Christian Wolmar
HS2’s business case.
“The noises from HS2 supporters seem to be becoming louder as well as increasingly incoherent.”
EVERYTHING has its price. Even those who think HS2 is a good idea must consider there is a point at which its cost makes the project unsustainable. Or do they?
I only ask because Lord Berkeley, the chairman of the Rail Freight Group and a longtime supporter of the railways has, for some time, been trying to find out the latest estimate of the cost of the line. He is by no means an opponent of the scheme - quite the opposite - although he has questioned the nature of the proposals for Euston which, in their latest incarnation, seem to require a 20-year period of work in the area, something that is clearly unacceptable for local residents as well as being inordinately costly. He has been pressing, in various meetings with HS2 and Department for Transport officials, to obtain an estimate of the cost of the scheme. The last official estimate published 18 months ago was that the first phase to Birmingham would cost £23.5 billion (now £24.3billion to take account of inflation) and there has been no release of any more detailed costings since then.
I have been spurred on to write about this project, having left the subject alone for a long time, because the noises from HS2 supporters seem to be becoming louder as well as increasingly incoherent. Indeed, according to a rival magazine, I am the Lord Haw Haw of transport economics for merely questioning the value of the HS2 project. That is what Ian Walmsley, a former engineering project manager for Porterbrook, the rolling stock leasing company, called me in an article suggesting that I was a hypocrite for opposing HS2 while claiming to support the railway industry. William Joyce, the real Lord Haw Haw (who was not a lord), was a Nazi sympathiser who blatantly lied about the conduct and progress of the war in broadcasts to the UK and was eventually hanged for treason. I think, therefore, the comparison may be just a tad over the top, but I leave that to Walmsley’s conscience.
However, this use of intemperate language rather than reasoned debate is quite characteristic of some of HS2’s supporters. Perhaps subconsciously his ludicrous comparison with Lord Haw Haw betrays the fact that, like many of the more messianic HS2 supporters, he considers it a matter of treason to question the arguments for the project. It is, according to ‘believers’ like Walmsley, wrong even to doubt any aspect of the project or highlight its potential pitfalls
I am, however, not a man of faith, but one of science. As Berkeley and numerous other experienced railway people – including many in Railfuture, of which I am honorary president – argue, there are legitimate questions to ask about the project whether one supports the scheme or not. The most basic of these is cost.
Berkeley, in pressing for a better solution to the Euston terminus than the current 20-year nightmare, managed to obtain the current estimate of £8.25bn for the station and the first six miles of line to Old Oak Common. As Berkeley pointed out in a debate in the Lords in January, that leaves just £16bn for the remaining 200 kilometres. That is highly improbable. As Berkeley puts it, “having spent £1bn on consultancy, it is remarkable that HS2 still don’t have a price for the line.”
Lord Bradshaw, who could hardly be likened to Lord Haw Haw, as he is a long-time and highly knowledgeable supporter of the railway, also argued that: “The scheme as envisaged is extravagant, and this is not a time when we can afford extravagance. There is a good case for having an independent
assessment of the costs.”
The reluctance of HS2 Ltd to produce an estimate is, of course, deliberate. If a new estimate were produced, the whole business case would have to be revisited. So the good Lord enlisted the help of Michael Byng, who has written a manual on how to price projects which has been accepted by Network Rail as the best available. He has made detailed calculations, which I have seen, and initially came up with the figure of £53.6bn for the whole scheme up to the West Midlands (known officially as Phase One). This is approximately the supposed cost of the whole Y but Byng, trying to be fair and professional has, after further conversations with HS2, reduced his estimate to £48bn, still double the current official cost.
One of the reasons for Byng’s higher cost is the need for slab track which, he says, is likely to be required for much of the route, something which an HS2 adviser ‘let slip’ to him. Byng, who has given evidence on HS2 to the Commons Transport Committee, told me that ‘a very senior and distinguished quantity surveyor, a partner in one the world’s largest practices’, admitted in a meeting last year with the Camden petitioner, at which I was present, “that HS2 had no comprehensive structured estimate for the project”’. That certainly rings true. Even now, Byng says that none of his estimates have been questioned by HS2 Ltd, nor has it provided any further evidence that its costs could fit in with the Government’s current budget.
Byng would like to see a delay to the scheme while the costs are properly estimated. Of course, his estimate drives a cart and horse through the business case, which has always been tenuous anyway. Essentially the benefitto-cost ratio for the scheme, using the admittedly flawed methodology that the Government insists on, is 1.7 to 1, which is not very impressive for such a huge project. If Byng’s estimate is correct, the figure would go below 1 to 1, which raises fundamental questions about the plan.
If any supporters are naive enough to think that HS2 is a done deal, think again, especially given the DUP deal (which is sucking £1bn out of other departments’ budgets) and the coalition arrangement, which have led to the effective scrapping of the austerity programme and more spending on housing, welfare, education and care of the elderly.
The question I would like to pose to supporters of the scheme is: if this is a true estimate, and the cost of the whole project is likely to be around £100bn, would it still be worthwhile? Byng of course may be wrong and too pessimistic, but that is not the point. As I asked at the beginning, is there a stage at which the whole idea just becomes unviable and unrealistic? Is it when the expected cost reaches £70bn, or even £100bn? Precisely when is the cut-off point?