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HS2 Local Authority Briefing:The new Business Case for HS2

Hilary Wharf14 March 2011

www.hs2actionalliance.org

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Headlines

1. New case is worse than the old2. Main change is to demand forecast – but still overstated3. Almost all our original concerns remain, including

• Accounts all time spent on train as wasted• Benefits of ‘alternatives’ stay hidden• Existing services will suffer• No evidence on improving north south divide

4. Materials not fit for purpose?5. Other aspects eg carbon

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1. Worse business case (VfM)

London – W Mids The Full Y March 10 Feb 11 March 10 Feb 11 £bn (NPV) Benefits £28.7 £16.5 £67.2 £37.3 (with WEI) (£32.3) (£20.6) (c £73) (£43.7)

Costs £17.8 £17.8 £29.0 £30.4

Subsidy £11.9 £10.3 £16.9 £17.1

NBR 2.4 1.6 4.0 2.2

(with WEI) (2.7) (2.0) (c 4.3) (2.6)

Value for money? One third worse Nearly halves

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2. Revised demand forecast

Assumed lower economic growth & higher faresStretched out old forecast for another 10 yrs

March 10 Feb 112033 2043

Background growth*: 133% 102%Equivalent to : 3.3%/a 2.0%/a

Including HS2 uplift: 267% 216%

* from 2008 base

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Issues with new forecast

Extending the period using a short term model to compensate for lower economic growth:– Eddington - 10 yrs; March ‘10 - 25yrs; now - 35yrs!

Saturating demand for travel - ignores the evidenceOut of date forecasting factors used, despite their new research confirming PDFH V5.0 factors correctHistoric 2008 base and crowding nos. changed!– March 10: 45k to 145k/day (+20k stay on WCML)– Feb 11: 50k to 136k/day (+22k stay on WCML)

Less from car/air (now 13% ) & new trips (22% )

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Sources of passengers

Phase 1 March 2010 forecasts to 2033* Feb 2011 forecasts for 2043

% journeys per day

journeys per year (m)##

%# journeys per day

journeys per year (m)##

Switch from rail 57 85,000 29.8 65 88,467 31.0

New trips 27 38,000 13.3 22 29,943 10.5

From air 8 11,000 3.9 6 8,166 2.9

From car 8 11,000 3.9 7 9,527 3.3

Total on HS2 100 145,000 50.8 100 136,103! 47.6

remain on WCML 20,000 7.0 22,255$ 7.8

Total WCML + HS2 165,000 57.8 158,358 55.4 # # Based on 350 days/a (from HS2 Demand Model analysis, Feb 2010)

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3. Original concerns on benefits

Value of time saved: still based on pretending all time on trains is wasted. DfT’s defence is – Crowding benefit would be greater – no its artificial!– Those switching from air & car benefit – small (car only)

Out of date value used for business time (av £70k/a)Unrealistic comparator: uses a ‘do-minimum’ case– Presumes only planned capacity or service changes -

not even 11-car on all WCML fleet– Ignores transformation certain by 2043

No scenarios or proper sensitivity analysis despite HS1 experience eg rail demand crucial but no PDFH5.0 case)

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Correcting the Business Case

A provisional re-assessment of the NBR:

DfT Feb 2011 Corrected Corrected demandbenefits and benefits

with WEI with WEI with WEI

Phase 1: 1.6 2.0 0.6 0.9 0.3 0.5Full ‘Y’: 2.2 2.6 0.9 1.1 0.4 0.6

Net Benefit Ratio below 1 is ‘poor’ value for money – costs outweigh benefits eg for every £1 spent just 30 pence benefit

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Still concerns with ‘alternatives’

Buried and misrepresented: the cheaper, better VfM, and risk-free alternatives stay hidden – Best option not created eg Rail Package 2 (RP2) not 12 car– All bundled into scenarios for the Y ie for WCML, ECML, MML – RP2 (WCML upgrade) buried with poorer options for the Y to

hide its benefits inside Scenario B– RP2 capacity misrepresented (at 54%), but delivers all that’s

needed (135%+); can be done sooner, incrementally and has less crowding than HS2 – and must have better NBR

Disruption: WCML upgrade causes less disruption than HS2 and not like last upgrade– Cures pinchpoints rather than redoing all track and signalling– Lengthening trains (11 car) and more trains (52 to 90)

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Existing services will suffer

Disruption during construction– Euston (8yrs), GWML services, Chiltern

Delays to increasing capacity– Overcrowded commuter trains: Northampton, M Keynes,

Euston – wait to 2026– ECML and MML – wait until 2032/3

Impact of HS2– Winners: Birmingham, Leeds, Manchester, parkway stations

Losers: some major stations get slower & fewer services• eg Coventry, Wolverhampton, Stoke (Phase 1); Leicester , Chesterfield,

Peterborough, Doncaster (Phase 2)• Towns served by interchange stations – worse off• GWML services (all make an extra stop)

– Beware of uncashable promises of more ‘classic’ services

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Unpacking North-South divide

Direct economic impacts of HS2 investment– Productivity benefits: – already in business case– Wider economic impacts: – now £4bn (phase 1); £6.3bn (Y)

• ‘Agglomeration’ – freed-up capacity for local services (if funded)• ‘Imperfect competition’ – savings from faster connectivity

– Further benefits? – none found by Imperial College

Regenerative benefits – HS2 as a catalyst– Property development by stations – 30,000 jobs – most not new.

7 out of 10 in London. Old Oak Common best regeneration location– Transformational benefits ie economic growth:

• Relocation from London – more likely go to London• Transfer within region – but no net gain to the region• New business start up – no evidence

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4. Materials not fit for use?

The Y does not even work– Not enough train paths - none left for HS1 & Heathrow– Not enough capacity on ‘classic compatible’ rail to take

the extra growth eg to York and NewcastleNot enough information– Especially for the Y (basis of the VfM Consultation Q 2)– Substantial FOI task– Inconsistencies between different parts and last year

Misleads and misinforms– On ‘alternatives’ – On sensitivities

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5. Other aspects

Carbon emissions– Still claimed carbon neutral – but:

• Still issues over air– will freed up slots be used for long haul? why emissions are the same despite less modal switch

• Still issues over electricity generation assumptions

• Car emissions – cars have potential to be greener faster than rail, so difficult to see any modal shift benefit by 2043

Compensation for loss in property value– Despite promises, no proposals until further consultation in 2012– 3 options for comment (Hardship Scheme, Property Bond, and

Compensation Bond) but clear steer Gov. do not wish to purchase properties, and favour the latter – that compensates in 2027.

– If HS2 cannot afford to treat people fairly, then HS2 is not affordable

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More information?

HS2AA reports on:Business Case

‘Initial Review of the Consultation Business Case for HS2’‘10 questions to ask before deciding about HS2’Review of the Business Case for HS2 (based on March 2010

White Paper)

Alternatives More capacity on WCML: an alternative to HS2

Wider economic impactsReview of wider economic impacts of HS2