High Speed Rail - Transport Committee Contents

Written evidence from HS2 Ltd (HSR 169)


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.


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.


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 country—London, Birmingham and Manchester—representing 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 Review—which 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.


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 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.


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 year—just 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


High Speed Rail: Investing in Britain's Future (February 2011)

Economic Case for HS2: The Y Network and London-West Midlands (February 2011)

Demand for Long Distance Travel (April 2011)

Valuing the Benefits of HS2 (London to West Midlands) (April 2011)

HS2 London to the West Midlands Appraisal of Sustainability (February 2011)

HS2 Route Engineering Report (February 2011)

High Speed Rail London to the West Midlands and Beyond HS2 Technical Appendix (December 2009)

High Speed Rail and Spatial Patterns and Strategies in Cities and Regions published as Appendix 3 of HS2 Demand Model Analysis (March 2010)

Advice on the Assessment of Wider Economic Impacts: a report for HS2 (March 2010)

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Prepared 8 November 2011