High Speed Rail (Preparation) Bill

Written evidence from HS2 Action Alliance (HSR 06)

1 HS2 Action Alliance, founded in April 2010, is a not for profit organisation that is making the case that HS2 is a poor use of resources and not in the national interest. It now has the support of over 90 local community, resident and action groups that are affiliated to it.

2 HS2AA have challenged the case for HS2 in the media, courts and with Government. We have responded in detail to all Government consultations since 2010 and appeared before the Transport Select Committee. Our particular area of expertise is in the business case, matters of proper process and in compensation. We developed and are championing an alternative approach to compensation called the Property Bond.

The Preparation Bill 

3 The Preparation Bill makes provision for funding development of HS2. HS2 has no sound justification, it is a waste of money and should not proceed. As the National Audit Office has suggested [1] , HS2 is not an effective means of achieving its strategic objectives.

4 Our evidence demonstrates that HS2:

· Is not needed for capacity

· Not only requires a massive subsidy but delivers economic and social benefits that are considerably smaller than the subsidy

· Is unlikely to redress the North/South divide

· Will not benefit British industry or jobs

· Is not green

· Is not required for Britain to maintain competitiveness with foreign competitors

· Has inadequate compensation arrangements for the extent and degree of blight it is causing.

5 As a consequence the preparation bill would give approval to a misallocation of precious resources.

Capacity

6 It is repeatedly claimed that HS2 is needed because WCML will run out of capacity in the mid-2020’s. However this ignores the fact that capacity on WCML can be increased to more than meets the doubling in long distance demand that DfT forecast to 2037. The 51m Optimised Alternative has been proven to be capable of doing this (Network Rail do not dispute it) with a combination of longer trains, reallocation of first to standard class capacity, and addressing three pinch-points on the route.

7 When DfT assessed the 51m solution in January 2012, they found it to have a benefit to cost ratio of 5.17 [2] compared to 1.4 for the first phase of HS2 (excluding Wider Economic Impacts). Since then Network Rail has said it intends to implement the infrastructure works which cost most in the 51m proposal, with the result that the residual costs are small enough that the 51m solution no longer requires a subsidy [3] .

8 DfT have claimed that the 51m solution does not accommodate forecast additional short distance London commuting, whereas HS2 frees-up capacity that can be used for short distance London commuters and freight.

9 However, the service patterns published in January 2013 for HS2 and the residual classic services show that HS2 does not provide spare capacity for London commuting and freight traffic. This is because the capacity previously thought to be freed-up is consumed by re-instating services to cities that are bypassed by HS2 – and would otherwise have worse services. We have put this to DfT and they have not contradicted this analysis [4] , and this assessment was published in Modern Railways [5] without challenge. In any event it is hardly a proportionate response to a shortage of short distance London commuting capacity to build a new high speed railway!

10 It is unlikely that the level of demand forecast by DfT will materialise. Their forecast was based on an out of date forecasting model that exaggerates long distance demand (as NAO pointed out), and no account is taken that the long distance domestic services on WCML are currently the emptiest or that passenger growth on WCML has stopped [6] . If demand is less than predicted, HS2 will require even more subsidy, while the 51m alternative can be implemented to just the extent (and cost) needed.

No business case

11 The announcement of the nearly £10bn increase in HS2 costs worsens the public subsidy needed and the benefit cost ratio (BCR) figures. Yet despite this Preparation Bill none of these figures have been released. HS2AA estimate [7] the new subsidy to be

· £18.4bn [8] (from £13.5bn) for Phase 1, after the extra £5.1bn infrastructure spend is included

· £33.4bn (from £25.7bn) for the full Y, after the extra £9.2bn infrastructure capital costs are included

12 The effect on the BCR (on DfT’s figures) will be to reduce it below the threshold of 1.5 that Philip Hammond marked out as his key test of value for money [9] . In the context of a bill that is proposing funding it would seem a highly appropriate test, with (using DfT numbers):

· Phase 1 BCR falling from 1.4 to only1

· Full Y BCR falling from 1.9 to 1.4.

13 But DfT’s benefits are based on 13-year old data, and assume that no one spends any time working on trains. A major study that reported in 2009 [10] , which DfT itself commissioned, recommended almost halving the value of business time savings because people were already working on trains. It also noted the trend in increasing use of train travel time for work. By 2026, when HS2 starts services, being on a train will be no inhibition to productivity, and journey time savings will have negligible productive value. Reflecting this in the business case devastates the benefits attributed to HS2 – as the business journey time savings are taken by DfT to be worth over £21bn (of the claimed £48bn benefits) for the full Y. This single and transparently outdated assumption for business travellers accounts for well over 40% of HS2’s benefits, and over half with the similar assumptions also applied to leisure travellers.

14 DfT have commissioned more work on the value of time, ignoring the work they have already had done, which is clearly now dismissed as giving the ‘wrong’ answer.

15 It is clear that the benefits purchased with the subsidy are worth less than half of the subsidy. In other words there is less than 50p back for every £1 spent of public subsidy. It is not a question of whether it is an investment UK can afford to make, it is a waste of money.

North/South divide

16 HS2 would be another London-centric railway, further improving connections between the economically, politically and culturally dominant capital city and regional centres.

17 There is a consensus of academic experts that better connecting an efficient economy with a weaker one is likely to be to the advantage of the stronger economy – in virtue of removing a barrier to competition. London is the economically most efficient city in the UK, and its strength is in the service sector – which is the sector most relevant for passenger travel.

18 As a study done for HS2 Ltd [11] shows, high speed rail does not itself improve the efficiency of labour markets and create economic growth. A more effective – albeit unsexy – approach is to improve local transportation, for example by improving bus services, creating better access to jobs and training for those who are currently economically inactive. As ‘new economics foundation’ state [12] , improving the intra-regional transportation and hence the efficiency of regions is a better solution than HS2 if the objective is regional regeneration.

British industry and jobs

19 HS2 is presented as a bonanza for British business. The reality is that the building and operation of HS2 itself will create few jobs in the UK. The UK lacks a high speed rail design and manufacturing capability, so that UK activity would likely be restricted to assembly and installation. 9,000 jobs are expected to be created for the construction, with 1,500 permanent jobs for its operation, and about same again for phase 2 [13] .

20 When built, it is likely that HS2 will attract shopping centres and offices to the vicinity of its stations. However, this may well be at the cost of other locations in the ‘hinterland’ rather than creating additional jobs. NAO have questioned this, showing that DfT have offered no evidence that such jobs are additional to what might happen in any event. This puts 80,000 of the 100,000 jobs in question. Even if they had been truly additional jobs, at £400,000 a job it makes no economic sense.

21 There is a body of work – including that done for Centro (Birmingham) and the Northern Way (a former consortium of northern transport interests) – that purports to show that HSR (and HS2) would bring major increases in productivity. This work has been discredited by academics in this field [14] . The key academic study indicates no such benefit, and HS2 Ltd’s advisor in this area, Prof Vickerman, observed that such an effect in Kent from HS1 is ‘not visible to the naked eye’ [15] .

Not green

22 Even DfT claim than HS2 is no more than roughly carbon neutral. Accounted correctly it is worse. Speed is not green, with trains travelling at 360km/hr (HS2 initial maximum operating speed) consuming three times the energy for the same journey travelling at 201km/hr (125mph) [16] – the current maximum speed of intercity services.

23 On DfT’s own figures, most of HS2’s passengers would transfer from less polluting means of travel (classic rail) or would not otherwise have travelled (65% and 24% respectively), with only 11% transferring from car and air (8% and 3% respectively). And this level of modal shift for the full Y depends on implausible levels of growth in travel, given that total domestic air travel has been declining since 2005, and domestic travel per person has now been static for nearly twenty years.

24 The ‘future proofing’, which involves a track layout that allows 400km/hr running, means that HS2 scythes through irreplaceable tranquil countryside and the Chilterns Area of Outstanding Natural Beauty.

Competitiveness

25 Shorter rail journey times between Britain’s major cities is not a priority. Journey times between London and the next five largest cities are already shorter than for its main European competitors. Britain has had fast frequent intercity trains well before its competitors, and its smaller size means that journey times are not an issue, as was noted in the Eddington transport study (in 2006).

26 Despite its larger size, even France is turning away from high speed rail and the massive operating subsidies it requires, greatly curtailing planned expenditure.

27 Increasingly business is dependent on high performance electronic communications. Business travel is actually declining [17] . High speed rail is simply the wrong priority.

28 HS2 is not an ‘engine for growth’ but we believe an investment in obsolescence.

Compensation

29 The preparation bill seeks money for compensation. But the Government decided to introduce compensation arrangements long before the preparation bill was mooted and had budgeted for this – with a budget of £1.5bn for phase 1 (and a further £1bn for phase 2) with most not being spent before the hybrid bill is planned to be passed in 2015.

30 Almost all the losses are not actually borne by Government but by those unfortunate enough to live close by the proposed route – and are uncompensated.

31 The HS2 compensation schemes are outdated, do not reduce blight and relieve very few of the financial costs that HS2 creates. We have proposed how compensation can be modernised, with a property bond approach.This adopts private sector best practice, greatly reducing blight and puts the costs of blight where they belong – on the promoter.

32 A property bond not only puts the cost where it belongs but by restoring market confidence actually removes blight itself. It would be a win win – stabilising the property market and giving fair compensation for those affected by blight, and at the same time reducing opposition founded on fear of uncompensated losses for the promoter.

On the basis of the above evidence HS2AA believe the preparation bill is not required and should not proceed. The case for HS2 has not been made.

July 2013