New research released today by the Institute of Economic Affairs, High Speed 2: the next government project disaster? , shows that the High Speed 2 (HS2) project is economically flawed. It reveals why the scheme is not commercially viable and asserts that taxpayers will bear a high proportion of the financial risks.
The research finds that policymakers in favour of HS2 are making their case on the basis of bogus assumptions:
- Huge government subsidies on the existing rail network mean that prices and demand levels are severely distorted.
- Estimates made by the government of demand growth are very optimistic. The long timescale involved also adds to the uncertainty.
ØThe DfT’s Command Paper said demand for HS2 would be 267% higher by 2033. However, in the more recent Economic Case, it was said that this demand level would be reached by 2043 i.e. 10 years later.
- The effect of competition from other rail lines has been ignored when projecting future HS2 ticket prices and passenger numbers. Lower prices would make the project even less viable.
ØCompetition from the West Coast Main Line or from the Chiltern Line could lead to the lowering of HS2 ticket prices in order to attract and retain customers.
- The cost of HS2 will require a contribution of £1,000 per Income Tax payer
- The project has been ‘gold-plated’, leading to grossly wasteful allocation of resources. The first five miles of the route, from Euston to Old Oak Common, for example, will add almost 25% (c. £4 billion) to the cost of the first phase but deliver negligible time savings.
ØAdditionally, the decision to route the line through the Chilterns will require major tunnelling work; this 18-mile stretch accounting for 17% of the construction costs
- Significant environmental and social costs are not included in the assessment of the economic case, with several areas likely to be affected by ‘planning blight’.
- HS2 is likely to create demand for additional high-cost, taxpayer-funded transport capacity. Terminating the line at Euston may require a new Underground line or Crossrail 2 link to cope with extra passenger numbers.
Exaggerated time savings