How much is too much for High Speed 2?

Photo credit:   Ward.

June 27, 2013 // By: David Theiss

Transport minister Patrick McLoughlin yesterday announced the contingency cost of High Speed Two (HS2), raising the total commitment from £33 billion to a staggering £42.6 billion – that’s an increase of more than a third on an already eye-watering cost.

Despite fresh assurances that it is unlikely that the scheme will actually rack up such a large bill, UK taxpayers are left holding what seems to be a potentially ever escalating cheque. We’ve heard this story before.

Way back during the public consultation for the scheme, we were assured that the £33 billion cost for the scheme included ample ‘risk allowances’ and accounted for overly confident thinking by incorporating ‘optimism bias’ costs. Apparently, in the last two years we’ve realised we can’t squeeze the grandiose HS2 into such a tight £33 billion budget after all. What will happen in the next twenty years? Has the Department for Transport (DfT) really checked their optimism bias this time?

Last week we expressed serious doubts about the value of HS2, and these new higher cost figures will mean a smaller return on investment for UK taxpayers. Taking the figures roughly, the return will likely drop by over 30%, reducing the base benefit-cost ratio (BCR) from an already low 1.9 to a pathetic 1.3.

What about the other benefits trumpeted by McLoughlin, like hundreds of thousands of jobs? Official reports published by the DfT have not presented evidence that the creation of these jobs after spending tens of billions over decades is actually contingent on the construction HS2. Furthermore, evidence from abroad suggests that most of these jobs will be generated in stronger performing economic areas, like London. 

Given the cost escalations, lack of ability to project concrete wider economic impacts and low return on investment, it is now impossible to ignore the stench of political imperative wafting around HS2. Revising the cost figures may be the ‘right’ thing to do, as McLoughlin says, but this is a scale-change so significant that Parliament should take a step back and properly examine the reality of the project.

MPs need to consider the wisdom of proceeding with HS2 when real and valuable alternatives have not been considered - as we pointed out in our report last week. And what if the bill keeps rising? Is it HS2 at any cost? If so, what does that say about policy-makers’ stewardship of our increasingly scarce public funds? 

Issues

Transport & Infrastructure

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