Stop this absurd project in its tracks - Letter to Local Transport Today 17th-30th August 2018

HS2 is, in its minor way, an illustration of the corruption that besets the West (‘Politicians didn’t see adviser’s damning assessment of HS2’ LTT 03 Aug). No brown envelopes perhaps. Instead vast salaries for supporting politically sensitive decisions, however stupid those decisions may be. The Times reports that 25 per cent of HS2 staff earn over £100,000 per annum for Heaven’s sake.

The most fundamental fraud associated with this, and most rail projects, is the bizarre ‘Willingness to pay’ calculus used in the economic evaluations. The analyses compare the financial losses, incurred by the Government, with the value of the supposed time savings etc. The absurdity is that the losses may be changed at the stroke of a pen.  Change the extent of public ownership, or indeed the tax rates, and the losses to Government change.

For example, in broad terms the loss to the Government amounts to the scheme costs minus the “incremental fares”.   For HS2 the incremental fares are the fare revenues taken by HS2 minus the revenue lost by the rest of the railway as a result of HS2. That represents the net effect of HS2 on the fares taken by the rail system as a whole, all of which the Government owns. However, if Network Rail were in private hands, free of subsidy, its loss would be ignored, as are the losses to airlines or filling stations. The incremental fares would then be the full fares taken by HS2, thereby greatly reducing the overall loss. That would inflate the “economic” performance of the project no end. On the other hand, if the Government owned the airlines and filling stations as well as the rest of the railway then the losses attributed to those additional activities, as a result of HS2, would increase the loss to Government, so reducing the crucial benefit to cost ratio. Indeed, if Jeremy Corbyn nationalised the entire economy then every pound taken by HS2 would be balanced by a loss elsewhere and the incremental fares would be zero.  That would destroy the business case at the stoke of a Corbyn pen.

Likewise, the theory could be used to support every loss-making enterprise in the land. For example, Toys-R-Us went bust because, as with HS2, costs were greater than takings. However, this Willingness to Pay theory could have been used to persuade the Government to pour taxpayers’ money in. After all, there would have been a social benefit to those parents and children who so loved a day out walking up and down the shop’s aisles.

Where there is a market, as with rail and our toy shop, the decision should hinge on financial analyses, as with the toy shop. HS2 makes a £31.5bn loss at the 2011 price and discount base, equivalent to an actuarial loss of over £70bn at 2018 prices in the supposed opening year of 2033.  That vast loss is, of course, set to double or triple. After all, the optimistic passenger forecasts, and hence fares, may not come in, Michael Byng and Lord Berkley say the cost will double and National Infrastructure Commission chair, Sir John Armit, is calling for another £43bn of complementary local transport improvements to better connect the route to the local areas it serves. OK

Another sleight of hand used in the analysis, is the increase in the percentage of HS2 trips that are assumed to be business-related. For example, between London and the North West, the 2012 business case assumed 24 per cent of trips were on business. The National Travel Survey suggests 41 per cent of weekday long distance trips between London and the North, (including the West and East Midlands) are for business.  But HS2 Ltd’s latest work used 50 per cent rising to 65 per cent for trips to Manchester! Since business time is five times as valuable as other time the effect on the analysis was decisive. Worse still, studies suggest that business people use time on a train as effectively as they do time in an office. Hence the value of business time savings, so crucial to the project, should be set to zero.

I could go droning on but, cutting to the point, the truth is HS2 should be stopped immediately and those who have so shamelessly promoted it should be investigated.

Paul Withrington BSc MSc MICE C.Eng

Director Transport-Watch

PDF: 

LTT 122 published version.pdf