HS2 cost and benefit debate not over

Handout image of what a train on the new HS2 high speed rail line might look like With cross-party support as well as backing from business and union leaders, the high speed rail link between London and Birmingham is likely to be approved

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The idea that the proposed HS2 high-speed rail link between London and Birmingham, and eventually beyond to Manchester and Leeds, would bring vast economic benefits for the UK lies behind the government's intention to invest some £32.7bn in the project.

The government insists the HS2 project will bring between £41.4bn to £46.9bn of economic benefits over a period of six decades, ranging from income from ticket sales to reduced congestion on the roads and the creation of hundreds of jobs.

If this is indeed so, it is clearly a no-brainer: Investing £32.7bn to reap £46.9bn obviously makes sense.

Indeed, the project has cross-party support and is backed by some of the country's most senior economists and business leaders, as well as by many MPs and by union leaders such as RMT head Bob Crow and Len McCluskey, general secretary of Unite.

Network Rail, which owns and operates the UK's rail infrastructure, has also thrown its weight behind the project, having dismissed alternative proposals to upgrade the existing railways as too costly and disruptive.

Nimby arguments

But there are also plenty of those who have challenged the government's assumptions and calculations.

Many who live along the proposed route are naturally opposed to the project.

One major reason is obviously the prospect of years of disruptive construction work, followed by up to 28 trains an hour screaming past their homes and villages at speeds of up to 250mph (400km/h).

However, fed up of being portrayed as Nimbys ("Not in my back yard"), the locals along the proposed railway line have tended to focus less on the impact on their own rural lifestyles.

Instead, they highlight other - arguably rather more objective - reasons why it should not go ahead.

The government's case in favour of HS2 is naturally based on a number of assumptions that opponents have worked hard to discredit.

Detail from high speed rail map Many who live along the HS2's proposed route fear their communities could suffer

The Campaign to Protect Rural England, for instance, has expressed doubts about the government's carbon forecasts for HS2.

But the main arguments relate to the economic assumptions behind the government's analysis of the costs and economic benefits.

The Institute of Economic Affairs (IEA), which is arguably the most vocal think tank opposed to HS2, predicts that costs will be greater while the economic benefits will be lower than the government has forecast.

The overall costs would be higher for a number of reasons, the IEA insists, ranging from minor costs such as compensation for disruption during the construction work being paid to season ticket holders, to major expenses arising from a resulting need to expand and upgrade Euston station and transport links to and from the station.

Moreover, it says, when operating costs are added to the initial investment, the overall cost of HS2 increases to some £44.3bn.

Overall revenue from ticket sales and such are unlikely to exceed £27.2bn, the IEA calculates.

But the central argument against HS2 put forward by the IEA is that the business case is based on an overly optimistic prediction about how much and how fast demand for long distance train travel will grow.

The Taxpayers' Alliance, another vocal opponent of the project, claims that "the business case is based on a 27% over inflation rise in fares" and calculates that "if that does not take place revenue is likely to be at least £10bn lower".

Meanwhile, the cost of servicing government debts of some £30bn to finance the project would be £1.3bn a year during a decade of construction, the Taxpayers' Alliance claims

And it says that "mitigating the environmental effects of the line, for example by running portions of it underground, is likely to add at least £3bn to the cost".

Hidden costs

The IEA also points to a number of hidden costs that it says have not been included in the government's calculations, such as the impact on the people who currently live in or visit the Chilterns, an "area of outstanding natural beauty".

HS2 train The value of the nature through which the fast trains would cut is difficult to calculate

"Quantifying such costs is highly problematic, since valuations are highly subjective, but nevertheless the impact is likely to be significant," it argues.

Similarly difficult to quantify, it reasons, are the costs involved when so-called "social capital" is destroyed as a result of "communities being broken up and dispersed as a result of compulsory purchase and/or general planning blight".

Rush-hour delays and longer commuting times for people who live near Birmingham Interchange or Euston station in London could result as the volume of traffic is set to increase, and again it is difficult to estimate the precise economic cost, the IEA reasons.

Imprecise analysis

The government insists it has listened to all the arguments put forward by the HS2 opponents - including many more that have not been mentioned in this article.

And, in putting forward its latest benefit analysis, it predicts that the completed HS2 network will bring in an additional £31bn in rail revenues, and economic benefits of £42.7bn.

The benefit cost ratio (including wider economic benefits) for HS2 is £1.80-2.50 benefits for every £1 spent on the cost of the project.

"The BCR has been revised downwards slightly due to the current economic climate but remains convincing," says the government.

But the harsh truth is that any cost/benefit analysis of a project of this size that is set to last for decades will be imprecise.

This is partly because it must be based on predictions, but also because it will have to make choices about which costs and benefits should be included in the calculations.

If built, it will be decades before anyone will be in a position to say whether HS2 has been an economic success - and chances are we will never know.

After all, even retrospective calculations are based on choices about which costs and benefits to include, and it is unlikely that opposing parties to this argument will ever agree on that.


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  • rate this

    Comment number 156.

    When our roads were reaching capacity, motorways were built. These were new, planned routes which revolutionised road transport increasing capacity and speed. Adding lanes to the A1 would not have been a substitute for building the M1 as upgrading the WCML is no substitute for a new line.

    There was opposition to a third runway at Heathrow & now opposition to high speed rail - what do we do?

  • rate this

    Comment number 155.

    So looking to the future, we'll use the technological marvel that will be HS2 to bend space-time and travel from Birmingham to Euston at warp factor 9. Then what? Handed off to the A-team of customer service and efficiency: London Underground! Get used to standing around at Euston while LU do their well practised "station control" act to deal with the hoards of new space travellers.

  • rate this

    Comment number 154.

    Police officers have just been told they will be having up to a £4000 a year pay cut - yet this gets the go ahead!! Remember the toll road?!

  • rate this

    Comment number 153.

    What a stupid decision to make.

    With more and more people using virtual offices, web conferencing etc. the need to get to Birmingham in under one hour just is not there any more. Total waste of taxpayers' money.

    26.alexicon : I totally concur!

  • rate this

    Comment number 152.

    So many people are pointing out the basic problems with this stupid plan,you have to question the govt's motives - and sanity.

    I suspect the same dark forces - the fetid nexus of corrupt local govt officers, property developers and construction companies - who are behind the drive for urban sprawl.

  • rate this

    Comment number 151.

    Let the decision to proceed be based upon the assurance that the estimate is accurate and underwritten by financial institutions and on the understanding that it does not get built if the tendered fixed price exceeds the current estimate.
    HS1 was to time and budget because the price included enormous bunce for risk. Looks good doesn't it! On time and budget. Drinks all round on the bunce hic!

  • rate this

    Comment number 150.

    143.Alastair Barbour
    £32B is the total cost of the full 'Y' network to Manchester and Leeds.

    London - Birmingham is £17B.

  • rate this

    Comment number 149.

    What would have Sir Edward Watkin said to the nimbys. Sir Edward Watkin powered the last great main line into London before HS1 the Great Central Railway now sadly closed through those very back gardens,with a vision of linking up to the continent?It was built to continental widths.

  • rate this

    Comment number 148.

    I am a keen supporter of any railway project. A railway does not blight the countryside, in fact it opens it up and enhances it.However I support this project tongue in cheek as , like Crossrail, it's building a railway where there already is one. How do the many towns and villages who lost their railways under Beeching feel?

  • rate this

    Comment number 147.

    What's even more galling is that passengers pay a few % over inflation each year, (this year capped at 6%) for development and improved services. So lets hope it costs the taxpayer nothing. The railways have already taken the money over the last 10 years.

  • rate this

    Comment number 146.

    16. "If you want economic benefits to the nation you have to either be exporting goods or importing tourists who will bring extra money into the economy."

    By that reasoning, how does the World economy survive? By exporting to other planets?

  • rate this

    Comment number 145.

    I use the WCML from the Midlands into Euston most days of the week with Virgin. With the odd exception everyone gets a seat. If it's busy they'll declassify a first class carriage. I don't recognise claims of undercapacity. Admittedly it's often standing room only on London Midland out of Euston, but most of these passengers don't go beyond Watford so HS2 won't help them. Who is HS2 for?

  • rate this

    Comment number 144.

    I wonder how many people will even want to use it once the terrorists discover how easy it is to derail an HST. It doesn't require the work of professionals just a kid a catapult and some garden chain could do it. Maybe "Take the train to heaven" should be the HST's slogan - though maybe 'a train to hell' might be more appropriate. : )

  • rate this

    Comment number 143.

    Maybe I missed the HS2 debate but £32bn is a heck of a lot of money to benefit very few. Besides HS2, what else will we have to compliment high speed travel between London, Birmingham etc? What is really needed is mass transit and better public transport to get cars and trucks off the critically congested roads. The majority of the population want cheap, long before we want speed.

  • rate this

    Comment number 142.

    The EU has spent 30-odd years preventing us from putting freight on rail to reduce road congestion and save money and the environment while forcing us to build roads we didn't want

    Now the EU elite are forcing this on us at our expense.

    It is like on of those status symbol projects (White elephants) created by crack-pot, third-world dictators.

  • rate this

    Comment number 141.

    #115 Chris Cox

    Seriously none of their figures add up. The 46.9 billion of added value is based on premise that is complete rubbish. The whole 'time is money' thing assumes a constant work rate - which is almost never true except in a few fairly menial jobs, and never true for places like higher management. Remove the constant and the figure will be closer zero.

  • rate this

    Comment number 140.

    In the same way that Concorde became TOO SLOW (video conferencing is much faster and cheaper) and TOO EXPENSIVE (Business Class gets you there in comfort) - by the time this vanity project is built it will be out-of-date...

  • rate this

    Comment number 139.

    I understand that the projected time savings between London and Birmingham are in the region of 20 minutes or so. Large vanity projects by governments almost never come in at estimated costs, so the benefits will be negligable and the costs enormous. If the track were improved, the number of train carriages increased and the service run reliably, then an extra 20 minutes would not trouble me.

  • rate this

    Comment number 138.

    Has anyone looked at the benefits of investing a similar amount in making travel more affordable for all, removing tolls from the road network etc.
    Any calculation of the benefits of HS2 will be very speculative ( wet finger extended in the wind) and a long time hence. The benefits of more affordable travel would be immediate and real.

  • rate this

    Comment number 137.

    re my comment 122: I tried to include a link to the blog of my walk along the route of HS2 (called "HS2 the slow way") - in case any of you want to have a look, but the link didn't work. I'm a bit new to this!

    Let's try again:



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