Press release 4: Weasel words: the cost of HS2 misrepresented
The report by the Economic Affairs Committee of the House of Lords cites the net cost to Government of the full high-speed rail network as £31.5 billion at the 2011 price and discount base, but these are weasel words. Let us be clear what they mean.
They mean the sum which, if invested at the Treasury discount rate (principally 3.5%) in 2011, would fund the construction cost and all future costs, minus the fares, out to the remote year of 2093.
The words are “weasel” because of the choice of 2011 as the discount base. For example, change that to 2001 and, HURRAH, the sum falls to £22bn. Instead the honourable discount base is the opening year, 2033. Rolling up the £31.5bn at 3.5% between 2011 and 2033 yields £66bn.
That is the actuarial loss, at 2011 prices, which will be faced by those standing in the opening year - supposing the cost is as claimed and supposing the fares come in. It is the £66bn which the Lords should focus on, not the £31.5bn.
By 2033 over £50bn will have been spent, or perhaps £80bn as suggested by Dr Wellings of the IEA, if the costs of the links to the new stations etc. are included. Apart from technical underestimates the cost may have spiralled because of the shortages which will arise in the construction industry when faced with this huge project.
Hence taken in the round the actuarial loss faced by those standing in the opening year of 2033 is likely to be at least £70bn. That is equivalent to £2,500 for every household in the land, 99 percent of which may seldom if ever use the system. After all nearly half the population use a train less than once a year and 90% of rail journeys are less than 80 miles long.
So if we assign the 70bn to the one percent likely to make significant use of HS2 the cost amounts to an astonishing £250,000 per household.
Paul Withrington, director of Transport Watch comments:
“In the face of such gigantic losses why on earth is anyone contemplating this scheme”
“People from households in the top 20% percent of income travel four to five times as much by rail as do those from households in the bottom or second to bottom 20%. Those who may make regular use of HS2 will be overwhelmingly from the better off. Why on earth should they attract such a vast subsidy?”
“The costs cited by HS2 take us to Manchester, Liverpool and Leeds. However, pressure will build to extend the system to Edinburgh and Glasgow leading to additional loss making expenditure in the tens of billions of pounds".
"Why should the taxpayer subsidise this vast folly? It is no more sensible than pouring tens of billions of pounds into Harrods, Fortnum and Mason or some loss-making chain of fast food shops”.
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For more details, or to arrange an interview, please contact Paul Withrington on 01604 847438: [email protected]
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