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High Speed 2 case further undermined

Backers of the controversial High Speed 2 (HS2) scheme were dealt a blow this week with news that its economic benefits had been revised down for the second time since January.

The economic appraisal was downgraded after promoter High Speed Two Ltd (HS2 Ltd) and its consultants reexamined two technical reports that had supported transport secretary Justine Greening’s decision to approve the scheme in January.

The two reports were the Model Development Report and the Demand & Appraisal Report and were published for the first time last week. Assumptions were reassessed ahead of publication

The resulting analysis has forced down the benefit to cost ratios (BCRs) to as little as 1.2:1 for the London to West Midlands phase one route and the full “Y” network serving Manchester, Leeds and Sheffield. This is despite the latter previously being thought of as having a more robust economic case than the short phase one route.

The Economic Case for High Speed 2 - Next Steps and Future Updates, also published by HS2 Ltd last week as a result of the amendments, states that: “The process of preparing these documents has identified a small number of areas in the analytical framework where minor technical adjustments should be made, relating to factors including revenue calculations, rail and non-rail demand calculations and the service specifications used.”

Adjustments

These adjustments had “roughly” balanced each other out, it continues, but a further technical adjustment regarding the point in time at which HS2 passenger growth peaks has forced the reduction of 0.2 in the BCR for the London to West Midlands route and 0.3 to 0.4 for the Y network. In January the BCR of the shorter route was revised down to 1.4:1 from 1.6:1 while the BCR for the Y network was put at 1.6:1 having earlier been as high as 2.2:1.

The document stresses that the economic case continues to be reviewed and adds that ahead of the publication of a revised economic case for the Y network - due in early summer - modelling has been altered to account for the latest economic growth predictions.

Greening is expected to respond to HS2 Ltd’s advice on Y network route options in the autumn.

A hybrid bill for the London to West Midlands phase is expected to be introduced by the end of next year with construction set to start in 2017. Construction of the rest of the Y network will not start until 2025.

The Economic Case document also pledges that HS2 Ltd along with the Department for Transport will consider improvements to the modelling through testing more scenarios in relation to market saturation, passenger forecasting and impact of fare growth.

But this latest development will instil little confidence in critics of the scheme.

RAC Foundation director professor Stephen Glaister said in January that the business case, even before the revisions, was “weak at best” while even those who recognise the current unfavourable economic climate is making the case look weaker say they would prefer public money to be focused on projects with a stronger business case.

House of Commons Public Accounts Committee chairman Margaret Hodge previously said that “in constrained times you look for your best value”, which Glaister suggested may instead come from the “scores” of other transport projects, big and small, that would “deliver greater benefits much sooner”.

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