High Speed Rail (Preparation) Bill

Written evidence from Andrew Bodman (HSR 04)

1. Andrew Bodman – retired IBM project manager. He lives close to Northampton, approximately 16 miles from the proposed route of HS2. He has studied in detail the evidence for and against HS2 since March 2011. He has delivered presentations on HS2, and has submitted written evidence to the Transport Select Committee, Public Accounts Committee and National Audit Office.

Summary

2. The HS2 Preparation Bill enables unlimited spending to be made on the HS2 programme. Full details of the programme have not been provided to Members of Parliament which compromises their ability to make well informed decisions. HS2 is an ill conceived project for the following reasons:

· The West Coast Mainline does not have the capacity issues that other lines currently experience.

· HS2 is more likely to attract businesses to London (not to the North and Midlands) based on independent research that has been carried out.

· HS2 appears to offer very poor value on a cost per mile basis.

· The benefit cost ratio of this programme is unacceptable and the passenger forecasts are very likely to be overstated.

· HS2 will require a substantial ongoing subsidy and will add to the significant debt this Government already has.

· HS2 has no expansion capability beyond 2032/3 due to the designed in bottleneck between London and Birmingham.

· Underground services at Euston will be overwhelmed

· The vast majority of homeowners living close to the proposed route will not be fairly compensated.

· Classic rail services post HS2 will be downgraded in many cases

· Experience of high speed rail in other countries shows there has been a cutting back of new projects.

· There appears to have been weaknesses in some aspects of programme management so far.

Preparation Bill

3. The High Speed Rail (Preparation) Bill is an additional piece of legislation which was not part of the original plan for HS2. It had been thought that a Hybrid Bill would be the only legislation required for HS2 Phase One. The Hybrid Bill would have allowed for a detailed study of the issues associated with HS2 by all Members of Parliament prior to a vote. While the Hybrid Bill is still expected to proceed between 2013 and 2015, voting on the Preparation Bill will be taking place without the same detailed information about the HS2 project being made available for study by Members of Parliament.

4. The Preparation Bill is not needed to enable compensation payments to be made. Total HS2 expenditure to date (approximately £260m) has been made without a Preparation Bill. Phase One safeguarding payments (about £1bn) have been expected from as long ago as 2009. The Exceptional Hardship Scheme payments are very small within the overall context of the HS2 budget (£49m to date).

5. There is no upper expenditure limit proposed within this Preparation Bill. While most Government departments have been forced to reduce expenditure during the most recent spending review, it is both extraordinary and inconsistent that no limits are placed on expenditure for HS2.

6. Reporting to Parliament regarding HS2 will first take place after 31st March 2015 and annually thereafter. The reporting will be on expenditure incurred. Therefore the whole reporting process will be backward looking without any looking ahead. Parliament should be advised of the likely expenditure before it is incurred and actual spending should be compared with anticipated expenditure. A definitive total budget needs to be established, as does the budget for each year of the programme between now and completion.

7. If Parliament approves the Preparation Bill, it is facilitating the expenditure of taxpayers’ money on a singularly ill-conceived and ill-founded project. It is ill-founded for the following reasons.

Capacity Requirements

8. It has been argued by Government ministers that the West Coast Mainline (WCML) will be full by the early 2020s and that HS2 is the only way to overcome that overcrowding. However, peak time loading of Virgin trains was measured at 52% in 2011. Since then over half of the Pendolino fleet has been extended from 9 to 11 carriage trains, reducing peak time occupancy to about 35%. Significant spare capacity exists now and this was confirmed by the First Group bid for the WCML franchise in 2012 (initially accepted by the DfT). The First Group anticipated annual growth of 10.4% for 13 years on the WCML1.

8. There are lines other than the WCML which are currently overcrowded. Nationally 69% of rail passenger journeys take place in London and the South East regions, while 2% are on Virgin Trains and just over 1% are on East Coast trains. 132,000 rail passengers stood on trains during the three hour morning peak on a typical day in autumn 2011. 89% of these standing passengers were on trains to London stations, although none of them were on Virgin or East Coast trains. DfT data from 2011 provided the following number of rail passengers standing (typical autumn day) during the three hour morning peak:

· London Bridge 32536

· Waterloo 29748

· Liverpool Street 15151

· Victoria 12297

· Fenchurch Street 6653

· Paddington 4435

· St Pancras 4018

· Euston 3716

10. Furthermore there was no sign of standing passengers on Virgin Trains at Euston in the morning peak. It was London Midland and London Overground services which carried the standing passengers. Similarly at Birmingham there was no sign of standing passengers on Virgin trains, but instead on London Midland and Chiltern trains. In the case of the latter, it is not clear whether the survey was performed before or after the introduction of Project Evergreen2.

11. If the Government wants to spend its money most effectively, it should be dealing with routes experiencing the most serious overcrowding now. Spending a disproportionate amount (in excess of £40 billion) to relieve congestion on a line which carries 2% of total rail passengers and currently does not appear overcrowded will surely delay investment by up to 20 years for lines which are seriously overcrowded now. Providing additional capacity in the South East and London regions would produce benefits to far more rail passengers and could be completed much sooner. The focus has been on the wrong area and needs to be changed.

12. However, if it is adamant about increasing the capacity on the WCML then the Government would be better served to implement the 51M Optimised Alternative which is more than 90% cheaper, can be introduced much earlier and provides more than double the standard class capacity at peak times compared to a 2008 base3.

Regional Regeneration

13. A number of Government ministers have claimed that HS2 will help rebalance the North South divide; it has also been suggested that 100,000 jobs will be created. No evidence has been supplied to support these claims.

14. However in his extremely well researched submission to the Transport Select Committee in 2011 and when being interviewed as a witness, Professor John Tomaney indicated that if there were to be any regional benefits, then they would most likely be experienced in London. That view was also supported by a Spanish professor on the Newsnight programme on 7th May 20134.

15. If high speed rail is such a creator of jobs and growth as the DfT and HS2 Ltd claim, how is that Spain has the second highest level of unemployment in Europe while also having the greatest mileage of high speed rail of any European country? If the Government wants to redress the North – South regional imbalance then there are far more effective methods than the construction of HS2; study the views of Professor John Tomaney referred to above.

Economic Case - value for money

16. The first phase of HS2 (London – Birmingham) is extremely expensive on a cost per mile basis. 140 miles are to be built at a cost of £21.4bn which works out at £153m per mile. This is an increase of 82% over the cost per mile of HS1. What is even more concerning is that the cost per mile of HS2 (phase 1) is five times greater than the cost per mile of an equivalent high speed line built in France. It is also of real concern that the cost of building HS2 increased by almost £10 bn in the last week of June 2013. That increase almost negates the total cost savings for 2015-16 brought about by the Comprehensive Spending Review in June 20135.

Economic Case – benefit cost ratio

17. In calculating the benefits for HS2, the assumption has been made that rail passengers do not work on trains. It has then been assumed that all journey time savings will lead to an equivalent amount of extra work. As most rail travellers will observe many people do work on trains using laptops, iPads, smart phones or reading documents. A DfT report in 2009 demonstrated that a specific journey time saving does not produce a corresponding amount of additional work. As approximately half the financial benefits relate to journey time savings (productivity improvements), this correction has a dramatic and adverse effect on the benefit cost ratio.

18. The passenger demand forecasts are over optimistic for HS2 for at least two reasons. Firstly the DfT have persisted in using Passenger Demand Forecasting Handbook v4.1. This was superseded by v5 in August 2009, but the DfT have continued to use the older forecasting model for HS2 even though they were using v5 in 2012 in relation to the West Coast Mainline franchising bid programme. The use of the later Passenger Demand Forecasting Handbook will result in lower (more realistic) passenger forecasts. In addition DfT guidelines say the model should only be used to forecast passenger demand up to 18 years ahead. Instead it has been used to forecast passenger demand at least 35 years ahead.

19. Secondly the DfT has assumed that HS2 ticket prices will carry no price premium. This is quite unrealistic when HS1 tickets carry a 20% price premium and high speed lines in Europe typically have a 75% price premium on their ticket prices. Premium priced tickets will lower passenger demand from that forecast.

20. Professor Bent Flyvbjerg of Oxford University found there is a tendency to overestimate passenger demand after studying 258 infrastructure projects in 20 countries. For rail projects he found the average cost overrun was 44.7% and the average overestimation of passenger traffic was 105.6%. His report is titled: "Survival of the unfittest: why the worst infrastructure gets built-and what we can do about it."

21. HS2 Action Alliance has shown that a more realistic benefit cost ratio for phase one is 0.43 to 1 and for the full Y is 0.9 to 1. This is after making corrections for the out of date forecasting model (see paragraph 18 above) and acknowledging that 50% of time spent on trains is not wasted. These calculations do not reflect the most recent rises in construction costs, which will further adversely affect the benefit cost ratio. Even then, the calculation does not include a realistic allowance for property blight compensation 6 .

22. Where a benefit cost ratio is less than 1 to 1, that represents a loss. Does the Treasury not have a responsibility to cancel a project with such a poor (corrected) benefit cost ratio?

Economic C ase – ongoing subsidy and debt

23. It is understood that Spain spends nearly $3 billion on high speed rail subsidies annually and Germany more than $1 billion per year. We also know that the high speed line between Amsterdam, Rotterdam and Breda (in the Netherlands) has been saved from bankruptcy with a £250m government bailout. It has been losing £320,000 per day due to disastrous levels of patronage.

24. Japan is another country which appears to subsidise its high speed rail despite it having the highest rate of rail use in the developed world. In July 2010 a World Bank report cautioned that governments planning high-speed rail systems "..... should also contemplate the near-certainty of copious and continuing budget support for the debt"7.

25. An ongoing subsidy of £1 billion or more per year for the next 50 plus years is an unnecessary and unwanted millstone for taxpayers. One of the reasons that a subsidy will be required is that passenger revenues will fail to match projections for the reasons outlined in paragraphs 18, 19 and 20 above.

26. In addition the Government is going to be saddled with the debt resulting from the construction costs of HS2 just as it has been (on a much smaller scale) for HS1. Network Rail currently has a debt of just over £30 billion. In France the accumulated debt from TGV line construction costs had reached 38 billion euros by 2011 (SNCF and RFF combined). Total rail debt in Spain in 2012 was 16 billion euros (Renfe and Adif combined). Japan has had major issues with the debt incurred in building its high speed lines which had reached $300 bn. China’s high speed rail debt is close to $300 billion and has been described by a professor as more serious than the US subprime crisis8.

Future expansion

27. HS2 will have no scope for capacity expansion as the section from London to Birmingham is planned to carry 18 trains per hour (in each direction) once the phase 2 sections have been completed to Manchester and Leeds. While HS2 Ltd and the DfT have yet to provide satisfactory evidence to support how such a high frequency can safely be achieved, that frequency will be needed to replicate existing frequencies of services. Trains travelling at 360 kph need a greater stopping distance than trains travelling at slower speeds. The highest frequency of high speed trains run in other European countries is 12 trains per hour and this is for trains travelling at lower speeds. The UIC (international Union of Railways) says that is unsafe to run more than 16 trains per hour at a speed of 350 kph; HS2 trains will initially run at up to 360 kph.

28. The indicative service pattern provided in January 2013 did not include any train paths to Europe on the section between London and Birmingham9. It therefore appears unwise to build a high speed rail line costing in excess of £40 billion which has no expansion capability.

Supporting infrastructure

29. It has been estimated that HS2 will provide an extra 10,000 passengers per hour into the Underground network at Euston in addition to the existing 7000 per hour at peak periods.

30. As is well known, the Underground is another British railway system that is very short of capacity at peak times. To more than double the demand at Euston without providing additional Underground capacity is unworkable. As Transport for London has pointed out, it will require the building of Crossrail 210.

Property Blight

31. It has been estimated that there are more than 300,000 homes within 1 km of the full HS2 route. It is likely that less than 5% of these homeowners will have their house purchased by HS2 Ltd. If any of the others want to move house in the next 14 years (phase one) or 20 years (phase two), they are likely to experience a loss of tens or hundreds of thousands of pounds. No individual should be forced to take a significant fall in the value of their life savings as a result of government action; they should be fairly compensated. If the government will not cover these losses then it should not be building HS211.

Classic Rail Services Reduced

32. Research into the indicative service pattern released by the DfT on 28th January 2013 suggests that a reduced service is likely to be provided to a number of stations on classic rail post HS2. Stations which may have a reduced service on classic rail to London post HS2 include Coventry, Birmingham (International and New Street), Stoke-on-Trent, Wilmslow, Stockport, Leicester, East Midlands Parkway, Nottingham, Chesterfield, Sheffield, Doncaster and Wakefield. Through services would no longer be run from London to Dundee, Aberdeen and Inverness. 17 stations are likely to have longer journey times to London on classic rail post HS2 due to extra stops and/or route changes.

33. This should not come as a surprise as the Government is planning to save £7.7 bn from classic rail post HS212.

High Speed Rail in Other Countries

34. Poland considered building a 480km high speed rail network but abandoned those plans. Portugal abandoned plans to build three high speed lines including one to link with Spain; it will focus its resources on improving rail freight capacity. In the last week of June France cancelled plans to almost double the length of its TGV rail network. French government ministers are concerned that their classic rail network has suffered from under investment for many years. Spain has suffered from low ridership on many of its high speed (AVE) lines. It stopped running trains completely on one of its AVE lines and in June reduced services on several AVE lines. The Netherlands introduced its high speed rail service five years later than intended. It had so much trouble with its rolling stock that it is now claiming a refund from the manufacturers in Italy. The Belgians no longer allow these trains to be run in their country because of safety concerns.

35. A number of countries with high speed rail have encountered lower than anticipated ridership on their high speed lines including The Netherlands, Italy, Spain and Taiwan. In some countries there have been reduced price ticket promotions to encourage more travel by high speed rail. If demand for high speed rail travel was strong, there would be no need for these promotions13.

Programme Management

36. Where a project or programme is well managed one can have a degree of confidence that it will be delivered on time and to budget. However the HS2 programme has faced a number of adverse comments from the National Audit Office in their report of May 2013. It has had three amber/red ratings from the Major Projects Authority (November 2011, June 2012 and November 2012). When Philip Rutnam appeared before the Public Accounts Committee on 1st July he advised there were a significant number of vacancies to be filled for HS2 within the DfT and programme (major project) management remains a concern14.

37. This suggests that there could be significant increases in cost before completion of the programme.

Conclusions

38. HS2 has received sustained criticism from several areas of Government:

Public Accounts Committee – July 2013

National Audit Office – May 2013

Major Projects Authority – believed to be third consecutive amber/red rating November 2012 (published May 2013)

Public Accounts Committee – July 2012

Transport Select Committee – November 2011

39. The justifications made for HS2 have in most cases not been supported by sound evidence. While there is currently enthusiasm within Government to embark on infrastructure projects, it does not follow that every project put forward is a sound investment. Each should be assessed on its merits and true benefits. If it does not measure up then it should be scrapped at an early stage. The current spend on HS2 is probably no more than 1% of its final cost. HS2 is an ill conceived project that does not use taxpayers’ money in a prudent fashion.

July 2013


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Prepared 10th July 2013