How many beans make five?

One member of the dwindling band of HS2 supporters who is prepared to stand up and defend the project on our television screens is railways fanatic and music producer, Pete Waterman. It seems that he is one of the first “pros” that TV producers ring when HS2 is one of the topics of the day; I assume that they find him “colourful”, or perhaps it is just the aforementioned lack of candidates these days. So it was that he popped up yet again on the day that the National Audit Office (NAO) report High Speed 2: A review of early programme preparation was published. His contribution, in the form of an interview given to BBC TV News, may be seen starting at 11 mins 40 secs into this video.

“… there is no economic case for a high speed railway. There has never been an economic case for a railway. So the more that people sit with beans trying to work out where the middle is, the further you go away from it. Nobody can actually quantify what this will mean. History tells us that when we speed up and build new rail services we open up the country. That’s history – they can’t deny that.”

In the past I have shown some impatience with Mr Waterman’s homespun economic theories, but I must confess that I have some sympathy with his view this time, or at least what I interpret his view as being from the interview. I buy into his opinion that counting the HS2 beans is very difficult, and that the economics, and especially the benefit-cost ratio (BCR) calculation, are not necessarily the be all and end all of the case for, or against, HS2. However, I do have problems seeing HS2 as opening up the country – it’s more like a relief road than a new route, more a service improvement than providing a whole new service. I think of it as similar to the M6 Toll Road, providing a quicker way of getting from A to B, but where these two locations are already linked; and, of course, the M6 Toll Road turned out to be a bit of a turkey. There is also the slight problem with HS2 that, in trying to get to B as fast as possible, it ignores C and D, and so any “opening up” is somewhat selective.

A somewhat different slant on this message appears to be presented in a rather more erudite exposition by another HS2 supporter, economist Paul Omerod, in an article in City AM. He appears to argue that concentrating on the value of time savings, a chief input into the BCR calculation, “completely misses the point”. He doesn’t agree with Pete Waterman that “there is no economic case for a high speed railway”. His argument is that a case can be made, but that it requires the “dynamic effects created by transforming the network” to be taken into account. He does appear to agree with the analysis by the NAO that the Department for Transport (DfT) has “poorly articulated the strategic need for a transformation in rail capacity and how High Speed 2 will help generate regional economic growth”.

Now Mr Omerod certainly can’t be accused of not practising what he preaches. His employer, Volterra Partners, published a report in July 2011 (Understanding the transport infrastructure requirements to deliver growth in England’s Core Cities) that paints a very rosy picture of what a “high speed rail network” could do for the UK. The claim in the report that attracted most attention, and raised more than a few eyebrows, is:

“Investment in a full HSR network and electrification will underpin the creation of 400,000 jobs in Core Cities, and 1 million jobs in total across their wider urban areas (specifically the geography covered by their Local Economic Partnerships).”

Yet a third opinion is proffered by Rory Sutherland in an article in The Spectator. He looks forward to 17th June 2033, the day earmarked for the opening of the London to Manchester High Speed Rail service, and “confidently” states what he expects the weather to be on that day:

“We know this, because, of course, we can forecast the weather 20 years in advance. Well at least we should be able to do this, since economic forecasters can clearly predict the demand for travel 20 years ahead. This same infallible skill also tells us that the economic effects of HS2 will spread wealth from London to the north — rather than in the other direction. Because, we know, don’t we?”

He answers his own question with, “We know nothing of the kind.”

All of which brings me back to the BCR calculation. Whilst I accept the caveats that the three gentlemen mentioned in this blog have variously identified, I still believe that the BCR is a useful and valid input into the decision-making process, albeit as a part of a more holistic approach, perhaps. It is arguable that the DfT and political decision makers place too much emphasis on the value of the BCR; it certainly appears that the DfT has a pathological fear of the value dipping below one and is resorting to extraordinary back somersaults of logic to avoid this happening (see my blog A work of fiction, posted 8 Sep 2012).

Surely, whatever significance should be placed upon the BCR it is important that its value is calculated as accurately as the tools available allow. If the BCR value is truly below one, then the DfT should not be pretending that it isn’t. Our political decision makers have a right to know what the “true” value of BCR is, according to the best calculation possible, and surely that is what the NAO is asking for.

Before I close I really must pick up on something else that Paul Ormerod says in his article:

“The North needs to generate more exports to London and the South. HS2 makes it more connected, and gives it the dynamic potential to meet this task.”

My fear with HS2 is that the main export from the North that it will encourage is people, in view of the opportunities that it will offer for long-distance commuting by “our friends in the north” to jobs in London.

Advertisements

One response to this post.

  1. Posted by chriseaglen on June 1, 2013 at 9:01 pm

    The Cost in BCR changes dependent on if the nation buys the right of way from the lauthorities, land owners and operators directly losing land. This occurs in some nations. The estimated costs of such large earth and ground works depends on how much Site investigation and Ground/Hydrological survey work is completed. Currently this is minor. Bean counting starts when the politics starts and does not stop on infrastructure when finished. Ask Pete Waterman how he will raise the £1Billion for Cheshire Transport requirements for whom he is an adviser and what levels of investment he will put in himself. BCR is incomplete for infrastructure it stems from Cost Benefit analysis of the 60s. Transparent budgeting is the new mantra but this requires facts and measured quantified estimates. HS2 is a gloss over currently and is approaching Hudson’s mirage currently. The true value of the proposed inadequate railway and its services is very different to a BCR of such a vast length of England. There is a technique of judgment in the face of uncertainty being realised to be needed instead of risk assessment and management. Neither of the two people have the range of competencies to guess with statements any more accurately than others.
    Lack of feasibility and lack of thorough estimating and lack of transparency is not helping.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: