UK: The Strategic Case for HS2

Last Updated: 3 December 2013
Article by George Morton Jack

The previous blog entry 21 touched upon the contents of Government's latest attempts to persuade the public that HS2 is worth the money, in its publication 'The Strategic Case for HS2' (published on 29 October). Patrick McLoughlin, the Secretary of State for Transport, says in the foreword to this document that the case for HS2 'rests on the capacity and connectivity it will provide. We need this capacity because in the future, as our economy and our population grows, we will travel more. We need the connectivity because bringing people together drives economic growth.'

The Strategic Case goes on to spell out what the Government sees as the main benefits of HS2:

  • Britain's railway network today is like its roads were in the 1940s when the motorway network was given the go ahead: the railways are in increasing demand from commuters, businesses and freight, and the existing rail system won't be able to supply enough trains by 2040. HS2 will provide a new north-south connection, taking the strain of rail traffic off existing lines, freeing them up for new and better services. The HS2 stations – from London Euston to Birmingham (in Phase 1, to be up and running in 2026) and on to Manchester, Sheffield and Leeds (in Phase 2, to be completed by 2032-33) – would receive 400m long trains, running up to 18 times an hour, and each capable of carrying 1,100 passengers.
  • HS2 would help to pull British cities and regions together to boost economic growth. In return for its estimated total cost of £51 billion, including £14.4 billion for contingencies and £7.5 billion for rolling stock, HS2 could increase economic output by £8 billion a year, and even as much as £15 billion (KPMG's estimate in its HS2 report commissioned by the Government, which has of course been widely criticised since). HS2's quicker rail journey times – reducing London to Birmingham by 35 minutes to 49 minutes, and London to Manchester by 60 minutes to 1 hour 8 minutes – would energise business productivity, partly through bringing about more easily and quickly the face-to-face contact that businesses thrive on. HS2 would also create new jobs, including 24,600 in construction alone, and up to 400,000 via commercial development generated by HS2 in areas immediately surrounding the stations.
  • HS2 is the only form of transport investment that could deliver its benefits for the cost. The other options, whether an expanded road network, incremental improvements to the existing railway, or heavier reliance on domestic aviation, are not good enough. Take improving the existing rail network, for example; that would cost at least £20 billion, involve huge disruption over many years, and not address capacity problems in the long-term.

The Government has again altered its forecast of HS2's cost-benefit ratio. Previously, HS2's predicted returns were £1.90 for every £1 invested, rising to £2.50 as HS2's "wider economic effects" kicked in. But now, as the Financial Times has shown in an article dated 29 October, the Strategic Case presents a more cautious prediction: £1.80 for every £1, rising to £2.30. This is the Government's response to earlier criticisms of the thinking behind the higher estimates, such as the assumption that people on trains were not at work.

For all the document's attempts to address past concerns on HS2, to stress that the contingency budgeting for Phase 1 is a deliberate overestimate of £4.24 billion, and to persuade with substantial back-up publications, many of HS2's critics are not impressed. According to the protest group HS2 Action Alliance, the Strategic Case is just 'voodoo economics', casting a weak spell of manipulated data and unrealistic double-counting. Lord Mandelson remains one of HS2's most sharp-tongued critics, telling the House of Lords on 24 October 'I do not support HS2, because its sheer cost will suck the very lifeblood out of the rest of the country's rail system':

'I ... face the fact that no empirical case has been established for HS2, despite repeated attempts. The so-called business case, when the original justification for HS2 was all about speed, duly collapsed under scrutiny when it was discovered that in real life people actually work on trains, and sometimes even better than when they are in the office. Now the whole justification has shifted to assumptions about increased overall capacity, reduced crowding and the economic benefits to a handful of the nation's cities – none of which assumptions, I might say, have been authoritatively quantified or verified, academically or otherwise. They all depend on forward projections of passenger loads which are uncertain, famously unreliable and greatly affected by the future price of tickets and elasticity of demand. ... I fear that HS2 has become ... a political trophy project, justified, on flimsy evidence, as being about modernity and prosperity, with, I might say, a lot of pressure being put on those conducting the cost-benefit analysis to come up with the answer that Ministers want.'

Mandelson is more outspoken than the leader of his party. Ed Milliband is pro-HS2 in principle – so long as it provides value for money. Labour are yet to pick a party line on whether it does, the risk of saying it doesn't seeming too great when its core city council supporters in the Midlands and the North might not like that ( as our blog recently discussed).

So Labour are trapped between not wanting to upset key party people by going anti-HS2, and not wanting to miss a chance to cause trouble for the Government by contesting what would be the biggest infrastructure project in Europe. As it is, Labour likes HS2 if it provides 'value for money' (which sounds more than a little like the Government's own message in the Strategic Case document), and this left too too few MPs in opposition on 31 October to sink the Government's motion in the Commons to get preliminary funds for HS2 - the motion was passed by 350 votes to 34. The more the Labour Party drifts on the issue, the firmer the Strategic Case's arguments can stand.

BDB HS2 seminar on how the hybrid bill process will work for HS2 - 27 November 2013

All of this is preliminary to the imminent introduction of the hybrid bill, which will contain the Government's firm proposals for Phase 1, including the necessary permissions to acquire land and carry out works. Hybrid bill offer those affected a specific opportunity to influence the project, by "petitioning" against the Bill and appearing before a Parliamentary Committee.

We are holding a seminar on how the hybrid bill process will work for HS2 on 27 November, the details can be found here including how to register.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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