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High Speed 2 (HS2) is a deeply flawed scheme that will damage the economy by consuming resources that could be allocated to more productive uses. In commercial terms the railway will make huge losses, with taxpayers bearing the lion’s share of the costs

Indeed, the government’s own models suggest that the first phase, from London to Birmingham, is only a ‘marginal’ project. A host of alternative road and rail schemes – many of them small-scale and incremental – have a far higher ratio of benefits to costs.

HS2 is therefore a very poor way to spend the transport budget. Worse still, the economic case for HS2 is based on a series of unrealistic assumptions that exaggerate the benefits and understate the costs.

Perhaps most ridiculous is the assumption that business travellers can’t work on trains. In the age of laptops and mobile technology this is clearly false. Yet it forms the basis of the time savings calculations that are central to the economic case for the new line.

The government also uses very high estimates of future growth in passenger traffic – much higher than most independent projections. If passenger numbers are lower than expected, fare revenues will be reduced and taxpayers will end up picking up an even larger share of the tab.

This is exactly what happened with High Speed 1 (HS1) – the Channel Tunnel Rail Link. Actual passenger numbers were only a third of the figure forecast when the line was planned. The bulk of the construction costs – around £10 billion in today’s money – had to be written off by the government, representing an enormous loss to taxpayers.

Part of the problem is that the planners of HS1 failed to factor in the impact of competition. The same mistake is being made with HS2. Its completion will release capacity on the existing West Coast Main Line, which may then offer services that compete with the high-speed railway. Given that the stations on the existing line will be more convenient for many passengers, it is likely that competition will both reduce passenger traffic and drive down fares on HS2. As with HS1, taxpayers may end up propping up the service with further subsidies.

On the cost side, the government has clearly failed to acknowledge the implications for the transport links that connect in to the high-speed route. The proposed London terminus at Euston already boasts two of the most overcrowded lines on the Tube network. Taxpayers may be forced to find billions more to build additional infrastructure to cope with the dispersal of extra passengers. Along the entire route of HS2, local authorities are already clamouring for subsidies to improve public transport around the new stations.

The government has also neglected the environmental costs of HS2. The scheme is not ‘green’ in any way, since high-speed trains use a disproportionate amount of energy. Even if the electricity is generated from renewables, it will only displace green power from other parts of the grid. And there will be substantial environmental costs at local level. The spectre of ‘planning blight’ now haunts areas along the proposed route. Homes will be demolished and communities destroyed.

The sad thing is that all the misery being heaped on residents and taxpayers is completely unneccessary. Rising demand on the railways can be addressed by measures such as phasing out subsidies, abolishing price controls and incremental investments such as introducing longer trains with fewer first class carriages. Speeds can also be increased significantly on existing routes – at relatively low cost. And regeneration in the North can be promoted more effectively by tax cuts and deregulation. HS2 should be cancelled before it becomes the latest in a long line of big government project disasters.

 

Dr Richard Wellings is Deputy Editorial Director at the Institute of Economic Affairs. He is the co-author (with Kyn Aizlewood) of High Speed 2: the next government project disaster?

http://www.iea.org.uk/publications/research/high-speed-2-the-next-government-project-disaster-web-publication



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Written by Dr Richard Wellings   
Monday, 08 August 2011 16:42
Last Updated on Monday, 08 August 2011 15:44
 

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