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The anti Hs2 campaign group Hs2aa like to pretend that they have more integrity than fellow travellers StopHs2 (whom they look down their noses on – especially Campaign Manager Joe Rukin, a man who’s notorious for telling porkies). The reality is – it’s a load of hypocritical nonsense – as the latest rubbish about the ‘true cost’ of Hs2 being £138bn shows in spades.
This fantasy figure was concocted by Dan Mitchell and Andrew Bodman & presented in a petition to the HS2 Select Committee on March 2nd.
Andrew Bodman is a figurehead in SNAG (South Northants Action Group) but he was parachuted into that group to stop it imploding due to its ‘managerial difficulties’ He’s actually a Director of Hs2aa (see here);
http://www.hs2actionalliance.org/about/team/
Bodman co-concocted the risible £138bn which is justified thus (taken from a StopHs2 press release) http://stophs2.org/news/13236-hidden-costs-double-hs2-bill
“The total cost of HS2 (Phases One and Two) could well reach £138 billion, maybe more. Yet the official figure is £50 billion including trains.
The largest additional amount (£30 billion) is the ongoing subsidy that is likely to be required. Only two high speed lines in the world are thought to be profitable (Paris – Lyon and Tokyo – Osaka) and it is extremely unlikely that HS2 will join that exclusive club. A subsidy will be needed to cover the interest payments on the considerable debt incurred in building this line, higher operating costs of such trains and revenues that fail to match forecasts as passenger numbers will probably turn out to be less than expected. Several countries subsidise their high speed lines by $1bn per year or more. A £0.5bn subsidy per year has been estimated over 60 years.
It also appears that the construction costs for Phase Two have been significantly understated. At present, the estimated construction cost (without contingency) of Phase One is £108m per mile while that for Phase Two is £59m per mile. By referencing the construction cost per mile for HS1, the HS2 Phase One cost per mile seems the more likely. With the current contingency for HS2 construction costs being 70%, it means the Phase Two construction cost is likely to rise from £21.2bn to £39.4bn.
The next element to be factored in is an additional power station bearing in mind how little spare generating capacity the UK has at present. Using input from electrical engineers, it is believed that an additional medium sized power station will be required to meet the demands of these powerful trains on what will be an intensively used series of lines. £16bn has been added to cover this requirement.
Furthermore Crossrail 2 will be needed at Euston to help the onward travel of rail passengers to their end destinations. The existing Underground services will be unable to cope with such significant increases of passenger numbers once HS2 Phase Two is running, and this shortcoming has been recognised by Transport for London. We have suggested a £7bn contribution to Crossrail 2 which is approximately a quarter of its total estimated cost to ensure that this work proceeds, and in a timely fashion.
Currently there is no research and development budget for HS2 which seems extraordinary when the plan is to run trains faster than in most other countries and more intensively between London and Birmingham than on any other high speed line in the world. There are many issues needing investigation including electrical engineering, vibration, sound and other speed related issues. A nominal £5bn for research and development has been added.
Other areas that have been added include security, track maintenance and upgrading the overhead line equipment on sections of the West Coast Mainline and East Coast Mainline (used by classic compatible HS2 trains) to provide improved reliability.
There are a number of costs associated with HS2 which cannot be readily costed at this stage, e.g. the HS2 Growth Taskforce Schemes for getting cities HS2 ready.
In addition there are concerns that some of the contingency amounts may be insufficient bearing in mind the recent cost increases which have occurred on the Great Western and other electrification programmes. The cost of the Great Western Electrification programme has gone up by 70% in the latter half of 2014 alone and 180% since first conceived, while the cost of each connection to the National Grid has increased by 150%.
Dan Mitchell said he was concerned that Parliament was currently being misled as are taxpayers. He is very aware that the Public Accounts Committee and Major Projects Authority also have serious concerns regarding the cost of this significant project. Dan Mitchell has also said that £138 billion is a disproportionate amount of money to spend on a single project. He believes there are other more pressing issues to address on the rail network.”
Let’s dissect these claims, shall we…?
“Ongoing subsidy over 60 years – £30bn.”
As the Hybrid Bill Committee very promptly picked up, other countries make policy decisions to subsidise their railways more than we do. But that’s just one reason why alleging that HS2 will need a subsidy on the basis of international comparisons is invalid.
First, our InterCity trunk routes serving the markets that HS2 will work in now pay premiums to the DfT for their franchises, so why should HS2 not do the same? Then, our high speed line will be used more intensively than those abroad, so will have more trains earning money on its infrastructure to share the cost.
As to the expected figures, the “Economic Case for HS2” in Table 15 shows a Present Value (that is, figures for every year of the project life rolled into one) of operating costs of £22.1 billion, and a Present Value for fares revenue of £31.1 billion. So, far from requiring a subsidy, over the project life fares will exceed operating costs by a total of £9 billion.
“Phase Two construction cost correction – £18.2 bn”
No, it is not valid to estimate the Phase 2 cost from Phase 1, as Phase 1 has more of the expensive items such as stations – not just Euston but also Old Oak Common, Birmingham Interchange with its 4-track section and complex junctions, and Birmingham Curzon Street – and tunnels. By comparison, Phase 2 is a relatively simple job, with less in the way of additional stations, tunnelling and complex junctions relative to its length.
“Crossrail 2 contribution – £7 bn”
Not this old chestnut again! TfL have stated clearly that they regard Crossrail 2 as essential for London full stop. It simply makes sense to construct its station box at Euston/Kings Cross at the same time as Euston is being rebuilt. If anyone could identify a true incremental cost imposed by HS2 they might have a point, but no-one has.
The £7 bn suggested to be charged to HS2 is not only arbitrary but a paper transfer, as it would just make the funding requirement for Crossrail2 £7 bn lower and leave total UK spending exactly where it would have been. But if you insist, just remember when charging HS2 with a quarter of the cost, to credit HS2 with a quarter of the benefits. And that means that effect on the HS2 BCR is zilch.
“Research and Development – £5bn”
This is pure fantasy. When did BR ever spend that much on research, whilst developing pioneering technologies such as Solid State Interlocking for signalling systems? And just for once we are learning from the high speed pioneers, rather than making the mistakes that others then learn from. HS2 is based around proven, off the shelf technology.
“Maintenance of track – £3.36 bn”
No, this has not been forgotten. Maintenance of the HS2 infrastructure, and the track access charge to pay Network rail to maintain theirs, are both in the calculated operating costs.
“Upgraded overhead line equipment WCML and ECML – £2 bn”
Well even if this isn’t just plucked out of the air, and not already counted in the capital costs, its benefits will be shared by all trains on the routes in question, not just HS2 trains. So the costs should be shared, and that doesn’t leave very much to be charged to HS2.
“Additional costs of Euston station – £2 bn”
To be funded by property development.
As for the rest, how am I meant to know any more than Bodman or Mitchell? None of this is their speciality any more than mine. But if their research is as valid as the big items above, it doesn’t bode well – for them.
So much for Hs2aa trying to pretend they have integrity. It’s one of their Directors who’s put his name to this rubbish remember…
Who can forget the lie from Hs2aa Director of Local Campaigns Peter Chegwyn about Coventry having a worse service than in steam days (nailed here)?
Or their lie about £8.3bn of ‘service cuts’ (nailed here)?
Their ‘sword of truth’ is just as bent as the last person who claimed the right to wield it – Jonathan Aitkin…
Paul Bigland 
Will HS2 create a Surplus worth £9bn – the Government does not think so and here is why.
Mr Bigland, I’ve asked you more than once on Twitter to correct the misinformation contained in this blog entry in which you argued, back in 2015, that HS2 would generate a surplus;
“ As to the expected figures, the “Economic Case for HS2” in Table 15 shows a Present Value (that is, figures for every year of the project life rolled into one) of operating costs of £22.1 billion, and a Present Value for fares revenue of £31.1 billion. So, far from requiring a subsidy, over the project life fares will exceed operating costs by a total of £9 billion.”
This was not even then a true statement for reasons set out below, but it is especially ironic for you to have made this deceitful claim in a blog entitled
“Hs2aa & the ‘Hs2 will cost £138bn’ deceit exposed”
They may have been deceitful, but that does not justify you being deceitful as well and not correcting your blog, even when the error has been pointed out to you.
You also stated, earlier in the same blog, that HS2 would not need a subsidy:
““Ongoing subsidy over 60 years – £30bn.”
As the Hybrid Bill Committee very promptly picked up, other countries make policy decisions to subsidise their railways more than we do. But that’s just one reason why alleging that HS2 will need a subsidy on the basis of international comparisons is invalid.”
Here is a link to the document in question:
Click to access S%26A%201_Economic%20case_0.pdf
Your error is in not reading Table 15 correctly (page 85). You correctly cite Operating Costs as £22.1bn and Revenue Costs as £31.1bn, and deducting the latter from the former does indeed give you a surplus of £9bn.
But, by a sleight of hand, you are able to produce your ‘surplus’ by ignoring the then estimated cost of building HS2, then £40.5bn in line 7 in the table. If you add the Operating Cost to the Capital Cost, as the full table goes on to do in Line 9, by adding the Capital and the Operating Cost together you reach the full expected cost of both building and maintaining HS2 over its 1st 60 years of life of £62.6bn.
Now, the table goes on to estimate the net position of building and operating HS2 minus the expected revenue the line is expected to generate. This is done on line 11 entitled “Net Cost to Government” where the sum of all costs (Capital + Operating Costs (£62.6bn) are set against expected Revenues (£31.1bn) leaving a sum of £31.5bn of outstanding costs, i.e. the debt owed to the Government.
What “Net Cost to Government” means is defined on page 81 of the document:
“Net cost to Government = Construction cost + rolling stock cost + operating cost + renewals – revenue”
However this document has been superseded by the publication of the High Speed Two Phase 2b West Midlands to Leeds Economic Case published in November 2016
@ https://www.gov.uk/government/publications/hs2-phase-2b-crewe-to-manchester-west-midlands-to-leeds-economic-case
This uses a slightly different definition of “Net Cost to Government” on page 50: “Net cost to government = Construction cost + Rolling stock cost + Operating cost + Renewals – Revenue”
In addition, because it is assessing the cost of different options for the cost and operating Phase 2b, it comes up with 3 different levels of debt that will be owed on the line after 60 years of operation in Appendix 6 (pages 56 – 58) Again look at line 11 of each of the 3 tables in Appendix 6 and you will see that in this latest estimate, the Net Cost to the Government (i.e. debt) range from £37.9bn to £38.7bn.
Yes, fares may exceed operating costs, but your deceit is then representing this as HS2 not requiring a subsidy whereas, in fact it will, for the foreseeable future need that £35bn + subsidy.
The fact that you struggle understanding these simple numbers helps illustrate why your campaign is a disaster. Not that macro-economic policy is even relevant to you. You’re a small (unrepresentative) local group. When the Hybrid Bill is voted through on your phase of the route (as it will be) and you have the chance to petition, all this will be completely irrelevant. It has nothing to do with any grounds that you may have for petitioning and the Ctte won’t be interested. You’ve never understood that, which is why you waste so much time on things that you don’t grasp in the first place.
My blog stands. There is nothing to correct. It’s not my fault that you can’t grasp that subsidy clearly refers to ‘operating subsidy’ (which is defined as the difference between operating costs and revenue from fares). And that is precisely how the author of the HS2AA “£138 billion” claim was using the word, to claim that there would be an operating subsidy because fares would not match operating costs. And that is clearly wrong.
No-one is claiming that the entire cost of building Hs2 will be covered through fares. What you either fail to grasp (or deliberately ignore) are both the BCR (Benefit Cost Ratio, the relationship between the cost and benefits of a proposed project) and the WEI’s (Wider Economic Impacts, the additional benefits to the economy from particular projects). It’s clear from both the BCR and the associated WEI’s that Hs2 brings far more benefits to the UK economy than it costs to build. But of course, that doesn’t suit your narrative, so you ignore it. Others don’t ignore it, like the business and political organisations that know what Hs2 means for their area – such as the cities of Leeds, Manchester, Birmingham, Sheffield, Derby, Nottingham and so in. You’re pitting your limited understanding against them. I know who’ll win. I also know from following the anti Hs2 campaign for years that you’re on a hiding to nothing.
Thanks for correcting that impression that HS2 will not require a subsidy – you are then confirming that that the figures quoted here are then correct as of 2016.
Your own analysis trots out the usual line on projected benefits but as the National Audit Office observed, it misses out on an additional cost factor, the cost of plugging in HS2 to local regional transport networks. Until that is known, we cannot easily undertake the BCR and the WEI analysis and any such analysis undertaken so far is questionable until these costs are factored in.
You’ve shot your own fox by continually complaining each time an announcement is made of money being available to help ‘plug in’ Hs2 to those very networks! As usual, the anti Hs2 campaign is exposed as being nothing more than a bunch of scaremongers.
Still, I look forward to seeing you try all this irrelevant hyperbole and hot air on the Hs2 phase 2 petitioning Ctte – if they ever give you locus – as none of this has the slightest relevance to the supposed aims of your tiny group anyway.