The strong business case for HS2

Tricky Tree

It often feels like the same people that moan about how bad our transport system is moan about the cost of upgrading it. What's the alternative? Save some money and have a dreadful rail system?

In2minds

"the investment boom in the cities"

Gearing up for another property bubble are we?

"For every pound the taxpayer puts in, it will get £2.60 back"

Will it indeed? If the returns are that good then why bother with the taxpayer, why not go straight to the banks?

Perry

"For every pound the taxpayer puts in, it will get £2.60 back,"

Strange sense of deja-vu here.

We used to hear such things about the Tunnel under the Anglo-French Pond, Concorde, and I guess the White Heat of Technology.

All very dramatic, but how about a decent infrastructure for everyday folk? - oh, - and a broadband that actually delivers? Oh, and HS trains that stop at Stratford.

Richard Calhoun

Absolutely agree, it is good to see a riposte to Matthew Sinclair's argument which was both disingenuous and 'luddite'
Would be interested to learn if there is any way that private finance could be encouraged so that the whole process could be speeded up

DavidDP

Regardless of the merits of either argument, this has been an excellent showcase for a well run blog - allowing both sides to make their points in a cogent and detailed manner.

Well done Speccie. More please.

Lotus 51

"For every pound the taxpayer puts in, it will get £2.60 back"

If this were true it wouldn't require taxpayers money to fund it.

Fail.

Commentator

Of course the private sector won't get involved on its own because the costs are out of all proportion to the projected benefits. David Begg says that for every pound the taxpayer spends, it "will" get back £2.60. Is David going to guarantee that? Of course not. This number bears all the hallmarks of the phoney graduate premium of £400,000 per student which Tony Blair used to missell tuition fees and which (surprise surprise) had collapsed to £200,000 (even on the Government's dodgy figures) when last considered.

And since when did "luddite" mean not being willing to p*** billions of taxpayers' money up the wall? On that basis, not joining the Euro was luddite.

John Adlington

How will being able to arrive a mere 40 minutes earlier in Birmingham create an investment boom. Nobody is that shallow.

libertarian

This piece is a load of fabricated tripe. If the returns are that good private investors would be queuing up to finance it. 40,000 jobs doing what for who exactly? Total and utter nonsense. Where I live ( Ashford) we already have HI speed link. 28,000 new jobs we were told, reality 4,000 ( 2,500 of which are public sector) businesses in town centre failing at record rates, why ? Cos most people now commute on HS link.

Face it rail, hi speed or other is a 19th century solution in a 21st century world

Sam Armstrong

A lot of people forget that there will be a link between HS1 and HS2 just north of Euston, which will not only put B'ham within 40 minutes of the capital, but it will also connect Birmingham to Paris and Brussels directly, and when Deutsche Bahn begins operating from Germany to Saint Pancras next year, B'ham and the North could be directly connected to Frankfurt and Cologne.

Britain needs this project. It will give a sense of national pride and it will make our large, secondary cities feel part of the future.

The French and Germans take such pride in their high speed networks, we deserve the same.

But let's keep this project in the family. Let Richard Branson run it. Don't let this line and it's rolling stock get taken over by foreign train companies.

John of Monmouth

Unless I have misunderstood I think Professor Begg is also being disingenuous when he states that 'for every pound the taxpayer puts in, it will get 2.60 back'. The cost of 17bn will be borne by the taxpayer but the 44bn is the total economic benefit of which only a portion will be returned to the taxpayer.

Catalyst

Firstly, where on earth did you get that figure of 40,000 jobs? Even David Cameron is only saying 8,000 and many of those would be temporary construction jobs. Secondly, where have you seen anyone proposing building a new conventional line instead? Upgrading the existing infrastructure would cost a fraction of HS2 & greatly boost capacity.

JR

Commentator/In2minds - the issue is that the benefits are widely spread across geographical areas and sectors. That is why we have general taxation to deliver such goods without freeriders. The spend is recouped by taxation over time not fares generally. Specific taxes are also sometimes used such as the Crossrail Business Rate Supplement. However across the world the fundemental principles of infastructure are the same in terms of public finance.

Walter Smart

I am very concerned about the predictions for the future on which this whole scheme is based. They assume economic growth is to continue on the same track as for the past 50 years. Am I the only one who’s heard of peak oil? This railway won’t be ready for 20 years. Who knows what things will be like then? It’s most likely that with sky high oil prices a large portion of household income will be spent on heating and food, and travel will be an expensive luxury. Traffic jams on the M6 and low cost airlines will be a thing of the past and railways will have loads of spare capacity.

The country should not be trying to catch up on a non sustainable mode of transport but should be leading the way in the development of less energy intensive and more environmentally friendly transport systems.

Publius

@Sam Armstrong
"Britain needs this project. It will give a sense of national pride and it will make our large, secondary cities feel part of the future."

-- I'm afraid you lost me once I reached this touchy-feely stuff.

I for one will not feel "pride" at being saddled with yet another unviable taxpayer-funded project, and as for "feeling part of the future", this is just a case of "feeling part of the latest fad." In other words, mobbish, trendy, unthought out, and probably doomed to fail.

As with all the other grand projects of late, I suspect we are being spun to by people who realise that once it goes ahead, the cost overruns can be forced through on the basis that it's too late to do anything but carry on regardless.

justathought

There are 31 million registered cars in the UK. By the time this HS2 is delivered in 2026 the population will have increased and so will the cars on the road. If we don't plan to increase capacity by moving some of those extra journeys onto rail then we will have the added cost of congestion.

We see today the threat facing us for being dependent on middle east oil to run our 31 million cars. Oil production worldwide cannot keep pace with the growing population and so instead of seeing £120 a barrel you can easily anticipate £300-400 a barrel in 2016. Thats not a legacy we want for our children and grandchildren because we failed to act now.

michael

The M6 toll road is dead as a dodo...it's all in the price.

Germany and France are large, its almost a days drive to get from Paris to Marseilles or Hamburg/Berlin to Munich.
Leeds to London is 3 1/2 hrs in the car or 2 hrs by intercity.

Bill Brinsmead

I'm sure Prof Begg is a splendid chap and he makes some valid and sensible points when rebutting the earlier TA tripe.

Not sure he is wise to continue association with the Northern Way.

Here in the North we see it as a Prescott super quango. Set up and run by the three northern RDAs - One North East, Yorkshire Forward and North West Development Agency.

I've no idea what it does save that its does nothing for us country folk, gives lots of money to labour friendly research bodies in our labour friendly universities. I’m told that the cost of running the Northern Way administration exceeds £4m per year.

It was a pointless and unnecessary creation. Any real work it does could be done by existing agencies.

Northern Girl

The business case is rather weak, in my opinion. When the West Coast Main Line was upgraded and journey times from Manchester reduced, my employers at HQ insisted I spend more time in London because it was easier and quicker to get there. They never volunteered to come north for the same reason. That is what will happen with HS2, it will suck in the surrounding areas and create long-distance commuters, just like I used to be.

Does anyone remember the Eurostar trains they ran from Manchester for a time? They were almost completely empty and were cancelled due to lack of demand. It will still be quicker and cheaper to fly to Paris from Manchester than go by train.

This is a vanity project built on a foundation of sand.

whatawaste

"our trains are full and demand for inter city travel is soaring"

Hmm, are you sure of this? I can believe it of peak time travel, but at non peak times this is a very dubious claim. Remember NXEC had to withdraw from the East Coast line when it could not afford the franchise oayments after passenger traffic fell by 1%.

The projections by the DoT on huge increases in rail passenger traffic also have to be taken with a large pinch of salt. Intercity rail travel is hideously expensive and only the rich and those on expenses can afford it. Rail price subsidies on the continent make rail travel there affordable - maybe the TOCs franchises here are too expensive?

My other concern is the location of the termini. In Victorian times their location is quite logical, but most new business growth is not in London but outside the M25 or the Thames Valley corridor. Travelling from these loctions into the centre of London is time consuming and air travel is the onlyoptions for these businesses.

Is this the best the Yes campaign can come up with, including quite a few numbers picked out of thin air? At the peak of construction of the Eurotunnel 15,500 workers were employed which rather makes a mockery of your 40,000 figure.

Chris

Jobs are a cost, not a benefit.

Foundavoice

Lotus51 - my thoughts exactly; it's amazing how many state (or state dependent) organisations come out with such rubbish. If we had such an ROI I'd sell my house today and take the return in a few years and retire before I'm 40!

The only known profitable rail service in the world is Hong Kong's MTR. It's amazingly cheap, reliable, modern and frequent and this is entirely down to the state not being involved and allowing them to produce their own business model. For example, the tunnels are rented out to telecoms to run their cables through; for example, they accept that profitis not going to be made from passenger tickets so use cheap tickets to increase the footfall numbers and then make sure that they own the land above the stations, which in turn are developed into shopping centres and residential outlets - thus making good profits from rentals and increased land value owing to the transport links.

I'm all for increasing our national infrastructure. But providing expensive, unrealiable trains at great taxpayer subsidy is not the way to do it. If we're going to splurge on our infrastructure, how about a proper motorway network?

Chris Tolmie

By 2026 (when the Birmingham to London route is complete) more than 30% of the population will be working from home with the latest video and telepresence systems.
The traffic forecasts for HS2 assume that the world will be the same in 2026 as it is now. Perhaps the rail forecasters are the real Luddites, trying to pretend that broadband won't unleash the knowledge economy.

Charlie the Chump

Railways are 19th century technology, rigid and inflexible (however much "tilt train" or 250mph technology you throw into them).

The fact is that the car is the most flexible form of transport though the reliance on internal combustion and the support of nasty men with beards in sheets is required and we now need to solve this problem, not the 19th C rail hangover.

I have no doubt that there will be demand for city centre to city centre communications for many years but this will be a diminishing proportion of the total.

The final reason to doubt the HS2 propaganda is when has central government EVER, EVER got spending and planning on this scale right? If approved it will cost more (double?treble?) and take longer than 20 years to deliver.

On the day that we are announcing plans to potentially sack all our forces in Afghanistan and throw away perfectly good frigates spending money on grand schemes such as this is a sick joke.

startledcod

@Bill Brinsmead I am sorry to have to tell you that Paul Begg is far from beeing a splendid fellow. He started his high profile career destroying the flow of Edinburgh traffic in a car hating frenzy, he then took his car hating on to a national stage (I think) with John 'Super Brain' Prescot's Integrated Transport team.

Paul Begg is a prat who has spent his career advancing his own car hating agenda by whatever means possible. It is such a sadness that he had left Edinburgh by the time a referendum completely rejected congestion charging zones.

Sarf of the River

"the investment boom in the cities"

Investment in what for God's sake? More shopping malls, overpriced coffee outlets, betting shops?

It's all very well investing but not much good if there are few people to provide for the payback.

The boom will surely turn to dust when the railway builders go home and stop temporarily propping up the local coffee and bacon butty economy.

Where is all the damned money going to come from to sustain a "boom"? Isn't a boom" the last thing anyone needs on the basis of what good they do anyone?

Mike Spilligan

Startled Cod @ 6:29: To start with a correction, it's David Begg, who was the leading member of Prescott's Commission for Integrated Transport. All members were appointed by Prescott, and it was just a coincidence that they were all car-haters who were programmed to go around in left-hand circles.
This was another of those bodies (like the windmill lovers) whose starting point was the policy they wanted and then created the "evidence" necessary. It can be done by computers these days, otherwise known as electronic chicken entrails.
No one can see as far as 2016. We're certainly going to have energy problems of various kinds before then and better, more widespread teleconferencing (or something we haven't got now) could be part of the solution. Whatever happens, higher speed isn't going to be part of it as no one can suspend the laws of physics which show that energy required to move a vehicle increases exponentially with the square of the speed.

In2minds

@Mike Spilligan - I've ploughed through the website of the Northern Way Transport Group, (link above) in a word, phew! It's not even written in English, it uses that gobbledegook the leftie types are keen on. Thanks for the info, my suspicions are now confirmed.

@Sarf of the River - I hope Paul Begg takes this mix up in his stride rather than sue for damages!

Richard Crow

If this project was viable commercially then private money would pay for it.

Sam Armstrong, above you said "Britain needs this project. It will give a sense of national pride" - thanks but at £30bn I can swallow my pride and do without it. You also said "But let's keep this project in the family. Let Richard Branson run it". Yep I agree - let him bleedin' well pay for it too!

Cynic

I'm with Publius on this one. Has anybody compared what this line is costing us with the sums involved for delivering similar projects in other countries? My bet is it would be vastly overpriced here - not to mention coming in late and over budget. I'd rather they restored the network as it was before Beeching's Axe. I'd like to see a radical overhaul of the railways; make it computerised so we could order a small (say 4-6 seat) carriage that would be automatically programmed to deliver us to our destination. Similarly routed carriages could be joined to make a train, but didn't have to be. That way, we could go where we want, when we want - just like a car, in fact - and we wouldn't have to listen to other people's mobile phone conversations.

startledcod

@Mike Spilligan - don't know what came over me, I wonder who Paul Begg is, have I offended him? But we are agreed, David Begg is a nightmare.

In2minds

Don't know what came over me either! It was startledcod and NOT Sarf of the River who got the wrong Begg. It's one of those days, yeah!

J h Holloway

David Begg was one of the road-toll loonies who told us just how much money the London C-charge scheme would make. In fact the admin cost ended up at £4.75 per car per day, so the idiots had to put the fee up to £8. Most profits are still made from fines and Boris's easy-pay scheme could render the C-Charge unprofitable - which is why the clever bugger did it.

Begg also lost the vote to bring in tolls in Edinburgh and then massively lost the vote for the huge greater Manchester tolling scheme.

I see he's now joined the railways, so he can flog his unique brand of estimation.

Two points. The number of people flying from London to Birmingham - or even London and Scotland - is probably under 3000 per day. Secondly, the vast, vast majority M40 traffic is not centre-to-centre.

I might leave central London and go to Gaydon or Castle Bromwich. I'd need to trek across the capital on public transport to the station and then find myself with another long, expensive taxi or bus ride to get to my destination. And I better not be carrying anything big or heavy.

I have my own theory as to why this is being pushed with such BS 'evidence'. HS2 is, in fact, a EU project which we are required to build as part of the Greater EU HSR network. That's why the green-reds such as Greenpeace are silent are plough a furrow up the middle of the country.

If you don't believe me, consider the widening of the western M25. It was required because that stretch of motorway is part of the EU motorway network, designated E15, I think.

http://en.wikipedia.org/wiki/International_E-road_network

eggshell

HS2will cost every tax payer £1,000 It is not
supported by the green party though generally they support rail travel.The high speed in germany has enforced thefact that one city gains the other loses.Thegovernment have already amended figures from £67bn to
£44bn payback not much difference is there
If you want to read the reasons why I dont believe it is a good thing for the country
go to stop HS2.com.

Rhoda Klapp

Just to show I am not a nimby, I will suggest issuing a licence to any private body or consortium who want to build this line without subsidy, but with assistance with planning and route acquisition. Maybe they could do it by public subscription to raise the money.

No takers?

(I retract a previous statement in a HS2 thread referring to railways as nineteenth century technology. Of course steam power in eighteenth century, and the use of rails predates even that by centuries again.)

Simon Stephenson

Cynic : 9.41pm

" I'd like to see a radical overhaul of the railways; make it computerised so we could order a small (say 4-6 seat) carriage that would be automatically programmed to deliver us to our destination."

Well surely this is the most likely way that transportation will develop - but the automatically directed carriages will operate on roads, not railway lines.

Wouldn't we be far better off investing in what we're going to need in 15 years time, rather than in what would be nice to have now, but which will be passé by the time it's finished?

Fergus Pickering

Well, there seem to be lots of arguments for both sides so lets just go for our personal preference. I like fast clean trains and I don't like driving long distances which is tiring and dangerous, nor do I like airports and aeroplanes. Who does? In a few years they probably won't let me drive because I'll be too old. So I like the fast clean trains. I don't much care what they cost and I don' care AT ALL what rich NIMBYS and greens think or say. It is a romantic thing, as far as I am concerned. And the French trains are out of this world. If the money were not spent on trains it would just go on African dictators and underclass children. Neither of which appeal much to me as recipients of my money.

Whig

Mr Begg is obviously privy to some insight denied to mortals (although also possessed by civil servants and lobbyists). He claims that for every £1 invested £2.60 will be returned. Of course, there is the highly dubious nature of this claim; have we ever known a government project delivered on time, on budget and to give the returns claimed? http://www.iea.org.uk/publications/research/they-meant-well-government-project-disasters
More importantly, however, is that he is essentially claiming that he can know - with absolute certainty - that the rate of return that the capital would have obtained if used for other purposes would have been worse. How can he know this? How can he prove that he, and the state, can spend money better than we can, especially given that utility is subjective? Like most champions of state spending (the UK Film Council recently tried this one), he is essentially claiming to have knowledge that human beings simply cannot possess!

padav

@Northern Girl: Does anyone remember the Eurostar trains they ran from Manchester for a time? They were almost completely empty and were cancelled due to lack of demand. It will still be quicker and cheaper to fly to Paris from Manchester than go by train.

Your memory is playing tricks on you @Northern Girl

There were no direct Eurostar trains ever from provincial UK cities. There were briefly trains that ran direct from these origin points to Waterloo, supposedly to connect with Eurostar trains

They had a number of massive problems;
1. They were slow and took a circuitous route, platform to platform times were in the order of 4 hours +
2. They used old rolling stock and were definitely not one would describe as state of the art
3. Passengers still had to disembark and go through the UK customs/security nonsense at Waterloo

So all in all a crap customer experience - unsurprisingly they were not very popular

When HS2 phases 1 & 2 are complete the journey time from Manchester Piccadilly to Paris Gard du Nord will be just under four hours.

It will then compete on an even footing with its short haul air rival - when that happens watch the customers vote with their cash - my bet is within one year, there will be no flights operating between Manchester Airport and Charles De Gaulle!

Mike Thomas

So for every £1, we get back £2.60..

If the returns are that good, why use taxpayers money. There are plenty of wealthy firms with expertise in rail that could fund the ENTIRE project and not cost the taxpayer a penny.

Ah..... they won't. Why?

Because the business case doesn't stack up.