You may have seen earlier this week that Peter Mandelson (the man who gave us the fiasco of the Millennium Dome) came out and questioned the cost of High Speed Rail. I found this particularly rich coming from a key member of the Government which crashed the British economy.
The Government’s plans for High Speed Rail (HS2) come on top of the significant package of investment in our railways that we have already announced which alone represent the biggest investment by any government in the United Kingdom’s rail infrastructure since the 1840s.
HS2 is an absolutely essential investment, not simply because it will get people from A to B faster but also and more importantly because it will free up capacity on the existing rail network, which is struggling to cope with ever increasing demand. It will also create jobs, reduce congestion on our roads and our reliance on short haul domestic flights, as well as cutting journey times between London and the North.
Some people have expressed concerns that the costs of HS2 are “spiralling out of control”, these concerns have been seized upon by long standing opponents of the scheme. However, the figures don’t back these concerns up, and the increase in cost is almost entirely down to the introduction of a new extra contingency fund that exists solely to deal with any problems that may or may not crop up in the future. The Olympics had a similar contingency fund and they were brought in under budget.
There are other good reasons why the estimate announced yesterday is slightly higher than previous estimates. Firstly, because we have listened to representations from communities along the line of the HS2 and have made important changes that will reduce the impact of the scheme. These include a new tunnel through West London, key design changes at Euston station and a new tunnel at Bromford, near Birmingham. Secondly, because we have worked up our budget to a much higher degree of certainty – which is why we are confident in setting HS2 Ltd a target price of £17bn for Phase One. And thirdly because we are making a greater allowance for contingency.
To balance this argument it might be worth drawing attention to the recent report from independent group GreenGauge 21 which estimates that 89,000 jobs will be created over the lifetime of the project. This figure refers only to jobs directly associated with the HS2 project and does not include the wider benefits to the economies of the areas serviced by the line. To get a snapshot of what these benefits might be we should look at Lille in France where the High Speed Rail station attracted 800 enterprises into the city and created 40,000 jobs.
The Liberal Democrats were the first party to champion High Speed Rail. HS2 promises to improve connectivity between London and the North, reduce the need for domestic flights and boost the economies of northern cities like Leeds and Manchester. More and more people are using the rail network every year so we desperately need more North-South capacity – unlike Peter Mandelson we can’t all hop on a private jet.
* Norman Baker is the MP for Lewes, a Minister of State at the Home Office and formerly Minister in the Department of Transport
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46 Comments
Was anything really needed after “Peter Mandelson is wrong”?
Excellent post from Norman, the issue of capacity is totally ignore by the likes Mandelson.
The 2008 timetable changes because of increased inter city took out lots of local trains, HS2 will put capcity back local services who have had a massive increase in passengers numbers.
What would be nice to hear is that High Speed lines will expanded to other cities and Scotland
I don’t think anyone’s arguing that HS2 will not bring any benefits.
But those benefits are only meaningful compared to the alternatives: what else could we spend £30-50bn on and what would the benefits of those be?
Lord Adonis is quite persuasive in saying that the main alternative is having ultimately to upgrade all the N-S main lines, at an even greater cost and greater disruption, for fewer benefits. But I’m sure others can point to better rail improvement alternatives. We could also, for example, increase spending on energy R&D by something like 1000% and maintain that level for the next 15 years – what benefits might that bring?!
At a time of austerity, it’s not enough to say that any X billion of spending will create 12 jobs and therefore is a good thing. It’s all about the opportunity costs and spending money in the most effective way possible. This article does not touch on that at all.
If it was anything other than another investment for London and the South east why not build it north to south instead of the other way round?
What a strikingly bitter tone to this article. Starting with the reference to the Dome (a project initiated by your current coalition partners) and ending with the reference to private jets shows schoolboy level pettiness that should be above a Government Minister. Play the ball not the man it is what adults do, sitting on the same benches as the flashmanesque Cameron is clearly rubbing off.
For the record I doubt if I could think of many issues where I agree with Mandelson, but I thought we were promised a new politics above all this type of childishness.
I find it fascinating how the the DoT and it’s representatives can promote the supposed economic ‘benefits’ of HS2 and keep a straight face. HS2 is a project we should remember that has attracted no investment interest from the private sector and hence will be entirely funded by the taxpayer.
When at the same time they have repeatedly rejected the Central Railway project (a freight line running from Liverpool to Folkestone ), which had private sector backing “on the grounds that Central Railway had been unable to guarantee that it could finance the building of the railway and if the company ran into financial trouble the Government might come under pressure to complete the project.”. [source: House of Commons Library, Standard Note:
SN/BT/688, 13 Apr 2010.]
Whilst this position might be commendable in protecting the taxpayer, we should be aware that the total cost of the Central Railway project estimated at £8bn in 2003 (circa £11bn in today’s money), whereas HS2 Phase 1 is £17bn.
Let us look a little closer at the Central Railway project. This project is for a freight line running between Liverpool and Folkestone (Channel tunnel). Combined with the Strategic Freight Network it would create a significant amount of new capacity, whilst at the same time freeing up capacity on existing lines (specifically the ECML, WCML and North London Lines). From a project delivery viewpoint, it was envisaged as having a 3-to-4 year planning and approval period folowed by a 4-to-5 year construction phase. So if we start today, it could be fully operational by 2022 and investors likely to see dividends sometime after 2025.
So I have yet to see anything that causes me to change my original opinion that HS2 is a vanity project.
I do think there is a compelling case for HS2 and agree with Norman’s comment that HS2 is an absolutely essential investment, not simply because it will get people from A to B faster but also and more importantly because it will free up capacity on the existing rail network, which is struggling to cope with ever increasing demand
As we go forward, I would also like to see dovetailing with planning for Airport capacity and arterial road networks i.e. a fully integrated transport strategy following publicatiion of the current Review on Aircraft Capacity in the South East of England being chaired by Sir Howard Davies, the former Director – General of the Confederation of British Industry.
Hi Norman,
I have a lot of time for what you say on most matters but I think you’re unfortunately wrong on this one. Its simply too expensive and that money could be used to greenlight much more needed smaller scale transport projects across the country that would have more economic benefit. A perfect example of this would be the atrocious Glossop/Longendale bottleneck between Manchester and Sheffield. The fact two major cities in the north, separated by little more than 30 miles don’t have a decent road between them is staggering. If we want economic growth lets look to the regions, they’re underemployed, underproductive and a little investment would pay huge dividends instead of further centralising economic activity in overheated London.
What worries me is that one day an economist said “infrastructure”, the next day the government said “HS2!” and that was that, decision made.
The grand plan seems to be to borrow money mainly from abroad, spent it on HS2 and other projects as quickly as possible, cheer the increase in national GDP, hide the spending on the capital budget, cheer the deficit has been reduced from tax receipts, cheer the job figures have gone up and then cheer re-election in 2015. Sounds great but it’s completely unsustainable.
Even if people maintain that it’s still a worthy project, at least build it from North to South.
Anyone making the argument for HS2 on the basis of increased capacity is showing their ignorance of basic economics, since any additional capacity will be swallowed up by the workings of Jevon’s Paradox. Congestion will increase as a result of increased capacity and decreased journey time. People who might have satisfied themselves with a conference call will travel instead.
I am not saying we should not build it – I just don’t think that the capacity argument is valid.
@Simon Oliver
If your logic is correct, we should simply close all roads and rail links, then!
Norman,
I had a lot of sypathy for your argument until you said “The Olympics had a similar contingency fund and they were brought in under budget.” This was under the revised, revised, revised Olypics budget, I presume, not the original £2.4b budget. Please get your prople to write articles that at least pass muster with someione who knows just a little about recent history. Otherwise your articles just end up looking shallow.
If London is A it would get people from A to B quickly but most people will want to commute from B to A. This will take jobs and skills etc from Midlands economy and further deny improvement in the north. We should think again. However I was told yesterday that we cannot stop it as it was promised to Europe during the Thatcher era
“If your logic is correct, we should simply close all roads and rail links, then!” Quite so. Jevons Paradox was an extension of Malthus’s demographic theories from corn to coal.
Today the issue is peak oil and whether improvements in energy efficiency measures will simply deplete existing resources at a faster rate as a consequence of an accelerating rate of consumption or will extend the useful life of known reserves.
Constraining transport efficiency and infrastructure in an effort to reduce the level of travel undertaken is not a credible policy approach or at least not one that any political group with ambitions to form a government can realistically espouse in a modern industrial society competing in International markets.
Am I the only one to find it ironic that the places which will benefit directly from HS2 are places that are already doing well – and with HS2 would do better still, to the disadvantage of their neighbours:
Manchester – Liverpool/Stoke
Leeds – Bradford/ Hull
Birmingham – Wolverhampton/Coventry
@crewgwyn
Its a good point well made. We should be focusing on regional development and infrastructre and not favour cities already in accendency
As Adam says, just claiming a project will deliver benefits and create jobs doesn’t necessarily mean you should deliver it (especially not at the cost of £40bn plus), you have to look at alternatives as well, which may deliver even greater benefits at less cost.
I saw an HS2 spokesman claiming that the schemes would deliver £2 in benefit for every £1 spent. A 2:1 benefit-cost ratio for transport schemes is actually quite paltry – many other schemes have a much better ratio.
In addition, the latest round of local government funding cuts announced last week is likely to mean even further cutbacks in local bus services – do we really want to be building a hugely expensive rail link for business travellers while at the same time cutting the bus services used for everyday journeys ?
The £44.1bn from the January 2012 economic analysis (later detail is not available) were sourced as follows: £5.2bn for improved reliability, as though the trains cannot be made to run on time without building a high speed network, £6.7bn for relief of crowding, most of which could be solved by adding carriages to peak-hour trains and improved signaling, let alone balancing supply and demand by price, £5.5bn for “other rail user impacts”, such as better access to stations, for heavens sake, £2.1bn for other impacts, and £24.6bn for time savings, dependant on the discredited assumption that time on a train is entirely wasted.
Worse still, no risk factor is associated with the ludicrously high passenger forecasts requiring up to 18 1000-seat trains per hour.
The supposed 100,000 jobs created by the proposal will have cost £600,000 each but how many will that destroy in the part of the economy that makes a profit?
Why on earth are we contemplating this scheme? It will be used mainly by the better-off whilst making a loss of more than £70bn, supposing the fares out to the remote year of 2093 actually arise.
Our view is that if accountants behaved as do these railway lobbyists then those accountants would soon be in prison.
New cost is just contingency… If previous estimate didn’t include contingency then it was a fraud. If it did then this is a huge increase. And – oh – both estimates treat the trains themselves as an optional add-on.
We’ve had to admit that people work on trains (!), which removes all or most of the cost/benefit argument even on the old reckoning.
As someone who live in the east Midlands I just cannot bring myself to support such a massive investment in a single route especially as this ‘vital link with Europe’ won’t even link directly with hs1. If I could get a direct train from Nottingham to Paris it might be worthwhile, but it will dump me at Paddington – I can already get to kings cross in an hour and a half from newark’ which is just across the road from the European routes. Madness.
What a tremendous idea for the government to revolutionise transport between commercial hubs and provide a quantum leap in speed of travel, and take on the investment if the private sector is too narrow-minded to take the risk!
It reminds me of Harold Wilson’s admirable commitment to the white heat of technology. So why don’t we link HS2 to that success and rename it – the Concorde line.
The sooner we come to our senses and abandon this ridiculous HS2 scheme the better. If the cost is already over budget with not a stone overturned, what will the cost escalate to ?
The Internet is already changing many peoples lives and way of working. It seems significant to me that Tesco, is now pulling out of building any more large stores as people are travelling less and shopping more electronically.
Abandon now before any more money is wasted
http://www.independent.co.uk/news/business/comment/anthony-hilton-were-making-the-wrong-connections-and-going-nowhere-fast-with-hs2-8691425.html
let’s improve our existing rail infrastructure first – this really does not look like a good investment.
Totally back Norman on this one. HS2 is the best thing this coallition has done. It is likely to be its greatest legacy.
For too many years, we British have relied on inherited infrastructure from our ancestors (eg Victorian railways). This Victorian infra-structure will not last for ever. We need to build new 21st century transport infrastucture including state of the art high speed rail.
As for the economists who oppose this, I have no confidence in them whatsoever.Are they the same economists who suggested we could have large house price increases but no inflation?
just think what we could do with the spare money if we scrapped Trident, we could afford HS3, HS4, HS5, and all the other local projects mentioned above as well.. now, what to do with the rest of the money?
It’s not my logic – hence the name
http://en.wikipedia.org/wiki/Jevons_paradox
Whatever the pros and cons of HS2, I am concerned that we still follow the herd and talk about another good idea as “the fiasco of the Millennium Dome”. The term was invented by certain sections of the media who didn’t like the Dome – on principle it seemed to me at the time. Using the above term invites the same culprits to add the same term on HS2. Similar easy additions are used by them to describe the LibDems – in that simplistic way journalists have to create public dislike. I have visited the Dome and believe it to be a great venue which we should not dismiss as it has exceeded its original expectations and functions well. To damn HS2 by association is not a good plan.
The whole scheme is a waste of money. There is no compelling reason for the London to Birmingham link and the benefits beyond that are not clear. We’d do much better putting the money into smaller schemes further north.
HS2 might be useful, but vital! I think not!
I wonder if Jevons paradox and the Laffer curve come out of the same box?
Alternatives if we want to spend this much money on transport.
http://dnwssx4l7gl7s.cloudfront.net/nefoundation/default/page/-/publications/NEF_HS2_Report_Final_Web.pdf
I like the idea of the Folkestone to Liverpool freight line
Perhaps if we only jailed dangerous violent criminals , signed up to schengen to benefit from economies of scale in managing migration and scrapped the VAT exemption for newspapers then we could afford this too
The roads are due to hit capacity by the mid 2020s yet the government is ploughing 50 billion plus into rail when only 9% of Journies are made by rail.
What about the Eddington Transport Study? published on 1 December 2006 to accompany the 2006 Pre-Budget Report.Sir Rod Eddington’s study addressed the issue of high speed rail objectively, by taking a step back to identify the problem that advocates of high speed rail were seeking to address
Sir Rod argued that economic returns from high speed rail in the UK were unlikely to be as large as for investment in some alternative projects. He identified a numbers of factors that could contribute to this, including: the compact geography of the UK; an extensive national air network; potentially high and unpredictable costs of new high speed technology andsignificant environmental costs.
He concluded that decisions on specific schemes or policies would need to be informed by detailed appraisals of specific high speed rail proposals, and of appraisals of other policy options for achieving the same objectives
.
He also predicted what has happned around the HS2 project:
The importance of good option generation has already been discussed, and in particular I have argued for policymaking that starts with the policy goal or problem, and then assesses a range of solutions that could be adopted in order to address the situation.
It is evident from my work that, in transport debates across the world, the opposite process can occur. We see situations where the solution develops first – perhaps driven by the prospect of an exciting new technology, aspirations of transforming the economic fortunes of a region, or even simply because a competitor city or country “has one”. The idea rapidly becomes a solution looking for a problem.
The risk is that transport policy can become the pursuit of icons. Almost invariably such projects – ‘grands projets’ – develop real momentum, driven by strong lobbying. The momentum can make such projects difficult – and unpopular – to stop, even when the benefit:cost equation does not stack up, or the environmental and landscape impacts are unacceptable.
The resources absorbed by such projects could often be much better used elsewhere.The suggested benefit:cost ratios of such projects, although only estimates, are often lower than many other less-exciting transport projects. International evidence collated for thisStudy suggests that the claimed transformational impacts of such projects are rarely observed, and any speculative assessment of ‘macro-economic’ benefits would involve considerable risk, particularly in view of the large sunk cost investment that would be required.
Furthermore, the projects are rarely assessed against other interventions that would achieve the same goals – it can often seem that, unless Government can somehow demonstrate that the project’s costs outweigh the benefits, the project should go ahead. In fact, the question should really be are there better ways to achieve the same goals, or are there better uses of the funds to achieve different, but more valuable goals, for the same cost?
In short, step change measures, such as a new nation-wide very high-speed train network, are not, in a world of constrained resources, likely to be a priority. That is why it is critical that the government enforces a strong, strategic approach to option generation, so that it can avoid momentum building up behind particular solutions and the UK can avoid costly mistakes which will not be the most effective way of delivering on its strategic priorities.
Why are the libdems encouraging more travelling when 70% of hs2 journies will be for leisure and the majority will be new journies.Estimated modal shift is very low and it will at best be carbon neutral
You need to rethink your position before you borrow another 50 billion plus for a white elephant
Paul Withrington (5th Jul ’13 – 10:38pm) gets it right, the HS2 “rah-rah” crowd carefully omit that the fact that the £40bn of “benefits” is only achieved in 2093 after taking into account a number of assumptions in 2093. Hence operating costs of circa £2bn pa (2010 money) between 2032 and 2093, should also be included in the costs of the project.
As I’ve said elsewhere there are some rail infrastructure projects with sound business and financial cases that either pay for themselves through savings eg. upgrade of the Midland Mainline, or which have a sound business case eg. the Strategic Rail Freight Network (moving significant numbers of lorry movements off the roads) and Central Railway (effectively enabling Liverpool docks to accept traffic for EU destinations) and hence don’t need to be justified by highly subjective measures.
So the real question Norman should be asking of the DoT and NetworkRail is why have rail projects with sound business and financial cases been put on hold or dismissed in favour of the HS2 basket case, and ensuring those responsible are dismissed on grounds of gross incompetence and misuse of government monies. We should remember their actions have cost the government/taxpayer money and have prevented the creation of work/jobs during a time when they would of help boost the economy.
Finally, if Norman does “hand on heart” believe in HS2 being an ‘essential’ project then lets fund it in the way the government funds many essential community projects, namely with seed/matched funding. I suspect that we have a different understanding of what ‘essential’ means…
An additional query: Can any one clarify whether the monies currently being paid to HS2 Ltd, a little under £1bn pa, are included in the Phase 1 & ” project budgets? From what I’ve seen, it would seem that they are not and hence this is spend that is not being attributed to the overall cost of HS2.
FYI, if you are really interested in the actual proposed route and not just the overview available from the HS2 documents then you should visit http://www.thehs2.com as for some reason whilst the data is available under the “Open Government Licence”, it was removed from the data.gov.uk website a few months back for reasons unspecified – Norman another job for you, please find out and report back.
@Adam 5th Jul ’13 – 12:39pm
“Lord Adonis is quite persuasive in saying that the main alternative is having ultimately to upgrade all the N-S main lines, at an even greater cost and greater disruption, for fewer benefits.”
Agree, particularly as Andrew Adonis carefully omits a rather important point: the majority of the upgrades needed on all the N-S mainlines will happen, regardless of HS2, as part of the normal maintenance and infrastructure renewal programmes necessary to maintain the reliable operation of the existing network.
” I found this particularly rich coming from a key member of the Government which crashed the British economy.”
Oh give it up. As I recall there was a something of a global crisis in financial capitalism in 2008. I don’t see that the coalition is doing so wonderfully well, having taken the economy from growth in 2010 to flatlining for 3 years.
Weren’t we going to have grown up politics? an end to name calling and Punch and Judy?
Play the ball, not the man, as they say.
What an astonishingly large number of morose, grumpy, cynical and generally foolish contributions! Not many are identified as Liberal Democrats so perhaps this is just trolling by the road building and Heathrow expansion lobbies who seem to be behind a lot of the attempts to undermine HS2 and the railways in general). Of course, they are supported by a lot of rightwing economists who see the investment in HS2 as an undesirable extension of the state. Then there are the people who think that if HS2 did not exist, their own pet investment scheme would go ahead instead. Dream on!
Finally there is someone daft enough to think that Bradford and Hull are already doing rather well!
Good for Norman, and just keep up the good work.
Tony Greaves
@Tony Greaves
You over look the significance of Peter Mandelson’s comments (backed up by the Public accounts committee chairman Margaret Hodge) – here we have the advisor to the tailor and Emperor, saying that yes the Emperor is not wearing any clothes and has therefore made all those who ‘believed’ (and we are talking about ‘belief’ rather than reason) the line that has been peddled by government et al that “there is a compelling case for HS2”, look very stupid…
Much of the debate here relates to economic benefits or not. However, there are other issues – the HS2 route directly affects 33 irreplaceable ancient woods. A further 34 woods are within 200 metres and therefore at risk through loss of connectivity of habitats. I didn’t join the Liberal Democrats to support this policy of environmental damage.
@Barry
Agree with you and note that the original/first report from HS2 Ltd made it clear that their proposals did not satisfy any of the mandatory environmental requirements set for the project by the government.
I have tended to focus more on the big picture because this is so obviously what the government (and HS2 Ltd) don’t want us to do! Remember they presented the scheme with a single pre-selected route and wanted to move straight into the planning process (the “consultation” was all about “the route” that HS2 Ltd had drawn up), without any discussion or debate about the overall scheme and its business/economic case. The intent being obvious, the objectors will be those who are either Luddite’s – who can be dismissed for trying to stand in the way of progress, or are impacted by the route and hence can be easily dismissed as NIBBY’s.
Oops! that should of been NIMBY not NIBBY.
Tony Greaves, you criticise us for being cynical but the opposite of cynicism is naivety. No one is completely honest all the time, but one of our campaigning techniques at the moment does seem to be based around exaggerating positives and negatives. I believe this has to go.
As ever, Christian Wolmar is on the money with this demolition of the “case” for this white elephant
http://www.standard.co.uk/comment/comment/christian-wolmar-50billion-hs2-has-reached-the-end-of-the-line-8697585.html