Committee of Public Accounts - The completion and sale of High Speed 1Written evidence from Andrew Bodman

Lessons Learned from High Speed One and how they Relate to HS2

1. Construction Cost

HS1 was expensive to build. The line from St Pancras to Folkestone which was built in two stages cost a total of £5.8 billion and is a length of 69 miles. That works out at £84 million per mile. http://www.railway-technology.com/projects/highspeedone/

However the first phase of HS2 (London—Birmingham) is more expensive on a cost per mile basis. 140 miles are to be built at a cost of £16.2 billion which works out at £116 million per mile. See section 7.2:

http://assets.dft.gov.uk/publications/hs2-economic-case-appraisal-update/hs2-economic-case-appraisal-update.pdf

This is an increase of 38% over the cost per mile of HS1. What is even more concerning is that the cost per mile of HS2 (phase 1) is four times greater than the cost per mile of an equivalent high speed line built in France. Source: NCE Conference Barcelona September 2011. http://metricviews.org.uk/2011/10/spotlight-falls-again-on-the-uks-high-construction-costs/

Sir Rory McNulty (rail industry) and Sir Philip Green (government procurement) have both found the government readily pays too much for goods and services. These lessons have not been taken on board, if the government is prepared to pay four times the construction costs per mile of a high speed rail line in France. This cannot be acceptable for a government seeking to spend taxpayers’ money prudently.

2. Projected Passenger Volumes

High Speed One has not reached more than one third of its planned capacity. Source: IEA, “High Speed Two, the next government project disaster?” See page 7, section 2:

http://www.iea.org.uk/sites/default/files/publications/files/High%20Speed%202%20-%20the%20next%20government%20project%20disaster%20(web%20version).pdf

This is not necessarily a surprise as Aalborg University found that nine out of ten rail projects overestimated passenger demand, the average overestimation being 106%. Source:

http://seekerblog.com/2010/08/31/high-speed-rail-inaccuracy-in-traffic-forecasts/

As a result of lower than expected passenger demand, 18 carriages were removed from the HS1 Javelin trains four months after the service commenced:

http://www.metro.co.uk/news/824624–140mph-train-service-is-reduced-after-complaints

It is very likely that passenger volumes for HS2 have been overestimated too because there are at least three respects in which the DfT calculations are flawed:

They did not use the Passenger Demand Forecasting Handbook version 5, instead using an earlier version.

The forecasting model was used to provide passenger estimates over a 35 year period when it should not be used for more than an 18 year period according to DfT guidelines. Sir Rod Eddington is concerned about using this model for forecasting more than a ten year period.

They did not use a forecasting model which takes into account cheaper alternative ways of making the same journey by rail; instead these were ignored.

Source: Review of the Consultation Business Case for HS2 v1.12 17 June 2011 Section 3.1:

http://www.hs2aa.org/index.php/news/publications/category/11-business-case-post-consultation-launch-post-2822011

Basing such a significant investment (phase 1: £16 billion, phase 2 £17 billion, plus rolling stock) on unreliable passenger volume forecasts is an enormous gamble. If passenger numbers have been 2 HS1 Lessons Learned overestimated, it will mean that other parts of the classic network which are in much greater need of investment (which would benefit millions more passengers) will have to wait tens of years before they are upgraded.

3. Ticket Prices

Ticket prices are 20% higher on HS1 compared to classic services eg Ashford to London. While this may be of little consequence for travellers making occasional journeys, it does make a very significant difference to regular travellers or season ticket holders. This is almost certainly a contributing factor to the lower than projected passenger volumes for HS1.

Most of the material provided for HS2 by the DfT indicated that there would be no premium for ticket prices compared to classic trains. However, close study of the Economic Case for HS2 (February 2011) section 6.1.5 implied a ticket price premium of 20%:

http://highspeedrail.dft.gov.uk/sites/highspeedrail.dft.gov.uk/files/hs2-economic-case.pdf

When questioned on this matter, the DfT said there had been a printing error in this section.

Bearing in mind that countries such as Holland, China, Japan and Korea charge a price premium for their high speed rail tickets, it would be a surprise not to see premium fare pricing on HS2. This would lower expected passenger volumes if premium pricing had not been part of the forecasting model.

4. Changes to Classic Services

It has been reported that classic train services in Kent have been slowed down and run less frequently since the Javelin high speed train service commenced. This has generated a large number of complaints from rail passengers and helped initiate a study by Canterbury City Council which confirmed these findings. Seepages 120 and 121:

http://www2.canterbury.gov.uk/committee/Published/C00000114/M00007535/AI00026597/$Executive2Feb2012HS1FinalReportDecember2011.docxA.ps.pdf

Whether this deterioration in service was necessary or an “incentive” to persuade travellers to use Javelin HS1 trains is hard to say. There have been other reports of the poorer classic train service and HS1 Javelin trains with low passenger numbers:

http://www.telegraph.co.uk/journalists/andrew-gilligan/8423638/High-speed-rail-Britains-first-link-hasnt-worked-as-planned-say-critics.html

http://www.kentonline.co.uk/kentonline/news/2010/march/11/trains_in_the_commons.aspx

In Holland, classic train services have been slowed down in an apparent attempt to drive passengers into using the high speed trains. A passenger group has taken the rail operator to a competition tribunal.:

http://www.telegraph.co.uk/news/uknews/road-and-rail-transport/9000166/High-speed-rail-A-250m-lesson-for-Britains-rail-enthusiasts.html

The DfT have claimed that by building HS2, the West Coast Main Line would be freed up so that more classic train services could be run. Emphasis is needed on the word “could” bearing in mind the experiences of Kent travellers above. One should also examine the HS2 Technical Appendix which was published in December 2009 which showed a deterioration in frequency and journey times for some existing services once HS2 is introduced. For example it is suggested that Coventry will have one fast train per hour (off peak) and two fast trains per hour (peak) when it currently has three fast trains per hour (peak and off peak). In addition the current journey time of 63 minutes will become 69 minutes. See Technical Appendix (Appendix 2), Page 17: 3 HS1 Lessons Learned:

http://webarchive.nationalarchives.gov.uk/20110131042819/http:/www.dft.gov.uk/pgr/rail/pi/highspeedrail/hs2ltd/technicalappendix/pdf/report.pdf

There are other stations as well as Coventry which would be adversely affected.

It is also worth noting that in the Economic Case for HS2, £5 billion has been reduced from the subsidy currently provided to the UK rail system. Therefore classic train services are not very likely to be increased. See Table 8 beneath section 4.5.2:

http://assets.dft.gov.uk/publications/hs2-economic-case-appraisal-update/hs2-economic-case-appraisal-update.pdf

If it does transpire that services on classic trains are not improved when HS2 is introduced, the DfT will have been guilty of gross deception. By then it will be too late as the £30plus billion will have already been spent and it will be too late to hold anyone to account.

5. Subsidy required

As noted earlier, the cost of constructing HS1 was £5.8 billion. In November 2010 a thirty year concession for its operation was sold for £2.1 billion.

http://www.railwaygazette.com/nc/news/single-view/view/high-speed-1-concession-awarded-to-canadian-pension-consortium.html

It is therefore likely to take in excess of 60 years to recover the original investment, assuming that further concessions are sold. There is clearly an ongoing cost to servicing such a debt.

Several studies have indicated that the vast majority of high speed lines across the World require an ongoing subsidy, which runs into billions of pounds per year per country. Another report indicates that only two high speed rail lines in the world make a profit: Paris—Lyon and Tokyo—Osaka:

http://www.cc-hsr.org/assets/pdf/bnote-6.pdf

Private companies running high speed rail in Holland and Taiwan have both received government bailouts. See Problems with HSR:

http://www.hs2actionalliance.com/index.php/news/publications/category/19-business-case-international-experience

In February 2011, Florida’s governor Rick Scott turned down a $2 billion government incentive to develop a high speed rail link from Tampa to Orlando. He believed passenger numbers to be overestimated, and that the state would have to pick up the bill for subsidies because the line would be unable to pay for itself. His decision follows very similar decisions made in Ohio and Winsconsin. See previous link above.

An ongoing subsidy will be required for HS2 also. The DfT mistakenly suggests that shortening the journey time provides a benefit that can be costed. Their logic is based on the rationale that people do not work on trains and shortening a journey time will allow people to spend more time at work. As most of us are aware, many people do use laptops, smart phones and other means to work on trains. Secondly a shortened journey time is more likely to allow people to spend additional time at home rather than at work. Therefore the £10 billion benefit of journey time saving on the phase one section of HS2 should not be included. It then becomes questionable that HS2 would make a profit. See tables 10 and 15:

http://assets.dft.gov.uk/publications/hs2-economic-case-appraisal-update/hs2-economic-case-appraisal-update.pdf

The problem would be exacerbated if passenger numbers turn out to be less than forecast. 4 HS1 Lessons Learned.

The UK government has enough trouble now in managing its debt. It would be unwise to add to that debt issue on an ongoing basis when there are cheaper alternatives which would benefit far more people sooner. I draw your attention to the Optimised Alternative proposed by 51 million.

http://www.51m.co.uk/sites/default/files/uploads/App%201%20-%20Optimised%20Alternative%20to%20HS2.pdf

March 2012

Prepared 5th July 2012