HS2 cost-benefit is a worrying mix of naive projections
BACK in the 1840s, almost the entire rail network we use today was built over just one decade. Yesterday, the government set out the route that its proposed new high speed rail line – known as HS2 – will take to Leeds and Manchester. It wants to build this new line in two decades. Is HS2 a return to Victorian ambition we should celebrate, or a political vanity project we should oppose?
There are two important differences between the breakneck development of the nineteenth century and the government’s proposals now. First, it was private capital and not taxpayers’ money on the line back then. And second, the Victorians were mostly building new railways along routes that had often known nothing faster than a horse before. By contrast, the government is building a new line to serve cities already connected by the West Coast Main Line, with trains travelling at 125 miles per hour.
Many Victorian investors lost their shirts. But the railways were still there at the end, and their customers still enjoyed much faster and more convenient travel than they had before. Now we all need to worry about whether the government has got the benefit-to-cost ratio on this new project right. The billions it is planning to spend are equivalent to well over £1,000 for every family in Britain.
Unfortunately, the business case is desperately weak. The benefit-to-cost ratio outlined for the original line (before several adjustments) has steadily fallen. It has dropped from £2.70 of benefits for each £1 the line costs in the Department for Transport’s original March 2010 estimate, to just £1.70 at the latest estimate in August 2012. But this is still far too optimistic.
The Department is assuming that all the time spent on board trains is wasted; they are using an outdated model to forecast passenger demand; and they are not comparing strategic alternatives to HS2 fairly, among other things. In reality, the benefits are almost certainly less than £1 for every £1 spent.
HS2 will also create other problems on the existing transport network. Under the current plans, important cities like Coventry and Stoke-on-Trent would get a worse service than they do now. The transport connections at Euston, on the other hand, will be completely overwhelmed, with so many more trains going into the station.
Even if you think the business case is robust, however, that doesn’t mean HS2 is a good investment. There are much better projects, with much higher benefit to cost ratios, which are not going ahead. With resources scarce, and the government spending way beyond taxpayers’ means, the money available for new infrastructure needs to be focused on the right projects more than ever.
The bill for HS2 is just too high. Too much money would be spent to provide too little benefit to too few, mostly fortunate, passengers. Politicians should scrap this expensive white elephant and look at better alternatives.
Matthew Sinclair is chief executive of the TaxPayers’ Alliance.