions to benefits only (see basis in table below)			Revised demand only	Revisions combined
Col 1	2	3	4	5	6	7	8	9
	Business	Leisure/ commut	Total	Business	Leisure/ commut	Total	Total	Total
1.1 Rail journey time saving	14.1	4.3	18.4	0.9	2.2	3.1	11.2	1.9
1.2 Improved reliability	4.4	1.3	5.7	1.5	0.6	2.1	3.5	1.3
1.3 Reduced crowding	1.5	3.6	5.1	0	0	0	3.1	0
1.4 Waiting time	2.0	2.0	4.0	1.3	2.0	3.3	2.4	2.0
1.5 Other impacts eg access	0.5	0.6	1.2	0.4	0.6	1.0	0.7	0.6
1.6 Released capacity benefits			1.3			1.3	1.3	1.3
2. Road decongestion	2.7	1.3	4.0	2.7	1.3	4.0	2.4	2.4
3. HS1 link			0.4			0.4	0.2	0.2
Total transport user	25.2	13.1	39.9	8.3	7.3	15.1	24.9	9.7
Reduced tax			-2.7			-2.7	-1.6	-1.6
Net transport benefits			37.3			12.5	23.3	8.1
4.1 WEI - agglomeration			4.1			4.1	4.1	4.1
4.2 WEI - imperfect competition			2.4			0.8	1.3	0.4
Total WEI			6.5			4.9	5.4	4.5
Total net benefits incl WEI			43.8			17.3	28.7	12.6
Additional revenue			27.2			27.2	16.6	16.6
Capital and operating cost			44.3			44.3	44.3	44.3
Net subsidy			17.1			17.1	27.7	27.7
Benefit cost ratio (excl WEI)			2.2			0.7	0.8	0.3
Benefit cost ratio (incl WEI)			2.6			1.0	1.0	0.5