Why did we come this way?

By my count I have spent the last nine blogs – more than a month’s postings – examining the entrails of the economic case for HS2. Now this has not been natural territory for me; I have had to learn fast on the journey, and I should at this point express my thanks to HilaryWharf at the HS2 Action Alliance for helping me climb this learning curve. However, I hope that one advantage that comes from having a non-expert writer is that he better appreciates the problems of understanding that a non-expert reader may have and that this may reflected in a clearer explanation; well that’s the theory, anyway!

I hope that what I have been able to do is to shine a searchlight on the rather shameful way that the Department for Transport (DfT) and HS2 Ltd have approached the calculation of the Benefit Cost Ratio (BCR) for each of the two identified phases of the HS2 project. I appreciate that BCR is not the only way of assessing the economic case for a proposed project, but it is the headline way that has been chosen by DfT/HS2 Ltd and so it is fitting that they be hoisted by their own petard; for to be sure the BCR calculation, despite the ingenuity and deviousness that DfT/HS2 Ltd has applied, has rather exploded in front of its creators.

You may recall that my nine blog extravaganza started with Going down the pan … (posted 11 Aug 2012) in which I considered item 14a) in the tabulation at the front of Volume 2 of document HS2 London to the West Midlands: Appraisal of Sustainability; item 14a) is on page 28.

The description of item 14a) is “support economic competitiveness and make efficient use of public funds” and the score given is “+ +”. The justification for this rating is presumably in the following commentary which has been made against the item:

“Total business user benefits were estimated as being equivalent to be around £17.6 Bn, (NPV, 60 years, 2009 prices and values). This represents very large benefits, reflecting the large journey time savings that HS2 affords and the high levels of underlying demand on the WCML.”

It would appear that business user benefits have been selected as the indication of the ability of the proposal to “support economic competitiveness”. The comment does not refer to BCR, but that is surely one way of assessing whether HS2 will “make efficient use of public funds”.

On the valuation of total business user benefits for HS2, you may remember that I had trouble reconciling the figure of £17.6 billion and thought that it should be £11.1 billion (see my blog … and down the drain …, posted 15 Aug 2012). This was on the basis of the figures published in February 2011. The modern day Christopher Tietjens in DfT/HS2 Ltd has succeeded in boosting this figure since then – the August 2012 document Updated Economic Case for HS2 claims, in Table 2 on page 4, that the business transport user benefits for Phase 1 amount to £12.6 billion, but that’s still a long way short of £17.6 billion.

And, of course, that calculation assumes the thoroughly discredited premise that all time travelling on trains is unproductive. The August 2012 update does not identify how much of the £12.6 billion is down to the value of travel time savings, but in my blog … and out to sea … (posted 23 Aug 2012) I used the more comprehensive set of figures published in January 2012 to make an estimate that travel time savings had been inflated by between £2,590 million and £3,700 million. So perhaps we should shave about £3 billion off the August 2012 claim for total business transport user benefits for Phase 1, making a more realistic assumption of £9.6 billion. This is only about 55% of the £17.6 billion claimed in the Appraisal of Sustainability tabulation and somewhat dents the claim that HS2 will “support economic competitiveness”.

As for assessing whether HS2 will “make efficient use of public funds” the BCR for Phase 1 (without WEIs) is officially in the “low” category and, as I hope that I have demonstrated over the last month, the reality is that it is “poor” and that is a rather flattering categorisation. So HS2 will most definitely not be a good way to spend public funds.

So with a BCR that has collapsed and the total value business user benefits appreciably reduced, can a “+ +” score still be justified? I think not.

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One response to this post.

  1. Posted by chriseaglen on September 16, 2012 at 11:48 am

    What has been overlooked in the calculations is the known rising costs of tunneling and large civil works due to the iterations of design/detailing and cost estimate models being out of synchronisation.

    There is also the inadequacy of one track in either directions and also the go slow days of autumn leaves on line and defensive driving the Chilern Line is also know for and the freezing conditions and foggy conditions.

    The BCR is not a universal measure and when coupled with the needs for more tunneling being denied to some communities and the failure to consider the costs of a 4 track railway this programme or many projects is too premature for consultation in the micro scale and for a hybrid bill.

    If you want to address a useful areas consider the expected requirements of the Railway Act, Transport Works Order and Highways Act and determine why the hybrid bill process is not suitable for a 160km route and large scale city works with so many options still not concluded and with such inconsistency in treatment.

    The cases are about inadequate consultation and unacceptablity of the hybrid bill also and these are need review before the finalisation of the 5th October submission of papers.

    Reply

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