LORDS

Poor Government case for a £50 billion investment in HS2

25 March 2015

The Government has not made a convincing case for HS2. It must do so before Parliament passes the Bill to enable the construction of the first stage of the railway to begin. This is the conclusion of the House of Lords Economic Affairs Select Committee, in a report published today.

The Committee supports transport infrastructure investment. However, at a cost of £50bn HS2 will be one of the most expensive infrastructure projects ever undertaken in the UK. The Committee argues that the Government have not yet made a convincing case for why it is necessary.

The Government sets two main objectives for HS2: increasing capacity on the railway and rebalancing the economy but, concludes the report, it fails to make a convincing case for either.

On capacity

Full information on railway usage has not been made publicly available by the Government, on the grounds of commercial sensitivity. The evidence shows that long distance trains arriving at and departing from Euston are, on average, just 43 per cent full and even during peak times are only between 50 and 60 per cent full. Overcrowding is largely a problem confined to Friday evenings and weekends on long-distance trains and to London-bound commuter trains.

There are less expensive options to remedy these problems than HS2 but these have not been properly reviewed.

On rebalancing the economy

The Committee agrees with the objective to rebalance the economy but disputes the claim that HS2 is the way to achieve it. The evidence from other countries, such as France, shows that the capital city is the biggest beneficiary from high speed rail.

London would most likely be the biggest beneficiary from HS2. The Committee argues there is a strong case for improving the trans-Pennine links or building the northern legs of HS2 first, both of which could be a better way of rebalancing the economy than building the southern leg of HS2.

On cost

The Committee says that the cost per mile of HS2 is estimated to be up to nine higher than the cost of constructing high speed lines in France. The Committee suggests that, if HS2 is to go ahead, the cost could be reduced by building it to run at 200 mph, as in Europe, instead of 250 mph, terminating the line at Old Oak Common or learning lessons from France to reduce the cost of construction.

The report suggests that the huge public subsidy to HS2, an estimated net £31.5 billion, conflicts with the Government's declared objective of making rail less dependent on public subsidy. The Committee argues that such large expenditure should be considered against the background of financial restraint. It queries whether the users of the proposed line, mainly business travellers, should carry more of the cost than is currently proposed.

The report also points out that the cost-benefit analysis for HS2 relies on out-of-date evidence, some dating back to 1994. The Department of Transport admits that fresh evidence is required and the Committee believes this should be provided before Parliament passes the HS2 enabling legislation. The Government's claim that the cost-benefit analysis placed HS2 in the high value-for-money category was disputed by a number of witnesses, who assessed it as being in the bottom 10 per cent of projects.

It is expected that the enabling legislation for HS2 Phase 1 will come to the Lords in the next Parliament and receive Royal Assent by the end of 2016. The committee concludes that this should not happen unless the Government has answered the important questions its report raises.

Chairman's comments

Commenting, Lord Hollick, Chairman of the House of Lords Economic Affairs Committee said:

“At £50bn HS2 will be one of the most expensive infrastructure projects ever undertaken in the UK but the Government have not yet made a convincing case for why it is necessary.

“The Committee are supportive of investment in rail infrastructure, but are not convinced that HS2 as currently proposed is the best way to deliver that investment. The Government are basing the justification for HS2 on two factors – increased rail capacity and rebalancing the UK economy; we have not seen the evidence that it is the best way to deliver either.

“Overcrowding on the West Coast Main Line is largely a problem on commuter trains and on long-distance trains immediately after peak time on Friday evenings and at some weekends. The Government have not carried out a proper assessment of whether alternative ways of increasing capacity are more cost effective than HS2.

“Full information on railway usage has not been made publicly available by the Government on grounds of commercial sensitivity. The plausibility of the Government’s claim that there are current long distance capacity constraints and also its forecast of future passenger demand are difficult to assess without full access to current railway usage. The investment of £50bn investment of public money demands nothing less than full transparency.

“In terms of rebalancing, London is likely to be the main beneficiary from HS2. Investment in improving rail links in the North of England might deliver much greater economic benefit at a fraction of the cost of HS2.

“We have set out a number of important questions on HS2 that the Government must now provide detailed answers to.  Parliament should not approve the enabling legislation that will allow HS2 work to begin until we have satisfactory answers to these key questions.”

Further information

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