House of Lords - The Economics of High Speed 2

The Economics of High Speed 2 - Economic Affairs Committee Contents

CHAPTER 7: IS HS2 THE BEST WAY TO STIMULATE ECONOMIC GROWTH IN THE NORTH OF ENGLAND?

315. In the previous Chapter we considered whether HS2 will provide economic benefits to the UK and how this growth might be distributed across the country. We concluded that investing in transport infrastructure can help increase productivity and that HS2 is likely to bring some benefit for cities served by HS2.

316. In this Chapter we examine what other options for transport investment might stimulate economic growth outside London. We focus on two particular alternative proposals for generating growth in the north—improving links between cities in the north or prioritising the construction of the northern legs of HS2 ahead of the London-Birmingham section of HS2.

Improving regional connectivity

WOULD IMPROVING REGIONAL CONNECTIVITY BE MORE EFFECTIVE?

317. Academics held different views about whether improving long distance high speed transport connections would be the most effective way of stimulating economic growth. Professor Graham said, "the question is about whether high speed is the best way to achieve growth or productivity … I do not think the answer is necessarily yes." He clarified that, "rather than have this big scheme that is connecting cities at long distances, have investment inside cities to improve congestion and relieve the costs of congestion."[380]

318. This view was shared by the Eddington study of 2006 (see Box 9 below) which found that concentrating investment on congested urban areas, international gateways and inter-urban links, would provide a "strategic focus" for the transport investment programme. The report concluded that "large projects with speculative benefits and relying on untested technology, are unlikely to generate attractive returns".[381]

319. Sir Rod Eddington clarified his view on high-speed rail when he appeared before the Transport Select Committee in 2007. He said that "that high-speed rail with unproven technology and with dubious economic benefits is not something we should be spending £30-40 billion on."[382] However, he confirmed that he had not "brushed away high speed rail", concluding that, "I have been generally modally agnostic and my observation is that in the densest corridors high-speed rail is a critical part of transport infrastructure."[383]

Box 9: The Eddington Study

Sir Rod Eddington undertook his transport study, published in December 2006, "to advise the Government on the long-term links between transport and the UK's economic productivity, growth and stability, within the context of the Government's commitment to sustainable development."

The Study recommended that "the strategic economic priorities for long term transport policy should be growing and congested urban areas and their catchments; the key inter-urban corridors; and the key international gateways."

The Study noted that "The economic case for targeted new infrastructure is strong and offers very high returns". It recommend that "smaller projects which unblock pinch-points, variable infrastructure schemes to support public transport in urban areas and international gateway surface access projects are likely to offer the very highest returns, sometimes higher than £10 for every pound spent. However, large projects with speculative benefits and relying on untested technology, are unlikely to generate attractive returns."[384]

Source: Eddington Study

320. Professor Venables took a different view from the conclusions of the Eddington Study. He argued, "we need to do something rather serious about making some of the regions more attractive places to work, to do business and to live … I think fairly ambitious transport comes in that set."[385] Sir Richard Leese, Leader of Manchester City Council, agreed and referred to the Northern Way project which compared investment in local transport infrastructure and intercity links, concluding that "you got more benefit out of investment in intercity links than you did from investment in local transport infrastructure."[386]

WHAT ARE THE PROPOSALS FOR IMPROVING LOCAL AND REGIONAL CONNECTIVITY?

321. No firm proposals have yet been made by the Department for Transport for improving regional connectivity in the north or the Midlands. Several high profile figures have however lent their support to improving these links. The Chancellor and the Prime Minister have supported plans for an east-west rail link, with the Chancellor saying in June 2014:

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322. Sir David Higgins said in his report Rebalancing Britain: From HS2 towards a national transport strategy that "substantially improved services East-West across the North are not only desirable, but possible. We need to turn the aspiration into a practical plan."[388]

323. Improvements to east-west links in the north of England have often been referred to as "HS3". This term has been used interchangeably to mean the connection between Leeds and Manchester or a longer route running from Liverpool to Hull via Manchester and Leeds. Such a railway would not necessarily need to be high-speed. Sir David Higgins said that: "You would never build a 225 mile per hour [360 kph] railway line between Manchester and Leeds. You would be getting off just as you sat down."[389] We refer to 'east-west links' rather than 'HS3' in this report as there is no clear indication yet what form or route the proposals might take or if the trains will be "high speed" in the same sense as HS2.

324. It is not known what the cost of any project would be as no plans have been announced. It has been suggested that plans to build a line from Manchester to Leeds would cost £7 billion, although Ms Munro of HS2 Ltd told us that £7 billion "was not our figure and I think it was simply if you took the per mile cost of High Speed 2 and applied it to High Speed 3."[390] Plans have been mooted to connect cities including Manchester, Leeds, Sheffield, Hull and Liverpool. Other suggestions have been made for how to improve regional connectivity which do have more detail (see Box 10).

Box 10: Proposals for improving east-west links

One North

The report One North, a Proposition for an Interconnected North,[391] sets out a proposal for improving transport links to maximise economic growth across the north. The proposal was developed by representatives from Manchester, Liverpool, Leeds, Newcastle and Sheffield and is supported by a number of other cities including Hull, Bradford, Wakefield and York.

The report proposes plans for 150 per cent additional capacity on roads and up to 55 per cent increase in journey times on a faster, more frequent, interconnected rail network. The proposals also include a new trans-Pennine railway and improvements to freight movements.

The One North report is intended to complement, rather than replace, HS2 proposals and includes plans to speed up the implementation of HS2 Phase 2.

Midlands Connect

The report, Midlands Connect: How better connectivity will maximise growth for the Midlands and the nation[392] was developed by a collaboration of Local Enterprise Partnerships and Local Authorities across the Midlands. Like One North, Midlands Connect builds on the HS2 proposals with the intention of providing a plan for investment in road and rail infrastructure to stimulate economic growth in the Midlands.

SHOULD EAST-WEST LINKS BE IMPROVED?

325. Witnesses were in agreement about the generally poor state of connections between northern cities. David Thrower, Transport Consultant, North West Business Leadership Team, described northern city-to-city connectivity as "remarkably poor".[393] Mr Blackett agreed, noting that there was potential for the development of east-west links in the Midlands: "we have barely understood connectivity east-west and have barely even thought about it."[394]

326. Lord Deighton suggested that plans for improving trans-Pennine regional connectivity were "Crossrail for the north. It takes the journey from Manchester to Leeds and makes it look like the journey from Heathrow to Canary Wharf on Crossrail."[395] Michele Dix of Transport for London agreed: "The interesting thing is how close Leeds and Manchester are. A line between them would be no longer than the Central Line. So we would support a clustering of the northern cities."[396]

327. Some witnesses were keen to point out that HS2 itself would help improve connectivity between cities other than London. Sir Richard Leese told us that "One thing that we have not adequately conveyed is that HS2 is not exclusively linked to London. If you are on the east coast, the links between Leeds, Sheffield and Nottingham are vastly improved, as are the links to Birmingham on the west coast."[397]

328. The economist Jim O'Neill, Chair of the Cities Growth Commission, agreed that improvements should be made to east-west links. He said that there was "quite a rise in commuting going on between Manchester, Leeds, Sheffield and Liverpool, in particular going into Manchester and Leeds from both those cities, but especially from Leeds and Sheffield." He felt that "the best interventions are when the trend has turned or is turning", concluding that "if you can explore non-too-expensive ways of trying to boost connectivity between those very closely geographic urban centres, you can probably get some agglomeration benefits that otherwise you cannot."[398]

SHOULD IMPROVING REGIONAL CONNECTIVITY BE PRIORITISED AHEAD OF HS2?

329. We asked witnesses whether they would prioritise improvements to regional connectivity ahead of building HS2. Representatives of cities with HS2 stations did not agree that improved trans-Pennine links should be prioritised ahead of HS2. Sir Richard Leese told us that "We will not be able to get effective links between Leeds, Sheffield and Manchester in an economically sustainable way without that high-speed line, in particular between Sheffield and Leeds. That is a prerequisite in order to be able to get that effective east-west link."[399] Mr Williams' response to the question of prioritisation was representative of the views of the cities with HS2 stations: "This is not an either/or … We want the lot, because our connectivity is poor."[400]

330. Representatives of cities that were not on HS2 were generally in favour of prioritising improved east-west links. The Mayor of Liverpool told us "if I had a choice between HS2 or HS3, I would go for HS3 all the time, because it is seriously about connecting cities to drive economic growth in those cities to genuinely rebalance the economy."[401] Dr Kelly agreed, telling us that Hull and Humber Chambers of Commerce "do very much like HS3, particularly if it is what we call the Hullerpool line, going right through from Hull to Liverpool. That is a particularly good idea and offers much more significant, immediate benefits to our part of the world."[402]

331. Several witnesses suggested that freight would benefit more from improved east-west connections than from improved north-south connections. Professor Glaister said that "As for freight, you need to serve the ports and bring stuff east-west, not north-south. It [HS2] will not be very helpful with those kinds of movements."[403] The Rail Freight Group said that "Capacity is increasingly tight, with the north Transpennine routes already having little or no available freight capacity. Investment to create new capacity … is therefore critical." They added the caveat that their backing assumed "that HS3 does not delay, or de-scope HS2", which they supported.[404] 20 Miles More suggested that building a spur from HS2 to Liverpool "would not only put Liverpool on the HS2 network but would be the start of HS3, from Liverpool to Manchester, Leeds and beyond."[405]

332. Mr O'Neill agreed that improving links between northern cities should be prioritised ahead of HS2. He told us that "an absolute minimum thing is to connect them [northern cities] all in a vastly better way than they are today".[406] He later said that "connecting all these places [northern cities] together, is in my judgment way more important" than making it faster to travel to London from these cities.[407] Chris Stokes, former executive director at the Strategic Rail Authority, noted that investment in regional links in the north of England would produce "greater and faster benefits" than HS2, "both during the construction phase [and] … the decongestion and agglomeration benefits produced by better connectivity in the region."[408]

333. The Secretary of State argued that it was not "one or the other. I do think that the east-west links are part of the same issue and solution."[409]

Building HS2 from north to south?

334. It has been suggested that HS2 should be built from north to south (i.e. the sections connecting Birmingham with Manchester and with the East Midlands, Sheffield and Leeds should be built before the section between London and Birmingham). This received support from some witnesses,[410] including Mr O'Neill who told us "if the purpose is to think about helping those urban areas to grow more, and if it is done just in its own right or to balance the contribution to national GDP, it would be great if it was done the other way round".[411]

335. Sir David Higgins, however, told us that building Phase Two ahead of Phase One was no longer practical: "You may have considered it five or six years ago, but the legislative process is such that getting the second phase through Parliament will take, if things go well, until 2021."[412] We note that the Parliamentary process is not an insurmountable obstacle and should not be treated as such if all other evidence points to a different solution being the most cost-effective.

336. Mr Prout agreed that the legislative process would make reversing the order of the phases difficult, but noted that the problem was "a practical one, which could of course be overcome by delay." He said a more fundamental problem was that it was more important to address "capacity constraints between Birmingham and London that are causing the problems on the West Coast Main Line. You basically have to tackle those first, otherwise by freeing up the routes to the north all you do is free them up and put them into a traffic jam."[413]

The importance of investment in infrastructure outside London

337. Representatives from the north and Midlands repeatedly made the point to us that investment in infrastructure in the north had been historically much lower than London and that HS2 was the opportunity to correct this balance by investing in the North as it had cross party support. Simon Green of Sheffield City Council noted that it was "130 years since we have had any major physical rail investment north of Watford."[414]

338. An IPPR North report, Still on the wrong track: an updated analysis of transport infrastructure spending, found that:

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339. Several witnesses compared the cost of HS2 to infrastructure projects in London under construction including ThamesLink and Crossrail. Sir Richard Leese argued that "The estimated total cost of the package between now and 2030 for the entire pan-northern scheme for the north of England, which includes all the incremental bits and so on, is less than the cost of Crossrail."[416] Mr Thrower agreed, telling us that "London did not have to choose between Thameslink and Crossrail; it rightly has both and is rightly looking at having Crossrail 2."[417]

Chapter 7: Conclusions and recommendations

IS HS2 THE BEST WAY TO STIMULATE GROWTH OUTSIDE LONDON?

340. We have heard much support for improving regional links between cities in the north to stimulate economic growth and we agree that investment in this area is necessary and long overdue. The Government failed to consider whether improving these links was a better option than HS2 for encouraging growth in the north.

341. As east-west links are currently poor and north-south links are already good, there is a strong case for investment to improve the former as the benefits to be derived from improving journeys between cities in the north are likely to be greater than the benefits from improving north-south links. We urge the Government to speed up its assessment of the options for improving east-west links in order that they can be considered against proposals for HS2. This assessment should include consideration of the benefits of such a scheme for rail freight.

380 QQ19, 22 Back

381 The Eddington Transport Study, The case for action: Sir Rod Eddington's advice to Government, December 2006, p 6: http://www.thepep.org/ClearingHouse/docfiles/Eddington.Transport.Study%20-%20Rod.pdf [accessed February 2015] Back

382 At the time Sir Rod Eddington was giving this evidence to the Transport Select Committee proposals for a "maglev" train running at 500 kph from London to Glasgow were under consideration. Back

383 Oral evidence taken before the Transport Select Committee, 16 April 2007 (Session 2006-07), Q40 (Sir Rod Eddington) Back

384 Eddington Study, pp 1-7 Back

385 Q22 Back

386 Q149 Back

387 George Osborne speech on 23 June 2014 at Museum of Science and Industry, Manchester. Speech available at: https://www.gov.uk/government/speeches/chancellor-we-need-a-northern-powerhouse [accessed March 2015] Back

388 Rebalancing Britain, p 9 Back

389 Q254 Back

390 Q70 Back

391 One North, A Proposition for an Interconnected North, July 2014: http://www.manchester.gov.uk/downloads/ download/5969/one_north [accessed February 2015] Back