High Speed Rail (Preparation) Bill

Written evidence from Dr Paul Hoad (HSR 02)

1. Background

1.1. Introduction

1.1.1. This paper has been written by Dr Paul Hoad who has 16 years’ experience in Transport Modelling and Planning. Dr Hoad has worked on a wide range of transport projects, in the UK, East Asia and the Gulf, including the economic and financial assessment of transport schemes. This experience has included "hands on" computer modelling of schemes, the management of planning projects and the critical review of other consultants’ work

1.1.2. Having undertaken and scrutinised studies of a similar nature (although admittedly smaller) to the HS2 scheme I consider that the study as currently being progressed has numerous errors and does not present value for money for the country. However given the remit of the Scrutiny Committee it is not my intention in this paper to present my detailed arguments over the errors made by the HS2 study.

1.1.3. It is however clear to me that a fundamental problem with the development of the HS2 project is lack of proper scrutiny of the work being carried out by HS2 Ltd, and a lack of rigour in their work. This was clearly demonstrated to me in a letter to me from HS2 Ltd in response to a Freedom Of Information request. I had written to HS2 Ltd asking for parameter values from their HS2 model. The response I had (HS2 Reference FOI13-642 dated 27th June 2013) was that HS2 Ltd could not provide me with these model inputs as "The company has not completed the quality assurance of the information." and that "Premature disclosure of potentially incorrect information is not in the public’s interest as it may mislead debate about an important policy issue."

1.1.4. As will be readily apparent, if the input values for the model could be incorrect then it follows that the output values could also be incorrect. Despite the concern about handing over incorrect input data, HS2 Ltd appears content to present forecast values to Parliament and the public. To be still going through the quality assurance process (i.e. checking) and be concerned over the accuracy of the model is unbelievable given HS2 Ltd have been using the model for at least three years to assess the scheme and to publish forecasts for public consultation, and the model lies at the very heart of any calculation of the overall benefit of the scheme.

1.1.5. The picture that the HS2 study presents is therefore that a decision has already been made that the HS2 network will be built and that the calculation of the actual benefits of the scheme is a mere formality, and that HS2 Ltd assume that the model results will automatically show a net benefit regardless of the inputs.

1.1.6. In addition, statements have been made in support of the HS2 project (including statements made by HS2 Ltd to Parliamentary committees) that do not appear to be supported by the documents made available to the public on the HS2 Ltd website. It is difficult to know if such statements are supported by documents which are not in the public arena, or whether there is in fact no evidence to support such assertions.

1.1.7. A clearer account therefore needs to be kept of the reports and other documentation produced by HS2 Ltd, to provide a better understanding of the evidence base of the study. This will assist not only with the current scrutiny of the project but would be of benefit in the future, should the project be built. Once HS2 is up and running there is every possibility that changes will be proposed to the method of operation. By having the original assumptions preserved in the Parliamentary records it should be easier to prevent subsequent detrimental changes being made.

1.1.8. It is therefore clear that greater scrutiny needs to be applied to HS2 Ltd, and by implication the Secretary of State who oversees HS2 Ltd. The purpose of this note is therefore to identify constructive methods by which more formalised scrutiny can be applied to the progression of the scheme and provide greater clarity to the public and Parliament.

1.2. Overview of recommendations

1.2.1. The Bill as currently drafted provides the Secretary of State with the power to spend large amounts of tax payers’ money whilst setting out only very modest requirements to justify this spend. Furthermore the development of HS2 has been, and will continue to be, a long drawn out process causing difficulties in keeping track of what changes may have been made and what previously published information may have been superseded.

1.2.2. The need for an annual financial report therefore provides the opportunity to produce what would be an Annual Progress Report, setting out not only what money has been spent but also what this money has been spent on. This would facilitate the transparency of the overall process to the public and ensure proper parliamentary scrutiny of the project, thereby maximising value for money.

1.2.3. The information provided in such an Annual Report should be readily available to the Secretary of State as HS2 Ltd would be providing their own progress reports as a matter of course. The Annual Report should not in itself need to carry excessive details, merely have a summary of information with references to the relevant reports or other document where the details can be found.

1.2.4. With regards the reporting of the expenditure, the Bill sets out the Secretary of State must provide "details" but is not explicit on how detailed. A large project such as HS2 would be broken down into different work streams with their own budgets so it should not be too difficult to give a breakdown of costs according to different aspects of the study. Such reporting is important to ensure that sufficient attention is given to each aspect of the study.

1.2.5. Using the concept of an Annual Progress Report as a template for the Secretary of State’s annual report, it would also be appropriate for the report to include a forecast of work to be carried out in the coming period (i.e. financial year). A listing of future work need not be to the same level of detail as would be used in reporting the preceding financial year, but should follow the same basic format, thereby allowing subsequent comparisons of what was planned and what was achieved.

1.2.6. Placing a requirement upon the Secretary of State to produce such an Annual Progress Report would not be an onerous task. The production of progress reports is a standard procedure within the planning and construction industry and presumably the HS2 study would be generating such reports on a monthly or even weekly basis. Therefore it would only be a matter of collating information that should be readily available.

1.2.7. Finally, previous experience of transport planning studies has shown the need for undertaking comparisons between scheme forecasts and actual outcomes. Given that HS2 is taking a major step in the provision of transport for which there is no precedent in the UK, it would be appropriate to carry out such a post opening study.

1.2.8. The requirements for such a "before and after" study would be significant and would require additional funding and would need to be prepared and planned for in parallel with the current study.

2. Items to be included in Annual Report

2.1.1. Listed below are a number of items, each of which should be included in the Secretary of State’s Annual Progress Report on HS2.

2.2. Breakdown of costs

2.2.1. All financial spending to be broken down according to the purpose of the spending, such as (but not limited to):

· Purchase of land;

· Rental of land;

· Maintenance of land;

· Construction costs (capital);

· Construction costs (labour);

· Transport Modelling;

· Economic Assessment;

· Engineering Design;

· Environmental Assessment;

· Publicity and Consultation

· Legal (with respect to statutory requirements such as Compulsory Purchase Orders);

· Legal (with respect to external challenges); and

· Administration.

2.2.2. All such costs should also be broken down according to which of the construction phases that they are related to i.e. Phase 1 (London – Birmingham) or Phase 2 (North of Birmingham), or whatever phasing may subsequently be applied.

2.2.3. In order to ensure clarity of the figures, no single category should account for more than 10% of the total figure. If necessary a category should be broken down into more detail so that each subcategory is less than 10% of the overall total.

2.3. Breakdown of hours

2.3.1. A summary of person hours worked should be included, broken down in the same categories as given for the breakdown in overall costs. Such a breakdown by person hours would be necessary in deriving the financial costs and should not place any additional burden on reporting.

2.4. Progress Statement

2.4.1. A summary of key milestones achieved, new work produced, revisions etc. should be given.

2.4.2. A full explanation for each need not be included provided that a relevant reference is given to the relevant published document where details can be found.

2.5. Report Listing

2.5.1. A list of all Reports, Technical Notes etc. that have been issued in the preceding financial year by HS2 Ltd, or the Department for Transport in support of the HS2 project.

2.5.2. A list of all Reports, Technical Notes etc. that have been superseded or otherwise rendered no longer relevant to the project in the preceding financial year by HS2 Ltd, or the Department for Transport in support of the HS2 project.

2.5.3. A summary list of all Reports, Technical Notes etc. that have been issued by HS2 Ltd, or the Department for Transport in support of the HS2 project. This would be a cumulative list, providing a definitive list of all reports, whereas the lists referred to above would refer only to the reports published or superseded during the previous year.

2.6. Deviations from Standards

2.6.1. A list shall be provided of all instances of deviations from standards, guidance or other established principles governing the development of the HS2, during the preceding financial year. For example, the DfT’s WebTAG guidance sets out the methodology for transport assessments. Any variations or inconsistencies from this guidance that HS2 has used should be identified. Similarly deviations from established standards on railway (or even highway) design should be identified. Such deviations from standards would be expected to be already documented by the study and so the information should be readily available.

2.6.2. Reporting on such deviations from standard would ensure the quality standard of the project. In addition, given that the UK has not built a railway with such high speeds, there is the likelihood that the design will require significant changes from current standards. By bringing together such deviations it would help to provide a valuable reference source to define new standards.

2.6.3. A full explanation for such deviation need not be included provided that a relevant reference is given to the relevant published document where details can be found.

2.7. Overview of Scheme Benefit

2.7.1. The annual report should include the Transport User Benefits and the Benefit Cost Ratio (BCR) of the scheme, to demonstrate the viability (or otherwise) of the scheme.

2.7.2. It should be noted that in deriving the BCR of a scheme, the convention is to exclude any historic costs from the calculations. In general the costs of scheme design and preparation are relatively minor compared with the overall scheme costs and would not affect the final BCR.

2.7.3. For the HS2 study significant costs have already been incurred, and the bill will allow further significant spending to take place before the scheme is finalised. As time progresses, such spending will therefore disappear from the projected costs of the scheme as tabulated in the Transport User Benefits and the Benefit Cost Ratio of the scheme. This will inevitably result in the scheme appearing to have a steadily better and better benefit and higher BCR ratio.

2.7.4. In order for consistent year on year comparisons to be made of the scheme benefits a BCR should be calculated using both future and historic costs (e.g. to include all previous costs of HS2 Ltd) and not just future costs. This will improve the transparency of the project and help maximise value for money.

2.7.5. Such reporting should be in addition to the conventional form of reporting and not replace it. As it is possible (and not unknown) for a scheme to reach a position where although the total costs (historic and future) mean that the scheme is not value for money, it may still be valid that finalising the scheme is better than halting the project in its entirety. However it is possible for significant additional costs to be left out of the BCR calculations using the conventional method.

2.7.6. To demonstrate the need for such an additional BCR calculation, take the following hypothetical example: in planning the scheme the purchase of a parcel of land might be assumed to cost one million pounds, and this value is used in the calculation of the BCR. When the land is actually purchased it then actually costs one hundred million pounds. Despite the cost being higher than planned, when the BCR is next calculated its value will actually be lower as the cost is in the past and not the future. Although self-evidently the scheme would not be as good as originally expected, the manner in which the calculations are carried out means that the scheme would appear to be better value.

2.7.7. Whilst it is not suggested that scheme costs have been undervalued to the extent shown in the hypothetical example above, this example clearly demonstrates how the true viability of a scheme can be obscured by how costs are accounted for. As the HS2 project is going beyond the normal conventions of a scheme, requiring a dedicated bill to allow significant sums to be spent prior to the final approval of the scheme, it is appropriate for additional checks to be carried out on the project to ensure value for money for the tax payer.

2.8. Projections for forthcoming financial year

2.8.1. A forecast should be provided of the projected spend for the forthcoming financial year. This total should reflect the budget allocated by the Secretary of State for the project. Given the levels of uncertainty in large projects, this value may not be the final sum spent, and this value should not be taken as a fixed value. Instead the purpose is to provide transparency over future spending and to allow comparisons to be made in the following financial year of what had been planned and what was actually spent.

2.8.2. The format and breakdown of the projected spend should be in the same format and breakdown as given for historic spending, in order to allow easy comparisons.

2.8.3. In addition to projected spending, the report should also provide projections for all other items to be included in the historic reporting. The report should therefore include projected person hours to be spent.

2.8.4. A list of key milestones to be achieved should also be included, together with planned deliverables (e.g. reports, construction, land purchase etc.).

3. Preparatory Work for Post Opening Assessment

3.1. The need for Post Opening Assessment

3.1.1. Undertaking a comparison of the forecast impacts of a scheme with the actual results is a common practice in transport planning. Such a process helps to inform future works and can identify potential weaknesses in assessments that can be addressed in future studies. For many studies this can make use of survey data undertaken as part of the original planning and design process (e.g. traffic counts) which can be repeated once the scheme has been opened.

3.1.2. For larger schemes where the impacts are wider than simply diverting traffic, there can be increased difficulties in identifying all the potential effects. This can only be rectified by carrying out additional surveys prior to the opening, or rather before construction, of the scheme.

3.1.3. Underlying the proposals for the development of HS2 network is the assertion that this will be a major step change in transport provision, not only providing shorter journey times but creating large numbers of jobs. As such, the implementation of such a scheme should be the subject post opening assessment, firstly to confirm whether such assertions were correct and if so, to obtain a better measurement of the effects.

3.1.4. Carrying out a post opening comparison for Phase 1 of the HS2 network (i.e. London to Birmingham) would help to inform the design of Phase 2 and any subsequent Phases.

3.1.5. To carry out such a post opening assessment would require a certain amount of lead time in order to get the study planned out properly (even before any surveys are carried out). Such surveys would include not only conventional traffic surveys (e.g. traffic counts, passenger counts) but surveys of employment and land use, which would be beyond that required for the current study (although the availability of such data may help to inform the current study).

3.1.6. The Secretary of State should therefore have the responsibility for, and the powers to progress, the preparation of a post opening assessment study for the HS2 network. Such a responsibility would be best initiated at the earliest possible time, and hence should be included in the current bill, and not be delayed till the final HS2 bill is passed.

3.2. The requirements for Post Opening Assessment

3.2.1. The Secretary of State should put into place the preparatory planning for a post opening assessment study. Such a planning process need not be undertaken by HS2 Ltd, and would be best undertaken in the conventional manner via competitive tender. However any such surveys would need liaise with HS2 Ltd, and hence HS2 Ltd would need to have budget allocated for such additional work.

3.2.2. In a similar manner, data may need to be obtained from local authorities (e.g. land use, employment etc.), placing additional financial requirements on them. In such a case a funding mechanism would need to be in place to facilitate the process.

3.2.3. Funding should also be allocated to allow a design study to be undertaken, with subsequent funding to follow to allow pre-construction surveys to be undertaken.

4. Conclusion and Summary

4.1.1. This paper has set out a number of items that should be included in the requirements of the Secretary of State’s annual report on the HS2 study.

4.1.2. The information required for such proposed items should be readily available to the Secretary of State and should not place any undue burden on the Department for Transport or on HS2 Ltd.

4.1.3. The additional data requirements will however provide greater transparency of the HS2 study and help maximise value for money in the project.

4.1.4. Placing more information on the Parliamentary record would also aid in future operation of the proposed network, providing a reminder of the assumptions the business case was based upon thereby preventing detrimental changes being made.

4.1.5. Conversely, there should be no reason why the Secretary of State should want to withhold any of the suggested items from the public domain.

4.1.6. The Secretary of State should also be authorised to undertake a post opening study, for which additional data would need to be collected prior to the construction of Phase 1, and for which additional funding would be required.

July 2013

Prepared 10th July 2013