High Speed Rail: follow up

In 2011 we examined the Government’s proposals for a high speed rail line from London to Birmingham, and then northwards to Manchester and Leeds (HS2). We broadly supported the project because it would provide a step change in capacity on the West Coast Main Line, benefitting both passengers and rail freight, and bring strategic economic benefits to the nation as a whole. We decided to look again at the project following the publication of a revised business case and new research by KPMG on the project’s possible regional economic benefits.

We support the strategic case for HS2 and stand by our conclusion that HS2 is needed to provide a long-term increase in the capacity of the railway and that alternative proposals to increase capacity are not sufficient to accommodate long-term forecast demand.

Connectivity, which can encourage economic activity and increase productivity, is also part of the justification for HS2, especially for the lines north of Birmingham. In our 2011 report we said “It is also disappointing that as a major justification for HS2 phases I and II is the rebalancing of the economy, a full assessment of the case for building north to south has not been undertaken. This work should be carried out as a priority.” Since then Sir David Higgins has told us that when he takes up his post as the Chairman of HS2 Ltd he will look at the case for building north to south concurrently with building south to north.

We believe that the economic, transport and political case for this has strengthened since our last report. We look forward to Sir David reporting back to us on this matter.

In our view, HS2 can help promote economic growth in the UK’s major city regions and contribute to a rebalancing of the economy. However, this will not happen automatically.

Local authorities and Local Enterprise Partnerships must develop economic development strategies to make the most out of HS2 and they must be supported in doing this by central Government.

KPMG has published useful and important research on HS2’s regional economic impact, which suggests that the project could add 0.5% to GDP by 2037. However, there are currently a number of limitations with the KPMG study and we recommend that HS2 Ltd continue to commission research in this area.

The KPMG research draws attention to the possibility that HS2 would affect different parts of the country in different ways and that some areas could lose out. In our view, it is essential that the benefits from HS2 are spread as widely as possible. This could be achieved by prioritising rail projects which enable trains from a wider range of areas than is currently envisaged gaining access to the high speed network; building additional links between the conventional and high speed networks; and bringing forward projects to speed up journey times on the conventional network, perhaps using the HS2 brand. Work to identify new service patterns on capacity freed up by the construction of HS2 should be speeded up. We recommend that steps be taken to achieve this.

KPMG’s estimates of the wider economic impacts of HS2 are not included in the existing 4 High speed rail: on track?

benefit/cost ratio. The appraisal methodology used by DfT focuses on benefits to individual travellers. We recommend that DfT review the appropriateness of applying its standard appraisal methodology to large projects with national significance.

DfT’s communications about HS2 should emphasise that the estimated cost is £28 billion, not £50 billion, and that cost increases to date have largely been due to the decision to undertake more tunnelling and other work to mitigate the impact of the project on people living near the route. We recommend that Sir David Higgins, the incoming chairman of HS2 Ltd, report to ministers by the end of 2014 on options for speeding up HS2 so that trains run north of Birmingham on high speed routes well before 2032/33, as currently envisaged.

There is little evidence to suggest that the Government will squeeze transport spending in other areas to channel money into HS2. If anything the opposite is happening in the rest of this decade, with several major rail projects beginning and steps being taken to provide more predictable funding for roads. We would not accept a situation in which other vital transport projects were delayed because of HS2’s funding requirements.

Our support for HS2 is not unqualified. For example, aside from the recommendations in this report, we remain concerned about how Heathrow will be incorporated into the plans for phase 1 and what impact including a Heathrow stop would have on the budget. Many important local issues will be debated and resolved by the hybrid bill committee and there will be detailed debates about many aspects of the project. However, we are convinced that it is essential for the UK for HS2 to go ahead, and to do so as a project which has the backing of all three major political parties.