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The HS2 disaster: a summary for MPs. December 2015

McLoughlin and others have said that the scheme will be transformational.  However, it is only generated trips which can transform since the effect of the others is obviously already with us.  Generated trips forecast for 2036 amount to a trivial 1.5% of all current rail trips and to only one in 2,000 of all current journeys excluding those made on foot and by bike. [1]  Hence the claim is a sham.  Likewise, with claims to transform the nation’s economic geography.

The proposers claim that the scheme will generate some 100,000 jobs and regenerate ‘The North’.  However, many if not most of these will be relocations.  Furthermore, the cost is roughly £700,000 per job at 2011 prices.  How many other jobs will that destroys in that part of the economy which makes a profit?  Why has the Secretary of State and the Chancellor not asked the question?

HS2 Ltd represents the financial loss as £31.5bn at the 2011 price and discount base.  That is close to a fraud on the nation.  The £31.5bn corresponds to £66bn at the opening year 2033 discount base.  The £66bn represents the actuarial loss at 2011 prices which those then standing will face, supposing the predicted passengers and fares roll in for 60 years out to the remote year of 2093.  It is that which MPs and the nation should focus on, not the published £31.5bn. 

Worse still, the £66bn excludes the other billions required to build links to the HS2 stations or to extend to the north.  Like as not the total will exceed £100bn or £3,000 to £4,000 for every household in the land.  That at a time when nearly half the populations uses a train less than once a year and when 99% will seldom if ever use this high speed system.

Meanwhile:

  • The Economic Affairs Committee of the House of Lords pours scorn on the values of time used to support this immensely expensive project.
  • Only half the supposed benefits come from train time savings.
  • If the £12bn due to dubious items, such as improved access, interchange and reliability along with less walking. are struck out then the business case collapses.
  • The latest analysis is rescued in part by inflating the proportion on business far above the values available from surveys.

So, why on earth is this scheme not cancelled?

Worse still, the underlying economic theory compares the cost to government with the supposed social benefits, mostly time savings.  However, that theory reduces to the absurd when it is realised that changing the economic boundary of the project or the tax regime can massively change the results despite the resources used and benefits derived remaining unchanged.   So, yes it’s a fake. Instead decisions should rest on financial analysis or, where there is no market, on comparing resource expenditure with benefits.  Under that dispensation HS2 could not possibly see the light of day.

The KPMG report claims that the proposal will generate Wider Economic Benefits (WEBs) worth £15 billion per year.  Those can arise only because of new business and commuter trips (the supply side).  They number circa 7.75 million per year.  Dividing the £15 billion by the 7.75 million yields £1,930 or close to £4,000 per return trip.  If the same were applied to all rail’s business plus commuter trips, amounting to some 0.8 billion per year, we would have benefits greater than the nation’s entire GDP, which is ludicrous.  Why on earth has the Secretary of State not  noticed that?  After all he has been told.

Comparisons with the TGV in France confirm that such schemes bring little or no benefits to the regions.   

International comparisons show that the financial losses are vast.  For example, the debt due to the much lauded Japanese system is $300 billion, see Ronald D Utt’s paper, “America’s Coming High Speed rail Financial Disaster” – it’s a frightening read. Why should the UK aspire to that?

In the national interest this scheme should be cancelled immediately.

See also topic 17 at www.Transport-watch.co.uk.
Transport-watch
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[1] FoI request 13-873 provides 76,886 HS2 generated trips per day in 2036, equivalent to roughly 24 million per year.  There were 1.6bn passenger trips by national rail in 2014, reference TSGB table 0601.  Hence the HS2 generated rail trips in 2036 amount to 1.5% of all rail trips in 2014.  Further, NTS table 0409 provides a total of 703 passenger trips per head by all modes in 2014.  With a population of 64 million that yields total passenger trips of 25 billion.  Hence HS2 generated trips amount to roughly one in 1900, cited as one in 2000 in the text, of all passenger trips in 2014.

 



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