The disaster that is HS2

Following the announcement on High Speed Rail, Sam Bowman, Head of Research, has given the following reaction:

"There are big questions remaining about the viability of HS2, and in all likelihood it will become a major burden on public finances in the years to come. Past experience in Britain and elsewhere suggests that governments tend to wildly overestimate the demand for high-speed rail, and it is telling that there are only two high-speed lines in the world that do not rely on a taxpayer subsidy. Britain's past experience with high-speed rail, the line connecting London St Pancras to the Channel Tunnel, was a disaster – it sold for less than half of its construction cost and passenger numbers were less than a third of the projected number. 

"The potential for overspending, too, is worrying. A tunnel in transport minister Cheryl Gillan MP's constituency will add £500m to the £32bn bill – at £190,000 per yard, or £5,300 inch, it raises the possibility of massive extra spending to keep key MPs happy. At £32bn, the project is enormously expensive and its first stage will reduce the journey time from London to Birmingham by twenty minutes. It is staggering that the government is prepared to use so much taxpayers' money for such a risky, costly project which will almost certainly require a significant long-term subsidy to remain operational."

Our report released last year 'High Speed Fail' pointed out the many flaws in the HS2 plans. Its key arguments are detailed below, but you can read the full report here. 

The facts on HS2:

• HS2 will be an expensive taxpayer-funded project – the first phase to Birmingham will cost £17bn, with completion of HS2 to Leeds and Manchester bringing this to £30bn and the planned eventual extension to Scotland bringing the total to £50bn. The HS2 project will therefore cost taxpayers approximately £1,500 per household.

• HS2 is extremely expensive even for high-speed rail: its cost is equivalent to £130m per mile and is a staggering four times the cost of the average European high speed rail line.

• Around the world, all but two high-speed rail lines depend on government subsidies for their ongoing operation. The TGV in France has caused SNCF’s debt to rise to c£25billion. The World Bank warned in 2010 of the debt created by high speed rail systems talking of the ‘near certainty of copious and continuing budget support for the (high speed rail) debt’.

• The potential for going far above the £4bn “optimism premium” set aside for overspending is high, especially in light of current inflation. Public pressure for more tunnels (which cost much more per km to build) through environmentally sensitive areas such as the Chilterns will push up construction costs, as has been demonstrated by the £5,300/yard tunnel expected to be approved to win the support of Cheryl Gillan MP for the project.

• Predictions of passenger numbers and demand for High Speed 2 may also be overambitious. This would have huge repercussions for HS2’s profitability. Britain's previous experience with high speed rail – the HS1 line between London St Pancras and the Channel Tunnel – proved far less popular than its promoters had predicted, with actual passenger take-up coming to one-third of the predicted amount. 

• HS1 cost £5.7bn but raised only £2.1bn when sold off, raising the possibility that HS2 may also incur a significant loss upon completion. If HS2's sale made the same magnitude of loss as HS1, it would mean a loss to the taxpayer of nearly £20bn.

• The outstanding questions about HS2's profitability make it appear extremely likely that the project will require a significant ongoing taxpayer subsidy upon completion and may well make a loss upon its sale. The promise of slightly faster journeys to Birmingham, Manchester and Leeds do not warrant this risk-taking with taxpayers' money.