Blog Archives

Soak the taxpayer? Ongoing subsidy required for HS2 – European precedents suggest £2billion

PCU: As some members of the public have suggested, if the business case for HS2 is so compelling, let business fund its construction and the whole operation.

In July PCU published an article and associated report by Andrew Bodman, on behalf of the South Northants Action Group, identifying ten projects which collectively have wasted more than £30bn.

On August 22nd the following message cited the findings of the government’s Public Accounts Committee investigation into HS1 (below)

It would appear from the experiences of several other countries that HS2, if it is built, will add to the ongoing subsidy required for railways in the UK. High Speed Two (HS2) if built will involve the expenditure of £33bn for its construction (London to Manchester and Leeds) plus several more billion for the trains. Is this sensible for a country as indebted as the UK? There are alternatives to HS2.

World Bank: copious and continuing budget support for the debt

What has been overlooked is that high speed rail involves a subsidy to keep its trains running once the lines have been built. 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”.

The National Audit Office estimated that the total cost to taxpayers of supporting High Speed 1 (in Kent) could be £10.2 billion over a 60 year period. HS2 is considerably longer than HS1 and will cost several times more to build.

Does it make sense for the Government to commit to not only an initial outlay in the order of £40 bn but an ongoing subsidy to run it? The subsidy could amount to £2 bn per year based on the experience of some European countries.

The Optimised Alternative

51M, a group of 18 councils which are opposed to HS2, advocates significantly cheaper alternatives which can be made available much sooner on a progressive basis. These measures would consist of lengthening existing trains to 12 carriages, changing one first class carriage per train to standard class and relieving a handful of track pinch points. This solution is known as the Optimised Alternative and more details may be found on their website: http://www.51m.co.uk/.

Further information:
Advertisements

HS2: Cameron and Osborne have allowed through a thoroughly bad project – 3: why this project got off the ground

Simon Jenkins: HS2 lobbyists are embedded in the Whitehall machine led by contractors and consultants

“Modern government is addicted to multi-billion-pound prestige projects, from aircraft carriers and health computers to the Olympics and HS2. This reflects the power of headlines, but also of industry lobbyists embedded in the Whitehall machine.

“Last week the chairman of the committee on standards in public life, Sir Christopher Kelly, warned that ‘preferential access to decision-makers’ by powerful interests was damaging respect for Whitehall.

“But what he merely called ‘no smoke without fire’ is a raging inferno, influencing campaigns for military procurement, runways, academy schools and planning changes. Contractors and consultants promised ministers and officials untold glory in return for contracts.

“The HS2 lobby has been led by contractors and consultants who manoeuvred themselves into what has become almost an arm of government. They promised ministers and officials untold glory in return for contracts. The lobby was actually set up by transport officials in 2009 to press their case, largely with the Treasury.

“Since then the HS2 project has been allocated an astonishing £750m of public money – enough for how many schools or hospitals? – without a single spade being turned and before any decision was made to go ahead.”

PCU comment: this is the debased form of government which puts corporate interests before those of the people they were elected to serve.

Spend a fraction of the HS2 cost to benefit far more people

In the Financial Times today Philip G. Varley, International CFO and TurnAround Executive, Littleton, CO, US, makes a very sensible point: 

“(W)ith the new train, unless you live directly above Birmingham station and plan to meet in the station buffet at Euston you will still spend an hour at each end to complete your journey. A 16% reduction in total journey time, as offered by HS2, is not significant.” 

He continues that when in the UK, unless he arrives at the crack of dawn, he needs at least another 40 minutes to find a parking spot in a remote lot and run to the station, adding that a £5m investment in a parking garage at each of these stations could provide another 1,000 spaces, adding: 

“While politicians worldwide may like the glamour associated with massive infrastructure projects, spending a fraction of the cost to eliminate bottlenecks at the local level would benefit far more people, sooner, and achieve the overall stated objectives of HS2.”

Sir Humphrey: “London to Birmingham HS2? A very courageous decision, Minister”

’Courageous’ ? In that context a weasel word for foolhardy?

Though describing high-speed rail technology as being ‘in vogue’ today, the Financial Times adds news of its ‘setbacks’: 
  • Last year in China two high-speed trains collided in July, killing 30 people and the government has since cut back on investment.
  • In the Netherlands, the country’s sole high-speed rail line encountered huge problems during the construction phase and is still not operating fully at the design speed because of troubles with signalling.
  • Portugal and Poland have in recent months cancelled high-speed rail projects because of funding concerns. 
Several other newspaper sources: 
  • Spain will be axing the high speed train running between Toledo, Cuenca and Albacete.
  • France’s plans for TGV expansion are running into financing problems because of the recession and the country’s high budget deficit.
  • Plans for a high speed line from Amsterdam to Germany (HSL-Oost) have been suspended.
  • The Taiwanese government has taken over the running of the Taiwan High Speed Rail Corporation, which was almost bankrupt, two years after it first started running its high speed trains. Passenger numbers were about one third of those forecast.
  • Taiwan’s high speed rail system is suffering from subsidence on some of its lines.
  • Florida’s governor turned down a $2bn government incentive to develop a high speed rail link from Tampa to Orlando. He believed passenger numbers to be overestimated, and the state would have to pick up the bill for subsidies because the line would be unable to pay for itself.
  • Similar decisions were made in Ohio and Winsconsin. 
Andrew Gilligan in the Telegraph yesterday expanded on the Netherlands’ experience:  

“The new “Fyra” high-speed service in the Netherlands — opened just two years ago — is close to financial collapse with passengers shunning its premium fares and trains running up to 85 per cent empty. 

“The line, between Amsterdam, Rotterdam and Breda, cost taxpayers more than £7 billion to build but is losing £320,000 a day amid disastrous levels of patronage.” 

He points out that the new 103-mile route is similar in length to Britain’s proposed “HS2” line between London and Birmingham and offers a comparable 25-minute saving. It has not, however, tempted passengers away from the existing service, which is about 20% cheaper. 

The Dutch line’s construction costs were relatively low because it crosses largely flat countryside. The British line cuts under west London and through the Chilterns, needing many expensive tunnels, viaducts and cuttings, and is budgeted to cost more than twice the Dutch equivalent.

The British precedent

The only British town to have been given a fully high-speed service to date – Ashford, Kent  – has had a half-hourly high-speed service to London, using the new tracks built for the Eurostar, for more than two years. The journey time has fallen by almost half, from more than an hour to 37 minutes. 

The claim that the new service has proved an “economic boon” for Ashford is hard to justify: the town’s unemployment rate has fallen more slowly, since the line opened, than the South-East England and British averages, and more slowly than in many other parts of Kent which are not on the high-speed line. 

Data from France and other countries with developed high-speed networks suggests that they suck economic activity into the capital more than they push it out into regional centres. 

All this factual evidence should be given more weight than hypothetical submissions in a paper exercise undertaken by commissioned consultants.

Beware ‘vanity projects’ which inflate political egos and enrich vested interests

Some cities have been beset by ‘iconic projects’ which often remove or impoverish beneficial activities and/or lead to the wasteful demolition of well-regarded buildings; Birmingham is a prime example – its vandalism started in the 60s with the breakup of communities in Hockley as the fine solid Edwardian-Victorian centre of the city was ripped out and – in many instances – replaced by unpleasing and less durable buildings.  

.

Birmingham MP Roger Godsiff regards high speed rail as another “vanity project” which will cost taxpayers billions of pounds for no good reason. 

The Mail reports that in the House of Commons he said the £32 billion it will cost to build a 225mph line between London, Birmingham and the North could be better spent improving public transport in Birmingham, for example by building an underground system like the London tube or a new tram system. 

He made the comments as campaigners against the proposed line handed in a petition with more then 108,000 signatures to Downing Street. 

The Post added his other comments: 

“HS2 will allow some businessmen and women to get to London a bit quicker, and to do this it will cut through whole swathes of the country which belong to all of us, not just the people who live there. Business leaders are backing HS2 but they will be the only ones who can afford the fares. 

“If we have £32 billion to spend then I think there are better ways of doing it than this. A rapid transit system in Birmingham, or an underground, would be far more valuable to the people of the city. 

“The economic arguments for it don’t stack up and I think many people who are struggling to make ends meet at the moment will feel there are better ways the government can spend billions of pounds.”

– 

Though there have been adverse reports of some of this MP’s activities, many readers will welcome his opposition to the expensive replacement for Trident, and – more recently – to the decision to give US arms giant Lockheed Martin a £150 million contract to provide and manage a computer system which reads the filled-in census forms and stores the results. Mr Godsiff warned that under the US Patriot Act, which became law in 2001 following the 9-11 terror attacks, the United States government had the power to examine any data held by a US company.

David Conway on High Speed 2

 

As he writes: 

The general public in Birmingham, Manchester, Leeds, Glasgow and Edinburgh have understandably shown no enthusiasm for HS2. 

Their needs are for government to create an environment and introduce relevant programmes today which bring about investment in sustainable local employment. 

Shiny new trains, tracks and railway stations built and supplied with imported labour and equipment and then left largely unused but massively subsidised are seen for what they are – another example of political arrogance and ineptitude. 

Mr Conway hopes to see future editions of Private Eye examining the social, economic and ecological flaws in HS2, with its usual well-researched articles. 

Source: Private Eye, Letters, 16.9.11

 

High Speed 2: who is seducing whom?

 

A letter in the Financial Times asserts that we should not be seduced by an ‘old canard’ – the proposal that the robustness of the business case for High Speed 2 can be simply tested by tendering a 30-year concession for the development and operation of the project. 

It points out that the Channel Tunnel Act of 1987 prohibited government subsidy for HS1 and delayed that mixed blessing, concluding that similar arguments should not be allowed to hamstring or delay the development of HS2. 

The Birmingham writer, Patrick Twist of Pinsent Mason: a corporate law firm, “is a partner in the projects and construction group.  He is a recognised specialist in PPP projects and has a strong industry and operational understanding of what it takes to deliver a project successfully. He acts for procuring authorities, financial institutions and contractors on major projects, including PPP”. 

An open declaration of interest would have put his advice in perspective.

 

Bad decision by government – 17: High Speed Rail 2

An article about the proposed second High Speed rail route [HS2] was recently sent to a journalist hoping that it would be used.

His question, “HS2 – Press worthy in what way? What’s the angle? 

The writer’s answer: “Every way! Pick your angle: loses out on cost, displacement, loss of fertile land, higher emissions, and does not even reach London proper.”  Several ‘angles’ have been gleaned from articles and messages:  

High Speed 1 

Look at HS1: Its trains carry only 50% of projected passenger numbers and it is now up for sale at for £1.5 billion, far below its construction cost.  

High Speed 1 runs through Kent to London. Though its 29 Japanese Javelin trains cut an hour from the London-to-Dover route and halved the journey time between Ashford and St Pancras to 37 minutes, Southeastern has now halved the length of six of its trains because fewer than expected are using it. There are complaints that they are uncomfortable and too expensive – the fares being a third more than other trains. 

HS2 will not even go as far as St Pancras: it is designed to start on the outskirts of  Birmingham and terminate at Old Oak Common three miles west of central London. Passengers will then have to ‘detrain’ and take a further 25-30 minute local journey to Central London. As Michael P. Turner asks:  What businessman or traveller will want such an option? 

A politically suspect set up 

There will be no planning application. The current plan is to pass a Hybrid Bill authorising both the London to Birmingham section and the network as far as Manchester and Leeds.  A Hybrid Bill is an alternative to planning and other laws, neatly cutting out the involvement of local authorities and the holding of public inquiries, though the Department for Transport ran a sort of ‘grace and favour’ stakeholder consultation earlier this year. 

In February, Sir David Rowlands – permanent secretary at the Department for Transport and chairman of the government’s High Speed Rail development company – passed through the infamous revolving door to become non-executive chairman of rolling stock leasing company Angel, which owns and maintains more than 4,400 passenger and freight rail vehicles in Britain.  This followed reported government blocks on his attempts to join the Boards of British Airports Authority and Bechtel [involved in Crossrail which will link with HS2]. 

Blighting the lives of many electors 

There have been many reports about those in the shadow of ‘planning blight’, some fearing the outright loss of their homes, businesses and retirement income. MP David Lidington asks “why should compensation be capped at 85% of the market value? People in Buckinghamshire did not ask for the line and they get no benefit from it at all.” He also asks why business premises are excluded from the current proposals. It is alleged that the state will not buy homes where the proposed route envisages a tunnel running underneath the property – reader, just imagine that! 

What price food security as farms are split and fertile land destroyed?

The proposed line would split Middleton House Farm, between Birmingham and Tamworth. The farm’s owners, Gordon and Robert Davies said that no amount of government money could compensate for the work that they and their family had invested in the land since they bought it in 1914. Gordon said: “They talk about compensation but no amount can ever reflect what my family has put into this farm over four generations. “We won’t have homes and we won’t have a livelihood. How can you compensate anybody for that?

The environmental impact? 

No environmental impact assessment has been published. MP Cheryl Gillan was told by Lord Adonis, when Transport Secretary, that there was no intention of publishing an impact assessment before the general election and asks, “How can that be right?”

Many question the “vast uptake of green belt land that would be required for such a venture, and the enormous cost of creating yet another transit corridor within which to build it.”

An American commentator summarises: “high speed rail is less of an environmental gain than regular rail; it takes a lot of energy to move that fast.  One can argue that because it is more attractive than regular rail, it is still a bigger environmental gain, because more people will switch from planes to trains.  This is only true, however, if the trains travel very full; moving empty cars is not environmentally sound.

Financial considerations 

The government’s 2007 transport white paper stated that high speed lines would be too expensive and too inflexible given the long build time before benefits might accrue. Another correspondent asked “What has changed?” 

A correspondent in the Solihull News now writes to say that in May MP Caroline Spelman said that no public funds would be used for HS2, but it is now proposed that at least £27 billion of taxpayers’ money will be channelled into the scheme – about a £1,000 a household. 

Christian Wolmar, a leading commentator on UK transport matters, says ”What is less clear is the rationale for pursuing plans for a high-speed line in this economic climate. Does anyone believe that the scheme could be funded without major cutbacks to investment plans on the existing railway?” 

Far more investment is needed in the current system. A recent report by MPs on the Public Accounts Committee stressed that rail passengers in England and Wales pay high fares and face “substantial increases in already unacceptable overcrowding levels” by 2014 and beyond. 

Economic benefits? 

Professor Mike Geddes of Warwick Business School has spoken about the reported wider economic benefits, quoting a report from Imperial College which states that any regional regenerational impacts would be ‘very small indeed’ and stated that “If you want to regenerate the north, HS2 is exactly the opposite of what you should do, as all the evidence suggests that closer links to London will only benefit London.” 

As Professor of Public Policy, he spoke on another occasion about the wider economic impacts of High Speed Rail.  He asked whether the case was deceiving the regions, as many expert studies have suggested that – in general – the larger the local economy the more it will benefit, so that : “So-called ‘agglomeration benefits’ flow primarily to the most economically powerful existing agglomerations i.e. London rather than the regions.” 

Last word  

In the USA, Megan McArdle, the business and economics editor for The Atlantic, sees “an enormous amount of existing infrastructure, in the form of houses, industrial plant, and roads, that would be very expensive to tear up in the name of building rail lines.” 

The same applies to HS2 and many will agree with her that: 

“ All in all . . . these things are more valuable than even a really cool train system.”

COMMENT

By email from Moseley

Don’t quite agree with Megan. If that was the adopted policy we’d still be trotting about on horseback. 🙂

That might be a good thing but you can’t stop progress – or can you?

By email from Cradley Heath

A correspondent in the industry has just written to say that the most authoritative HS2 proposals include a central London station at Euston and the latest statements from Government include a wish to link HS2 to HS1. 

“As I understand it, the Mawhinney report was advisory and for consideration by the Government – so the most authoritative proposals remain the detailed plans from HS2 Ltd released in March 2010, which include the enlarged Euston as well as the Old Oak Common interchange.  The Government is of course considering the Mawhinney report and much else besides, and will publish its position before Christmas with a full public consultation in the New Year. 

Government has of course stated more recently than either the above that they do want to link HS2 to Heathrow AND HS1, and it will be interesting to see the proposals for this. 

By the way, anyone who thinks that HS2 could or should serve St Pancras doesn’t know what they’re talking about: there simply isn’t room for the trains in addition to those that are already there – there are only four platforms for the Midland Main Line and just three for the Southeastern (domestic) HS1 high speed services – and in any case the lines at St Pancras point the wrong way.  While one could envisage a new station to the north of Kings Cross/St Pancras on a link line between HS1 and HS2, in practice this would be so far from the main line stations and Underground links as to be near-useless. 

The clever thing about Old Oak Common is the forthcoming Crossrail, which will mean that changing there will get you to several locations right across central London and Docklands as well as Heathrow, so it is not completely insane that the first stage of HS2 could terminate there (in order to get the trains running and alleviating the capacity issues on the southern part of the West Coast Main Line before having to pay for the tunneling in London). “