High Speed Rail

Written evidence from Ian Waddell (HSR 85)

1. Introduction

1.1 Very ambitious claims are being made by proponents of HS2 in terms of its predicted impact on regional and local economies. These may perhaps best be summarised in the assertion that it will play a key role in ‘bridging the North – South divide’.

1.2 It is clearly extremely important that the TSC examines carefully the nature of the evidence behind these claims in order to assess their validity.

1.3 In order to assist the Committee in this process my paper:

(i) Firstly summarises key evidence based on my analysis of INSEE statistics in relation to the French experience (France being the first European country to invest in high speed rail)

(ii) Secondly critically reviews the evidence being offered in support of the regeneration impact of HS2 in the West Midlands (a region with which I am extremely familiar)

(iii) Thirdly briefly relates these findings to the outcomes of a range of other independent national and international studies on the wider economic impacts of high speed rail.

2. Has the French TGV network had a significant impact on the economic fortunes of those cities and regions which it serves?

2.1 The primary TGV network was completed nearly thirty years ago. Consequently if high speed rail investment is indeed a significant factor in reducing local and regional growth economic disparities, then some evidence of this should be apparent by examining trends in relative economic well being of French regions, departments and cities served by the TGV.

2.2 In this context the proponents of HS2 frequently cite the examples of Lille and Lyon:

When examining the case of Lille it is firstly crucial to remember that it is located at the cross roads of the European high speed rail network. It therefore enjoys levels of HSR accessibility and frequency of service, significantly in excess of what might be expected for, say, Birmingham, Manchester of Leeds.

2.3 Leading transport expert Roger Vickerman of Kent University observes:

"…. the biggest gains in accessibility accrue to the major access points to the network. These are first, the major metropolitan areas such as London or Paris, and secondly major interchange points, such as Lille or Lyon."

2.4 Lille has certainly seen a significant growth in jobs particularly as a result of the large EuroLille development. But to what extent are these genuinely new jobs and how far has investment which would have taken place anyway been diverted from other parts of the Lille Conurbation, local Nord Department or the wider Region?

2.5 If these are mostly genuinely new jobs then one would expect to see an impact in terms of a reduction in the persistently high levels of poverty and unemployment in the Lille conurbation, Nord Department and Nord Pas de Calais region.

2.6 Evidence (from the French National Institute of Statistics - INSEE) shows that this has not occurred:

2.7 Between 1999 and 2009 the rate of unemployment in the Lille conurbation [1] has actually increased, both in absolute terms and relative to the rest of France

2.8 The same applies to the Nord Department and the Nord Pas de Calais Region within which Lille is located. Unemployment in the Nord Department has increased since the arrival of the TGV in the early 1980s (from an average of 10.7% 1982-6 to 11.9% 2006-10), resulting in a further widening of disparities when compared to the rest of France [2] .

2.9 Turning to the case of Lyon, this is an area which has traditionally been amongst more prosperous parts of France. It has not suffered the depredations of the decline of traditional industries on anything like the same scale as the North East of France.

2.10 Nevertheless, if claims for the wider regenerative benefits of the TGV are to be believed, some further decline in absolute and relative levels of unemployment might be expected for the Rhone Department, over 75% of the population of which live within the Lyon area.

2.11 In fact the reverse is true: unemployment in the Rhone department has increased by nearly 1.5% since the arrival of the TGV (from an average of 6.3% 1982-6 to 7.8% 2006-10). It has also increased in relative terms compared to France as a whole by 1.24% over the same period.

2.12 The picture for the region of Rhone Alps within which Lyon is located is similar: its prosperity relative to the rest of France measured in terms of unemployment rates has actually declined since the arrival of the TGV in the early 1980s [3] .

2.13 In conclusion therefore there appears very little evidence that investment in high speed rail in France has had any significant impact in reducing regional and local economic disparities based on the most obvious yardstick – unemployment. Over a period of nearly thirty years since TGV services started running, there has clearly been no "transformational" effect, in fact the evidence shows that disparities appear to have worsened.

3. A critical review of evidence being offered in support of the regeneration impact of HS2 in the West Midlands

3.1 A number of ambitious claims have been made for the job creation and wider regeneration benefits of HS2 on the economy of the West Midlands. Most notably they are contained in a document:

"High Speed Rail and supporting investments in the West Midlands - consequences for employment and economic growth"


3.2 The document purports to be an independent analysis, however CENTRO (the West Midlands PTE) have been active proponents of HS2 since well before its publication and KPMG had previously been commissioned by pressure group Greenguage 21 to produce similar material nationally.

3.3 To do the report justice, headline figures such as 22,000 new jobs for the region from HS2 have been widely quoted in an unqualified manner and totally out of the context of the report, which contains many significant caveats.

3.4 A close examination of this report and its methodology reveals that, even if the report’s own conclusions are accepted uncritically, then it implies:

i) the figure of 22,000 jobs is based upon a huge investment in local transport in addition to HS2, without this investment the report admits the jobs created would reduce to 10,000. Any "fare premium" required for HS2 over other rail services would further significantly reduce the jobs created – the report examines the impact of a 30% fare premium, concluding that jobs created would be further reduce to around 5000.

(at an estimated cost of £17bn for phase 1 of HS2 this would give a cost per job created of £340,00 compared to the DfT VFM guideline of £27,000 per job.)

2) In terms of the distributional impacts of HS2, the report admits that employment in Birmingham and Solihull will increase at the expense of employment elsewhere in the region:

"The benefits are concentrated in central Birmingham and around the new Birmingham International HS station."

(Para 6.1 of the report page 38)

3.5 In terms of connections with Europe, the report admits the benefits to Birmingham are, in the final analysis, marginal, modelling links with just one European city they the report concludes:

"With the introduction of a direct high speed rail service, Paris could become some six times more important as contributor to Birmingham’s effective business to business market. However, it begins from a very low base and remains far enough away to form only a very small part of Birmingham’s effective business to business market, even with a high speed rail link."

3.6 The methodology itself is based upon a highly academic analysis of projected connectivity improvements which is in turn based upon highly tenuous base data. In summary key weaknesses are:

§ no account taken of jobs attracted away from the region as (particularly business and financial sector enterprises) are enabled by HS2 to service their WM region clients from London

§ no account taken of the fact that time spent on trains can be productive

§ no account taken of the future impact of IT developments on the need to travel/business efficiency

§ the report bases its benefit calculations on assessments of productivity increases based upon a (highly dubious) assumption that relative wage levels can be used as a proxy for this. However it fails to identify appropriate local data sources, admitting:

"It has not been possible to source data for productivity that is more disaggregate than district level. This has weakened the analysis of productivity impacts using local data. Model results are therefore not based on relationships derived from local data but on composite assumptions drawing on findings from other studies."

3.7 In conclusion the report’s findings cannot in any way be relied upon to provide trustworthy evidence of positive regeneration impacts. Where it is in tune with other studies however is that it supports the view that high speed rail will have significant re distributional impacts – resulting in jobs and investment moving to areas in close proximity to projected stations from other (already less prosperous) parts of the region.

4. How the above findings relate to the outcomes of a range of other independent national and international studies on the wider economic impacts of high speed rail.

4.1 The above analyses (of unemployment impacts in France and of the probable redistributional impact of HS2 on jobs and investment in the West Midlands region) fit well with the vast body of independent research on the wider impacts of high speed rail key aspects of which are highlighted below.

4.2 This research shows that there is no evidence of any dramatic transformational effect on regional and local economies as a result of high speed rail. To the extent that there is a provable impact, it is in influencing the distributional patterns of jobs and investment:

§ from less prosperous to more prosperous regions

§ from more peripheral (and often less prosperous ) parts of regions to those areas in close proximity to the few HSR stations (often already the more prosperous areas).

4.3 Professor Henry Overmann of the LSE in giving evidence to the TSC (19 October 2010) stated:

" …..broadly speaking, the evidence that High Speed 2 will lead to a reduction in disparity is pretty limited".

4.4 This view was echoed by Professor John Tomaney of Newcastle University

"….. the evidence that HS2 will have a positive impact on rebalancing the national economy, to use the current jargon, is not really there. I think the international evidence suggests that, where you make these big investments in this kind of infrastructure-particularly high speed train networks-as important to the investment in the infrastructure itself is investment in the conditions of the nodes around the lines that stimulate economic benefit and economic development. There is some evidence from European high speed train systems, and from Asian high speed train systems, that this is a critical ingredient, and in the debates around HS2 I haven’t really seen that discussed."

4.5 In the case of the KMPG/Centro work discussed above, investment in a package of local transport improvements is shown to be equally, if not more effective in creating local jobs than the investment in HS2 and offers far higher VFM ratio in terms of jobs created.

4.6 At a broader level an OECD report [4] evaluating the impact of transport infrastructure investment on regional development concluded:

"…. there is a lack of information derived from ex-post studies which could provide a firm, quantitative basis for claims about the impact of infrastructure investment on regional economies and regeneration."

4.7 Lastly, as exemplified by the following extracts, there is a strong body of independent European research shows that a connection to high speed rail may actually disadvantage poorer regions:

"….for regions and cities whose economic conditions compare unfavourably with those of their neighbours, a connection to the HST line may even result in economic activities being drained away and an overall negative impact

(Givoni, 2006; Van den Berg and Pol 1998;Thompson 1995).

"Medium size cities may well be the ones to suffer most from the economic attraction of the more dynamic, bigger cities "

High-Speed Rail: Lessons for Policy Makers from Experiences

Abroad" - Daniel Albalate and Germà Bel GiM-IREA Universitat de Barcelona 2010

"Roads and rail tracks can be used to travel both ways. A better connection between two regions with different development levels not only gives firms in a less developed region better access to the inputs and markets of more developed regions. It also makes it easier for firms in richer regions to supply poorer regions at a distance, and can thus harm the industrialisation prospects of less developed areas."

- The Economic effects of High Speed Rail Investment

Ginés de Rus, University of Las Palmas 2008

16 May 2011

[1] The INSEE website provides localised trend data for ‘Zones d’Emploi ’ for the period 1999-2010 (Q2), the metropolitan area of Lille is defined by INSEE as comprising the two Zones d’Emploi of Lille and Roubaix-Tourcoing . Both show an adverse trend in unemployment rates over this period – taking the average rates for the first and last 4 quarters of the period unemployment in Roubaix-T went up from 13.2 to 14.7 % and in Lille from 10.7 to 11.1%.

[2] Taking INSEE figures for Q4 of 2009 and the first three quarters of 2010 (the latest currently available) and the equivalent quarters for 1982/83 the unemployment rate in the Nord Departrnent has increased by 3.9%, and the Nord pas de Calais Region by 3.3%. Over the same period the unemployment rate in metropolitan France increased by 2.3%.

[3] INSEE figures based on an average for the 4 quarters of 1982 and 2010 show an increase in the unemployment rate for the Rhone Alps region of 2.8% compared to an increase of 2.4% for metropolitan France .

[4] Impact of Transport Infrastructure Investment on Regional Development OECD 2002

Prepared 31st May 2011