The numbers are good – but HS2 was always a political project
The weary political journey to quicken the core north-south journey on Britain’s train system took another important step today.
The government published a new analysis of the strategic case for a full high-speed rail network connecting London, Birmingham, Manchester and Leeds. (Remember that HS1, the existing high speed line to Kent, is a by-product of the Channel Tunnel rail link connecting London and Paris).
These calculations are fraught, and that’s before reckoning with the Department for Transport’s rather creative spreadsheets.
The headline today is that the key measure of value for money for the full HS2 project, the BCR – or benefit cost ratio – has gone down a bit, from 2.5 to 2.3. That means that, including wider economic benefits, the government expects £2.30 of benefits for every £1 it spends.
If you remember, the government costs for HS2 have gone up since last year, from £25.7bn to £31.5bn. Luckily for the government, the benefits have magically gone up by almost the same proportion: from £48.3bn to £57.7bn, but not quite as much, hence the slight reduction in BCR to 2.3. (These figures are costs over 60 years, in net present value terms).
Two things: this measure of value for money compares well with London-based infrastructure projects, such as Crossrail and the Jubilee Line extension (remember all the fuss about the public money spent on those projects? Nope. I don’t either).
Having said that, the increase in forecast benefits will raise an eyebrow or two.
They did adjust downwards considerably the value of an individual hour of travel time saved by a business traveller from £47.18 to £31.96 (which is still over five times the valuation of a commuter or a leisure traveller).
Yet the forecast business travel benefits were greatly increased, from £34bn to over £40bn – the vast bulk of the increase in benefits arising from the scheme, according to the government. This seems to have come from assuming much greater connectivity across England, say from Bristol to Newcastle, using HS2 as a spine (in this case between Birmingham and Leeds).
All of this, as I said, is rather fraught. They top it all up by essentially ripping up the traditional Treasury green book methodology and pointing out that it is entirely feasible that passenger numbers grow after 2036 (currently the numbers presume zero growth just three years after the line opens). With this new “long term BCR” method, the benefit goes up sharply into the “very high” range.
Of course these numbers are spuriously exact. HS2 is and was always a political rather than economic project. And more on that to come later.
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