Escalating costs on a large infrastructure project in the UK is hardly news. But reports that the High Speed 2 rail line (HS2) might now cost up to £106bn, almost double last year’s estimate, is extreme even for this country.
Perhaps we should not be surprised. Industry experts have warned for years that HS2’s costs would overrun, with some forecasting that it could cost between 20 per cent and 60 per cent more than the £56bn sum the last government signed off.
Work on HS2 has hardly started and yet, throughout its 10-year political life, cost projections have more than tripled, from £33.3bn to today’s sum, if the Financial Times’ reports of the government’s review of the scheme are to be believed.
Without seeing the full review, it is hard to make firm assumptions. But when we analysed the economic and strategic case for HS2 at the New Economics Foundation (NEF) last year, we calculated that if the cost of the scheme went up by 60 per cent (which took the total to around £90bn) with no increase in benefits, it would no longer pass the government’s value-for-money tests.
Infrastructure schemes that are not good value for money but are viewed as strategically important, can still be given the political nod from the Treasury – but then the problems they are solving have to be important ones, and the solutions rock solid. In HS2’s case they are not.
Proponents of HS2, including the Department for Transport, will say that it frees up capacity on the existing West Coast Mainline that can be used to relieve overcrowding on trains and line congestion. It will, but it’s not at all clear to what extent it will do this or to what extent this is needed.
One reason for this is that, because of our privatised railways, the data you’d need to draw firm conclusions – about numbers of passengers on specific trains and where and when they board and alight – is owned by train operating companies and not released publicly. To get round this problem during our research, we conducted an informal census of passengers getting off at evening peak time on London to Birmingham trains in Milton Keynes. We found that around two-thirds of passengers leave these trains at Milton Keynes.
Even if every single passenger that doesn’t alight at Milton Keynes on peak time trains out of Euston is going to Birmingham or beyond, does this relatively modest thinning out of peak time west coast trains really merit spending more than £100bn and building thousands of miles of high-speed line? Probably not, especially given that trains are only overcrowded at peak times, and that similar overcrowding happens on other lines into London and around other big cities, most of which HS2 will do nothing whatsoever to address.
HS2 has also been billed as a project that will help ‘level up’ areas of the UK outside the south-east, bringing much needed jobs and growth to the north and midlands. But London’s inexorable pull and economic might means that starting the line in the capital skews the possibility of this happening. In fact, according to HS2 Ltd’s own economic appraisal – buried in an appendix on page 75 – 40 per cent of the benefits of HS2 will flow to London, compared to 18 per cent to the north-west, 12 per cent in the West Midlands, and 10 per cent to Yorkshire and Humber.
Investment in the UK’s railways – and in its bus network – is very sorely needed. For instance, none of the three critical east-west lines across the Pennines is currently electrified, which is not only essential to make transport low carbon, but also to speed up services and make them more efficient.
There are massive problems almost everywhere on the rail network and big, public-led investment is certainly going to be needed. But taxpayers should demand value for money, which HS2 does not deliver. The best solution would be to share out the investment capital of HS2 between the regions of England, and Wales and Scotland. Governments local and national should spend the money on solving the transport problems that affect the most people, which is generally the daily commute.
HS2 is a product of decision-making that begins and ends in London. It’s no surprise that with this approach we’ve ended up with a railway project that looks like a solution in search of a problem.
Andrew Pendleton is director of policy and advocacy at the New Economics Foundation.