Up to speed on HS2

Our good friend Ian Waddell has been researching the potential economic impact of HS2:

HS2 – transforming regional economies or a costly white elephant? The verdict of independent experts by 

HS2 would be the biggest and most costly infrastructure project ever undertaken in the UK. Will it really provide the huge economic benefits claimed, or is it destined to become our next ‘Concorde’ – technologically very sexy, but financially a disaster?

Proponents of HS2, most notably the Department of Transport and an alliance of some of our large cities, have the resources to pay economic researchers to provide the evidence they need to help ‘sell’ the scheme to the voter/taxpayer. Opponents and sceptics do not have access to these resources and therefore must rely upon the work of independent experts, some of whom support the Government’s arguments and some of whom do not (1).

1. Those saying HS2 will transform regional economies and the north-south divide

Hall and Chen (University College London) (2) studied the impact of high speed trains (HST) on Manchester and Lille and their sub-regions: –

“the connection with the national capital by faster train services did economically strengthen the regional capital, but not some sub-regions around it.”

Ahlfeldt and Feddersen, from the Department of Geography and Environment at LSE studied two stations on the line from Cologne to Frankfurt (3): –

‘It is quite clear that the line itself brought significant and lasting benefits in access to markets, growth, employment and individual prosperity. One of our key findings is a positive market access elasticity, which means that improvements in accessibility to other towns, cities and regions, will be reflected in economic growth’

2. Those who say HS2 is very unlikely to deliver the economic benefits claimed

Following a review of the international evidence, Professor John Tomaney of Newcastle University writes:

“…the impacts of high speed rail investments on local and regional development are ambiguous at best and negative at worst” (4).

The Economist (November 2010):

“….(the) economics (of HS2) are rather flaccid: every pound invested in high-speed rail is predicted to generate only around two pounds’ worth of benefit (measured in time savings, the extra journeys that will be facilitated, reduced congestion on roads and so on).”
It should be noted that since this was written the cost benefit ratio has been reduced by the DfT to £1.20 for every £1 spent.

New Economics Foundation (David Theiss) (5):

“Most importantly, it is unclear whether or not HS2 is the best bet for delivering onthe DfT’s ambitious and diverse goals. To properly assess HS2 we must take one step back and ask whether or not this scheme is the best investment possible. Given the bold objectives, austere economic and environmental context and sheer size of the impact on the public purse it is not enough that it passes a minimum threshold of return.”

Douglas McWilliams
Chief Executive, Centre for Economic and Business Research (6)

“…looking at the economics issues (underpinning HS2) dispassionately, the sums don’t add up.”

The Adam Smith Research Trust (7)

“(HS2 will) ..crowd out other much-needed railway investment. Phase 1 itself is very susceptible to two major risks– those relating to revenue, namely demand and average farebox yields, and to construction risk.”

“Moreover, the economic case, especially following the DfT’s recently reduced BCR projections, remains very weak and, if completed, Phase 1 may need substantial – and long-lasting – revenue funding from the
DfT to cover its operating losses.”

John Whitelegg of Stockholm Environment Institute, and visiting professor of sustainable transport at Liverpool John Moores University (8):

‘High-speed rail is a rich person’s folly and the government knows that spending public money on something that simply will not be used by the bottom 50% of income bands is a reverse Robin Hood strategy. It is a socially regressive project to transfer cash from poor to rich and to reward the rich with faster journeys to London’

3. The Verdict

The overwhelming majority of independent economists who have published research on High Speed Rail at the very least cast major doubts upon its value as an instrument for regenerating peripheral regions.

The limited amount of research supporting the proposition draws upon highly localised international case studies which bear limited comparison with the UK. The research by Hall and Chen refers to the existing Intercity network in England, while Ahlfeldt and Fedderson’s conclusions derive from a German line which has more stops, and slower speed than projected for HS2.

Most experts point to the fact that there are far more cost effective tools for economic regeneration, not least investment in local transport infrastructure. The concern is that it is this vital investment that the £35 billion required for HS2 will crowd out.

Catalysing economic growth in the Midlands and North currently remains the major underpinning argument for HS2. The independent evidence at the very least demonstrates ‘case not proven’. Can the UK afford to invest such a colossal sum based on such a leap of faith? As the respected transport expert Christian Wolmar says, this would be ‘one big punt’ (9).

Notes

1. Research by people like Volterra, KMPG., Greengauge 21 and others commissioned by the pro HS2 lobby are excluded from this summary as not being ‘independent’.

2. C-L Chen and P Hall (2012) The wider spatial-economic impacts of high-speed trains: a comparative case study of Manchester and Lille sub-regions. Journal of Transport Geography, 24, 89-110.

3. Gabriel Ahlfeld and Arne Feddersen, ‘From Periphery to Core: economic adjustments to high-speed rail’ German Economic Association 2010

4. Professor John Tomaney: The Local and Regional Impacts of High Speed Rail in the UK: A Review of the Evidence 2010

5. David Theiss High Speed 2: One track mind? Considering the alternatives to HS2
New Economics Foundation 2013

6.‘HS2 – A triumph of PR over economics’ CEBR 2011

7. Nigel Hawkins ‘High Speed Fail’, The Adam Smith Research Trust 2011

8. ‘HS2: an expensive, environmentally damaging waste of money’ – Guardian Professional 19 February 2013

9. The Guardian, Monday 28 January 2013

http://hs2theregionalimpact.wordpress.com/2013/02/19/hs2-transforming-regional-economies-or-a-costly-white-elephant-the-verdict-of-independent-experts/

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