Written evidence from HS2 Ltd (HSR 169)
INTRODUCTION
1. This document covers HS2 Ltd's response to
the Transport Select Committee's inquiry into high speed rail.
It summarises the outcomes of more than two years work to date
in response to our remit from Government to develop proposals
for a high speed rail network in the UK. This includes detailed
technical work on rail engineering and operations, demand analysis
and appraisal of sustainability and therefore this submission
is necessarily a high level summary. It is intended to complement
and support the Department for Transport's response, and therefore
does not specifically address the questions on the main arguments
for or against high speed rail and its fit with the Government's
transport policy objectives which are more properly covered by
DfT.
BACKGROUND
2. Britain's rail network is seeing a continuing
pattern of rising demand, in particular for long distance travel.
Rail capacity is under increasing strain and services are growing
more crowded. The scope to meet rising demand by running additional
services and longer trains is becoming increasingly limited. Some
of the country's key rail routes are forecast to be completely
full in peak hours in the next 20 years, meaning that a substantial
long-term expansion in capacity will be needed to enable the rail
network to respond.
3. The Government's assessment is that a new
high speed rail network would generate significantly greater benefits
for travellers in terms of capacity, connectivity and reliability
than any of the other options considered for adding capacity to
the rail network, and that it offers valuable potential to support
the Government's wider strategy to promote long-term and balanced
economic growth.
4. In this context, HS2 Ltd was established as
a Government company to examine the case and develop proposals
for a new high speed railway line between London and the West
Midlands, and potentially beyond. We submitted our initial advice
to Government in December 2009 and it was published in March 2010.
We have continued to develop these proposals, including refining
the alignment to mitigate environmental impact and examining options
for connecting directly with HS1 and Heathrow Airport. A public
consultation is currently underway on the proposed route.
5. The Government sees HS2 (London to West Midlands)
as the first stage of a wider high speed rail network. As part
of this we have been asked to develop proposals for a wider network
that would extend beyond the West Midlands to Manchester and Leeds.
We will submit our findings to Government by the end of 2011.
A Specification for High Speed Rail in the UK
6. In developing our advice to Government in
2009 we also developed a set of fundamental guiding principles
that would form the basis of high speed rail in the UK, with a
view to the future development of a wider national network. These
are:
Exploiting
maximum benefit from high speed capacity: With expected growth
in demand, and the greater range of destinations that could be
served with a wider network, HS2's capacity would be fully used
over time. Given also the high costs of construction, it is important
to ensure that the best use could be made of available paths.
Long
distance, city-to-city journeys: Benefits and revenues would be
maximised by focusing high speed services on direct connections
between large markets.
High
speed trains only: Permitting only trains capable of operating
at high speed would ensure that overall capacity of the line would
be maximised.
Integration
with the classic network: This would enable high speed lines to
serve more destinations, spreading the benefits of HS2 more widely.
Greater
segregation from the classic network over time: The highest levels
of reliability for passengers would be achieved on segregated
networks.
Integration
with other transport networks: To fully realise the benefits of
high speed rail it would be important that passengers could get
easily from the station to their final destination.
7. Given the timescale over which HS2 would be
operated, an element of future-proofing was included in the operational
and technical specifications anticipating likely technological
development in the coming decades based on advice from leading
suppliers and academics. The specifications were tested with an
independent panel of experts of international standing.
THE BUSINESS
CASE
Methodology and assumptions
8. To consider the economic case for high speed
rail we had first to consider what would happen in the absence
of such investment. The number of trips on long distance rail
operators has grown by 5% per year on average since 1995, and
our forecasts suggest that there will be continued growth in demand
for long distance trips going forward. However, given how far
ahead we are looking, we have taken a cautious approach to forecasting
demand, expecting it to flatten off at a certain level in future,
for example because of constraints on people's time.
9. For other rail appraisals the Department for
Transport typically uses a cut-off for demand growth of 2026 as
a reference point to ensure consistent comparison of smaller scale
schemes, such as investments in rolling stock. We do not, however,
consider this to be appropriate for HS2 as a major long term investment
that would not even open before this cut-off point. We have capped
rail demand in the WCML corridor (without HS2) at a level that
is slightly more than double current levels, which occurs in 2043.
This level of demand is consistent with households becoming wealthier
as GDP per head grows and adopting lifestyles with more frequent
long distance travel as demonstrated by those in higher income
bands today.
10. This growth would put increasing pressure
on the West Coast Main Line. Even with lengthening of Pendolino
trains this means that peak services would be very crowded with
all seats filled and passengers standing.
11. Against this background we have assessed
the economic case for HS2, seeking to take account of the full
economic costs and full economic benefits of the scheme and to
quantify these in monetary terms as far as possible. We approached
this on the basis of the HM Treasury Green Book and the Department
for Transport's Transport Appraisal Guidance. We assessed the
direct impacts that HS2 would have on transport users through,
for instance, journey time savings, reliability improvements and
reductions in crowding on trains. We also measured the impacts,
both positive and negative, that HS2 would have on the classic
rail network, and we looked at some of the wider economic impacts
such as agglomeration benefits. We looked at the scope for agglomeration
benefits beyond those identified by the current DfT methodology,
but it did not include these in the appraisal.
12. The appraisal assumes that the Government
would both regulate and maintain the high speed railway. In line
with Government guidance, we assessed the economic case over the
construction period and 60 years of operation, although we would
expect the investment in high speed rail to have a much longer
life.
13. Our assessment of the future level of demand
for long distance travel and the impact of introducing HS2 has
been informed by evidence and guidance from the Department for
Transport based on extensive research of trends in transport demand.
Our forecasts are set out in Chapter 3 of the Economic Case for
HS2 published as part of the consultation. For economic growth
we have applied medium term forecasts from the Office for Budget
Responsibility, with long term forecasts provided by HM Treasury.
Transport prices and population changes are taken from standard
Department for Transport guidance and models.
14. The relationship between these drivers and
transport demand is taken from existing evidence and the Department
for Transport's modelling guidance. For rail travel forecasts
we use the Department for Transport's recommended source - the
Passenger Demand Forecasting Handbook (PDFH). For air travel forecasts
we use modelling undertaken for the Department for Transport's
UK air passenger demand and carbon dioxide (CO2) forecasts 2009.
15. We established an external Analytical Challenge
Panel of leading independent experts to challenge and scrutinise
our approach to modelling the economic effects of HS2.
The economic case for HS2
16. A Y-shaped network that extended to Manchester
and Leeds would deliver journey time savings of up to an hour
between some of the UK's largest cities, with significant improvements
in connectivity between the North West, the Midlands and South
and West Yorkshire, as well as to and from London. It would generate
estimated overall benefits (including Wider Economic Impacts)
of £44 billion (present value), and estimated costs
would be £32.2 billion including risk and optimism bias.
Taking all factors into account, including estimated revenues,
we currently estimate a central benefit cost ratio (BCR) for a
Y-shaped network, including wider economic impacts, of 2.6; the
BCR excluding wider economic impacts is estimated to be 2.2. This
is a high level assessment at this stage, as we are still developing
detailed route proposals. We have been conservative in the assumptions
made for released capacity on the Midland and East Coast Main
Lines, and also for wider economic impacts, although the proximity
of Leeds, South Yorkshire and the East Midlands may mean that
agglomeration benefits are stronger than those observed in the
London to West Midlands scheme. We are continuing to refine the
assessment of the business case for the Y network as part of our
work on routes to Manchester and Leeds.
17. HS2 (London to West Midlands) alone would
deliver significant economic benefits. Benefits to business and
other transport users would represent the bulk of this (£11.1 billion
and £6.4 billion respectively). Benefits of journey
time savings form a large part of this, although improved reliability,
reduced crowding and other benefits to rail users are also important.
The benefits are not only from services on the high speed line,
but also from additional services that could be provided using
capacity released on the West Coast Mainline. Small further benefits
(£0.4 billion) are achieved through reductions in accidents,
noise and air quality from lower road traffic and benefits from
the HS1 connection. Net transport benefits would be worth almost
£16.5 billion.
18. From this we have subtracted the loss to
the Government of indirect tax revenue as a result of fewer people
travelling by car, for example, lower fuel duty receipts; this
is £1.3 billion. We estimated that HS2 (London to West Midlands)
would create around £4 billion worth of wider economic
impacts (WEIs) over the 60-year appraisal, with the largest element
being agglomeration benefits. These are mainly generated by the
released capacity allowing more commuter type services on existing
lines, rather than long distance journeys on HS2. The total benefits
of the scheme, net of the loss of indirect taxes, are therefore
estimated to be £20.6 billion.
19. Against these benefits, the costs of HS2
(London to West Midlands) over the 60 years of the appraisal would
be £24.0 billion. The bulk of these are capital costs
(almost £18 billion). As the first stage of a wider
network these include substantial "up-front" costs,
such as the reconstruction of Euston station and the London tunnels,
which would also be used on a wider network. The remainder of
the costs are the net impact on operating costs, covering both
HS2 trains and the classic network. Revenues of £13.7 billion
would partially offset the costs, giving a net cost to Government
of £10.3 billion. The BCR is the net benefit divided
by the net cost to Government. On this basis the BCR of HS2 (London
to West Midlands), including Wider Economic Impacts would be 2.0.
The BCR excluding Wider Economic Impacts would be 1.6.
Testing the reliability of the economic case for
HS2 (London to West Midlands)
20. There will always be some uncertainty about
future consumer behaviour and circumstances when predicting so
far into the future. We therefore carried out a thorough set of
sensitivity tests to explore the relationship between the assumptions
we made and the economic case. The main sensitivity tests covered:
The
level and pattern of demand without HS2 (London to West Midlands).
The
valuation of benefits of HS2 (London to West Midlands), in
particular looking at the valuation of time and other business
benefits.
The
cost to Government of building and operating the scheme.
Scheme
opening year.
21. The sensitivity tests showed that demand
for travel is a key factor affecting the economic case for HS2.
If demand is higher than our central case, benefits and revenues
would be higher and the BCR would rise. The opposite is true if
demand were lower. For such a long term investment the future
level of demand is the key consideration rather than the rate
of growth, since the latter affects the timing of investment rather
than whether it can be justified at all. For example, with the
same demand cap but a 50% lower rate of growth in demand, the
BCR excluding WEIs would be unchanged if the scheme opened in
2034 instead of 2026.
22. Therefore, factors which affect the level
of demand for HS2 and rail services will impact on the economic
case. Changes to assumptions on the cost of travel will change
demand levels, but large changes in respect of road and air travel
would be needed to have a very significant impact on the BCR.
For example, 50% higher road fuel duty and 37% higher air fares
would increase the BCR excluding WEIs to 2.7, while lower prices
would reduce the economic case. Slower growth in road or air travel
would reduce the BCR, and no growth in these modes would result
in the BCR excluding WEIs falling to 1.4.
Value of time for business passengers
23. For business users, the DfT values the time
spent travelling that could otherwise have been used in productive
activity and assumes that all time spent travelling is unproductive.
This assumption has, however, come in for challenge as, with laptop
computers and wireless internet access available on modern trains,
rail passengers are increasingly spending at least some of their
time in productive activity. If a business passenger spends half
of their time on a train working fully productively, then saving
half an hour in travel time may only save 15 minutes of 'lost'
productive time.
24. Even if this meant that values of time need
adjusting, it cannot be taken in isolation. For example, if people
are standing on a train it is reasonable to assume that they would
be unproductive, and relieving that crowding would have a productivity
effect. In our central case we value crowding for business passengers
at the same level as for commuters, so that the only impact of
crowding is the "discomfort" factor and no account is
taken of the potential lost productivity impact. It would therefore
be appropriate to increase this value if we were to assume that
some time on a train is productive. If we halved the business
value of time and adjusted crowding impacts to reflect the loss
of value experienced by business passengers travelling in crowded
conditions (instead of using commuter values for business passengers)
the BCR for HS2 (London to West Midlands) would actually increase
slightly.
Cost Estimation and Risk
25. Our cost estimates include an allowance of
64% for risk and optimism bias. Changes to costs will also have
an impact on the economic case. Recent work by the Treasury's
Infrastructure UK has identified a number of areas for potential
efficiencies. Reflecting this, the range of estimates of costs
we have tested implies a range of BCRs between 1.5 and 2.0.
Benefits of HS2 (London to West Midlands) across
regions
26. HS2 would generate benefits for transport
users across much of the UK and the three largest economic centres
in the countryLondon, Birmingham and Manchesterrepresenting
almost a quarter of the UK's employment, would benefit directly
from HS2 (London-West Midlands). Benefits would not, however,
be limited to areas directly served by HS2. Passengers from a
wider area would be likely to access high speed services, using
both road and classic rail to access the high speed stations.
27. It is difficult to analyse exactly where,
geographically, the benefits of HS2 (London-West Midlands) would
accrue. Our modelling tells us that trips starting in London generate
the single largest share of benefits, although more than 50% of
benefits in total relate to trips starting outside London and
the South East, with significant benefits in particular from trips
starting in the West Midlands and the North West. Over one quarter
of the benefits accrue to trips starting north of Birmingham,
with the North West the biggest beneficiary.
Learning lessons from other major transport projects
for successful delivery
28. During 2009 we undertook initial work on
the potential models for funding and delivering high speed rail,
drawing on experience of other major projects in the UK and overseas.
This is described in our report published in March 2010. We also
commissioned a 'benchmarking' study by independent consultants,
BSL, which investigated civil engineering costs in other countries
and compared them to costs in the UK. This study showed that civil
engineering costs in the UK are up to twice those in other comparable
European countries. Following this, we were asked to work with
Infrastructure UK (IUK). In December 2010 IUK produced a report
of this study - the Infrastructure Cost Reviewwhich identifies
the scale of issues and range of possible actions that could be
undertaken to reduce the cost of civil engineering construction
in UK. If the project is taken forward we would work further to
exploit potential efficiencies.
THE STRATEGIC
ROUTE
Station locations
29. In determining the location for a London
Terminus, our analysis showed the strongest demand is for a central
London station. Although it would require a larger number of demolitions,
we considered that, of the feasible central London locations,
the redevelopment of Euston over a single level was the best option.
It offered the best opportunities for longer-term redevelopment
of the Euston area, and would cost no more than the other main
options, and less than a double-deck station. An alternative at
Kings Cross Lands would have been a major engineering challenge
and would have severe effects on development currently underway.
The alternative of redeveloping Euston on two levels would be
very intrusive locally and would impose unacceptable disruption
to existing services during construction.
30. Given that most HS2 passengers would be travelling
to or from London, an interchange at Old Oak Common would provide
the best location for transfer on to the Great Western Mainline
and Crossrail and the Heathrow Express. It would also relieve
pressure on the underground at Euston and provide better access
for HS2 passengers to and from the City of London, the West End
and Docklands.
31. Using Birmingham New Street as a terminus
was not considered feasible as it would require removal of existing
classic services to another new station in the city centre, and
would be a significant, expensive engineering challenge. The station
location at Curzon Street would have a lesser impact on local
conservation areas than the main alternative and would require
fewer demolitions. A new interchange station close to Birmingham
Airport would increase the overall economic case for HS2 (London
to West Midlands) and benefits could be enhanced by an Advanced
People Mover connection to the airport and classic rail station.
Intermediate stations
32. On HS2 (London to West Midlands) we concluded
that an intermediate station at Bicester (serving Oxford) or Milton
Keynes could generate significant benefits to users of the station.
The case for such a station, however, also depended on the impacts
that it would have on other HS2 passengers and the capacity of
the line. An intermediate station would be detrimental to the
business case unless a loss of services on the line could be avoided,
which we concluded could not be achieved. We are, however, considering
the case for intermediate stations on Phase 2 of the network to
Manchester and Leeds.
Beyond the West Midlands
33. One of the main principles that formed our
basic model of high speed rail in the UK was that, in the early
stages of developing a network, the benefits of high speed rail
should be extended to cities further north with trains running
off the high speed line and onto the existing network. This was
considered to be crucial to the economic case for HS2 (London
to West Midlands), and would be provided for by a link onto the
West Coast Main Line near Lichfield for services to Manchester,
Liverpool, Preston and Glasgow. Similarly, our work on Phase 2
of the network is considering links onto existing lines to enable
services to continue beyond Manchester and Leeds.
The Appraisal of Sustainability
34. The economic case is only one of a number
of factors that the Government take into account in making investment
decisions. In line with guidance from Government, and the importance
of understanding environmental impacts, we have presented these
separately from the economic case, although we have included provision
for a further £215 million of environmental mitigation
(excluding risk) on the capital cost estimates for HS2 (London
to West Midlands).
35. All sustainability issues, embracing economic
development and job opportunities, effects on communities, as
well as environmental considerations such as landscape, noise,
the natural environment and climate change have been addressed
through the Appraisal of Sustainability (AoS). These have been
considered alongside the economic case and are outlined below.
ECONOMIC REBALANCING
AND EQUITY
Economic regeneration: local benefits of HS2 (London
to West Midlands)
36. There are potential localised impacts around
stations that have not been included in the economic case, and
are described in the AoS. The best regeneration opportunity would
be around the proposed Old Oak Common Station, where wider access
to Heathrow, Central London and Docklands through the interchange
with Crossrail would be a particular incentive for local development
and growth, and it is forecast that it could support 20,000 new
jobs. The proposed terminus at Euston would present a major opportunity
for regeneration, acting as a catalyst for the area to achieve
its potential of providing 1,000 new homes and 5,000 new jobs,
as recognised by the Mayor of London. Current estimates suggest
that HS2 (London to West Midlands) could contribute to the creation
of 2,000 jobs in the area.
37. Elsewhere, around Curzon Street Birmingham
City Council is revising the Masterplan for Eastside to take account
of HS2, which would see significant overall benefits building
on the regeneration stimulated by a new high speed service. It
could contribute to 4,500 jobs in the area. Birmingham Interchange
would support and create growth opportunities close to Birmingham
Airport, the NEC and the existing rail station. As investment
and businesses are attracted to the area, estimates suggest that
HS2 could contribute to the creation of 3,800 jobs.
38. In addition to the work reported in the AoS,
we considered international experience of the effect of high speed
rail on local and regional patterns of economic activity. This
showed that key considerations in the success of high speed stations
included integrating the station development into wider local
strategies such as land use plans and providing good links to
the local and regional rail network.
IMPACT
Carbon impacts of HS2 (London to West Midlands)
39. HS2 could provide a relatively low carbon
form of transport, offering the opportunity to deliver a major
improvement in capacity and journey time between our major cities
to support economic growth, without an increase in carbon emissions.
The exact effect on carbon emissions of HS2 (London to West Midlands)
would, however, depend on a number of factors including the carbon
efficiency of electricity generation and the level of modal shift
achieved, particularly from aviation. Under the best case scenario,
the proposed line would result in a total reduction in carbon
emissions of 28 million tonnes over 60 years.
40. Even on the most pessimistic scenario in
which the carbon efficiency of electricity generation remains
constant and no modal shift is achieved, the overall increase
in carbon emissions over 60 years would be 24 million tonnes
over the same period. This is equivalent to around 0.4 million
tonnes a yearjust 0.3% of total current annual domestic
transport emissions.
Local Environmental impacts
41. Since recommending a route to Government
in December 2009, we have identified refinements to around half
of our recommended route, including more than a mile and a half
of "green-tunnels" to maintain local access and minimise
noise and visual impacts, lowering large sections of the proposed
line and reducing the number of viaducts, while some changes to
the alignment have moved it further away from settlements and
important heritage sites. Nevertheless a project on this scale
cannot be undertaken without any local effects.
42. Allowing for mitigation that would be provided,
we currently estimate that for HS2 (London to West Midlands) around
10 dwellings would be affected by high noise levels, with around
150 additional properties likely to experience noise levels which
would qualify for noise insulation under the Noise Insulation
Regulations, and around 4,700 properties potentially experiencing
some noticeable increase in noise levels. Further design work
if the scheme is taken forward could reduce these numbers.
43. Around 340 dwellings would need to be demolished,
including around 200 flats in four blocks in the Regents Park
Estate to make way for the expansion of Euston. We intend to work
closely with the London Borough of Camden and the GLA, and with
community groups, resident's associations and affected residents
in the area generally to ensure that effective arrangements would
be put in place to meet the housing needs of those affected by
the demolition of these dwellings.
44. No Grade I or Grade II* listed buildings
would be demolished, and no internationally protected sites of
ecological interest would be adversely affected, while impacts
to nationally protected sites are restricted to a few locations.
The proposed route crosses the Chilterns AONB, with all but about
1.2 miles (2km) of the line in tunnel, deep cutting or in the
corridor of the existing A413 main road. Overall around half of
the route is now in deep or very deep cutting, or in tunnel, reducing
noise and visual impacts of the line.
Impacts of HS2 on the Classic Network
45. HS2 would be a passenger line only. However,
transferring intercity services from the West Coast Mail Line
to HS2 would free up capacity which could be used for either additional
passenger or freight services. For the purposes of calculating
the economic case we made some assumptions about the use of this
for additional commuter-type services into London and Birmingham,
but we have not done the same for freight services. Even with
the additional passenger services we assumed on the West Coast
Main Line, there would still be considerable scope for additional
freight services.
46. We believe that the redevelopment of Euston
station could be accomplished while maintaining at least the current
off peak service level, and there may be some minor alterations
to the timetable. There would be some instances of disruption
to services where, for example, the station would be closed for
a few days over public holidays.
47. The HS1 link would have an entirely new tunnel
away from railway infrastructure for the majority of its length,
but further work would still need to be done to the existing North
London Line viaduct through Camden. We believe that, if carefully
designed and staged, most of this work could be carried out with
limited impacts on existing freight and passenger services.
48. Elsewhere, there are a number of points along
the proposed route where HS2 would need to cross the classic network.
If the proposal were to be taken forward we would work closely
with Network Rail and the relevant train operating companies in
developing our construction strategy. We believe in most cases,
however, that disruption could be minimised to short-term closures.
May 2011
FURTHER READING
High Speed Rail: Investing in Britain's Future (February
2011)
http://highspeedrail.dft.gov.uk/library/documents/consultation-document
Economic Case for HS2: The Y Network and London-West
Midlands (February 2011)
http://highspeedrail.dft.gov.uk/library/documents/economic-case
Demand for Long Distance Travel (April 2011)
http://www.hs2.org.uk/assets/x/77832
Valuing the Benefits of HS2 (London to West Midlands)
(April 2011)
http://www.hs2.org.uk/assets/x/77834
HS2 London to the West Midlands Appraisal of Sustainability
(February 2011)
http://highspeedrail.dft.gov.uk/library/documents/appraisal-sustainability
HS2 Route Engineering Report (February 2011)
http://highspeedrail.dft.gov.uk/library/documents/route-engineering-report
High Speed Rail London to the West Midlands and Beyond
HS2 Technical Appendix (December 2009)
http://webarchive.nationalarchives.gov.uk/20110131042819/http://www.dft.gov.uk/pgr/rail/pi/highspeedrail/hs2ltd/technicalappendix/pdf/report.pdf
High Speed Rail and Spatial Patterns and Strategies
in Cities and Regions published as Appendix 3 of HS2 Demand Model
Analysis (March 2010)
http://webarchive.nationalarchives.gov.uk/20110131042819/http://www.dft.gov.uk/pgr/rail/pi/highspeedrail/hs2ltd/demandandappraisal/
Advice on the Assessment of Wider Economic Impacts:
a report for HS2 (March 2010)
http://webarchive.nationalarchives.gov.uk/20110131042819/http://www.dft.gov.uk/pgr/rail/pi/highspeedrail/hs2ltd/appraisalmaterial/pdf/widereconomicreport.pdf
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