14 November 2019

HS2 is a disaster – the Oakervee review should not pretend otherwise

By Harry Fone

Counterpoint: To read the case for going ahead with HS2, click here

In August Transport Secretary Grant Shapps launched an independent review into HS2 with the aim of aiding the Government to make a “go, no-go” decision by December. The review is supposed to consider HS2’s “affordability, deliverability, benefits, scope and phasing”.

The basic idea was to call in fresh eyes, bring some balance and ask the questions which, for too long, simply haven’t been asked. “The Prime Minister has been clear that transport infrastructure has the potential to drive economic growth, redistribute opportunity and support towns and cities across the UK,” said Shapps, “but that investments must be subject to continuous assessment of their costs and benefits”. Finally, HS2 would be subject to the same cost-benefit scrutiny and robust challenge as any other major infrastructure project. At least, that was the idea.

So, in very blunt terms, why on earth do leaks this week of the report recommend that HS2 should go ahead, whilst essentially saying ‘to hell with the costs’? While we have yet to see a full copy of the report, it seems the expected cost-benefit cross examination has not materialised. Even as the official budget creeps ever nearer to £100 billion, it seems the chair of the review, Douglas Oakervee, has chosen to go over old arguments rather than ask if the project really represents good value for taxpayers. The review seems to have taken the approach of accepting the project will go ahead, acknowledging the crippling issues, but simply looking for new ways to justify them.

Unfortunately, those issues have already brought the project to the point of disaster, with no light at the end of the tunnel.

Let’s start with the most obvious: cost. In announcing the review, the Government did the decent thing and forced HS2 Ltd to admit that the costs of the project will exceed £56 billion. This is something which we at the TaxPayers’ Alliance have long suspected, having said as much in 2017. Indeed, we put the number much higher, at about £90.8 billion. Recent advice from HS2 Chairman Allan Cook puts the cost at £81-88 billion in 2019 prices. In his heavily redacted stocktake, Mr Cook restates the already flimsy case for the project, but dig deeper and it seems no detail is included as to how the new cost was derived. As it stands, officials admit that the project could cost fifteen times as much as the Great Western Railway modernisation, but they don’t seem minded to share their workings.

Our suspicion is that, whilst some calculations may have been done, HS2 have once more produced an underestimate which they hope will get them off the hook with ministers and the public. When the TaxPayers’ Alliance and rail industry experts warned this was the case with the £56 billion figure, we were laughed out of the room. But if the leaked report is anything to go by, we are now looking at a final bill in excess of £100 billion. It turns out the truth of HS2’s costs, dragged kicking and screaming into the daylight despite officialdom’s best efforts, is likely to be even higher than the figures we were ridiculed for predicting.

The experts ignored

But some experts got it bang on. Infrastructure and procurement specialist Michael Byng, who has extensive knowledge of both railways and government projects, has calculated the final bill will be £106.4 billion. And that’s just for the line, stations etc; he estimates the rolling stock will cost a further £7 billion. Unlike HS2 Ltd, I have no doubt that Michael can show his workings. Yet reports suggest that Byng’s estimates were simpy ignored, as officials ploughed ahead with their own secret sums. Whatever the result, one thing is crystal clear: HS2 is more expensive than its supporters ever acknowledged, believed or planned for.

But what about the other side of the coin, which the review was asked to consider: the benefits. If we accept Byng’s figures, the question we have to ask is, will Europe’s largest infrastructure project deliver on all its promises? In short, no, and for a number of reasons.

Firstly, it is highly unlikely to achieve its aims of 18 trains per hour and a top speed of 400 kilometres per hour (248 mi/h). Let’s examine those targets more closely.

Trying to run 18 high speed trains per hour on the new line is utter madness. Of all the high speed railways in the world, not a single one has managed to run so many trains per hour. The Japanese Shinkansen, more commonly known as the bullet train, and France’s TGV top the world rankings at 14 per hour. HS2 argue that a clever signalling system called European Rail Traffic Management System (ERTMS) will mean the new line can surpass this limit. However, ERTMS is far from the finished article and at the time of writing has only been used in Britain on the low capacity Cambrian Line. The review looks likely to accept that HS2 has been over-optimistic and cut the number of trains to 14, a reduction which undermines the business case for the whole project.

Whilst train speeds of 400 km/h are possible (although not in tunnels, of which the HS2 southern section will have many), as demonstrated in China by the Fuxing Hao, the engineering required is vastly more complicated than ones that run at 360 or 320 km/h. Even the very advanced Japanese bullet train cannot run continuously at 360 km/h due to issues with noise pollution, wear to overhead wires and braking distances. One of the easiest ways to keep costs down would be to run HS2 trains at 300-320 km/h (186-200 mi/h), the same as French TGVs. These trains can simply be bought “off the shelf” without the need for a bespoke solution as set out in the government tender. Once again though, we hear that plans to reduce the speed of the trains from 250mph to 210mph have been removed from the review. Another whitewash, and another blow to the supposed benefits of the project.

The cost-benefit spiral

The ever-lower cost-benefit projections paint a very clear picture of a project in trouble. In 2011 the then transport secretary Philip Hammond told MPs that he would need to “seriously review the viability” of HS2 if the benefit-cost ratio fell below 1.5. A recent research paper from the Adam Smith Institute puts HS2’s benefit-cost ratio at a thoroughly underwhelming 0.78. This means that the Government will effectively be losing 22 pence for every pound of taxpayers’ money it spends. No sane government, company or individual would allow such a loss-making project to go ahead. The business case for this expensive white elephant is disappearing before our eyes. Yet the Oakervee review seems to be more interested in casting about for imagined or inflated new benefits from the projects in what can only be a desperate effort to balance the books.

But let’s pause a moment. The project is underway. This review can’t seriously be expected to halt the HS2 juggernaut and recommend it is scrapped. Why not just accept the project is too late, too far down the line, for it not to be delivered?

That’s all well and good – but there are very real concerns about the deliverability of the project even if the specifications were downgraded. The Infrastructure and Projects Authority (IPA) says that “successful delivery of the project is in doubt, with major risks or issues apparent in a number of key areas”. The IPA uses a traffic light system to give an easy to understand method of appraising major projects. Green is used to signify that successful delivery of a project is highly likely, all the way down to red, which signifies it is unachievable.

So how does HS2 fair? Not well at all. In fact it sets a new record as the only major project to have received seven Amber/Red warnings in a row since 2013. The project is barely underway, with not a single piece of track laid and is already one step away from being “unachievable”. Compare this to the running sore of Crossrail, which started off with five Amber/Green ratings before sinking to Amber in 2018 and Red in 2019. Comparatively speaking, Crossrail is far simpler than HS2 and just look how quickly that hit the buffers. Far from being too late to stop, HS2 may never actually be delivered – though it will cost billions all the same.

Shovel-ready options?

But what are the alternatives? Reportedly, the review will claim that there is no “shovel-ready” alternative to HS2. Many transport experts, and indeed many ordinary members of the public, beg to differ. In May the TaxPayers’ Alliance published the Great British Transport Competition, a competition for members of the public and organisations across the UK to suggest how they would better spend that money on alternative transport infrastructure. We found 28 shovel-ready alternative projects, with money better spent on improving existing routes, reopening mothballed lines, upgrading roads and building new cycle paths. Many of these projects could be completed within ten years, will improve capacity on the railways and all for less than £46 billion (approximately half the cost of HS2). If the review does claim there is no alternative to HS2, MPs would do well to look up the alternative opportunities sitting right there in their constituencies.

We desperately hope the reports of what’s in the Oakervee review are untrue, and the independent experts have had the courage and foresight to take up Grant Shapps’ challenge of a proper assessment of the costs and benefits. If they haven’t, we could well be in a position ten years from now where the line has barely made it to Birmingham and funds are fast running out. Politicians must not let this happen. It’s obvious that this project is already a disaster, costs are spiralling, the voters don’t want or need it and the benefits will be minimal. The Oakervee review will have done the public a great disservice if it tries to claim otherwise.

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Harry Fone is Grassroots Campaign Manager at the TaxPayers' Alliance