Author Topic: HS2 - birth of a white elephant?  (Read 141 times)

petagny

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HS2 - birth of a white elephant?
« on: January 11, 2012, 07:48:35 GMT »
You will remember that I have mentioned Britain's proposed high speed rail link between the South and North in a previous post on the need for independent review of appraisal results:

http://pfmboard.com/index.php?topic=2795.msg7087#msg7087

The Government has now reached a positive decision on the project, but opinions are divided about whether this will be the best use of public monies.  The FT is today leading with an editorial titled, 'A white elephant from top to bottom'. The three sources of benefits are questioned:

  • Relief of overcrowding on the West Coast Main Line (there's also a story about past investment in this line, but that's for another day!)
  • Time-savings for travellers between London and Birmingham
  • Wider economic development impacts

The criticisms raised are:

'The case against smaller incremental adjustments on the west-coast line rests on forecasts of long-distance travel demand that appear questionable. These are higher than other industry forecasts and are also highly sensitive to changes in the economic climate.

The benefits to passengers from the high-speed link are also overstated. Behind government thinking there is an assumption that all the time that business travellers spend on a train is wasted. While there is a benefit to speed, this is a somewhat questionable proposition – as proven by the number of laptops open in the carriages that run up and down the country every day.

As for the wider economic benefits, there are two quibbles. First, while most government-sponsored schemes are likely to result in job creation, policymakers should always question which projects do so most effectively. Second, hopes that the link will help to regenerate the north may be overstated. Evidence from a range of other countries shows that the main beneficiaries of high-speed railway lines tend to be the largest hubs on the route – which in this case will be London.'

In an opinion piece in Monday's FT, Iain Martin expressed similar views:

'To the delight of trade unions, the CBI and representatives of the construction industry, the proposed high-speed rail project (HS2) is gaining all but unstoppable momentum. The government seems ready to signal today that the £17bn line from London to Birmingham will be built.

In the making of most public policy disasters there comes a point when those in charge feel they have gone too far to turn around and determine, instead, to shut their ears to objections. The might of the bureaucratic machine is then put to work by officials who enjoy being able to please senior ministers by giving them what they want once in a while. So it is now with HS2. In Whitehall the project has acquired that most exalted of statuses in government: it is a prime ministerial “must have”.

...the government is in the process of making a hugely expensive mistake. HS2 is a vast vanity project that would have been a monumental waste of money in times of plenty. In an age of supposed public spending constraint and prolonged austerity the decision to give it the green light is doubly scandalous.'

Martin suggests that the resources would be better spent on incremental improvements to the existing network (a view expressed by the FT back in 2008 when the project started gaining momentum under the previous government) and that, if there has to be a mega-project, then a new London airport in the Thames Estuary might be a better option for economic development.

On the other hand, a group of distinguished economists led by Lord Skidelsky and Professor Anthony Venables wrote an open letter to the FT on 6 January pressing the Government to approve the project:

http://www.ft.com/cms/s/0/6242a5a2-36e5-11e1-b741-00144feabdc0.html#axzz1itF3XEot

Their arguments seem to revolve around reducing the UK's infrastructure deficit compared to competitors and on the impact on aggregate demand in the economy. The infrastructure deficit is probably real, but that still means selecting projects that represent best value for money. Keynesian arguments seem spurious unless it can be shown that HS2 is more labour intensive and/or less import intensive than other alternative investment proposals. Tony Venables is, however, a leading light in the study of the spatial dimensions of economic development (also former Chief Economist at DFID), so his views on the wider economic development impacts should probably not be taken lightly. Don't forget also that the independent review (and Transport Select Committee) did come down broadly in favour of the project, while drawing attention to the wide margin of error attaching to some of the benefit estimates.

Since all rail projects must be approved by act of parliament and the first stage of the actual project (London-Birmingham) will take until at least 2026 to complete, there is still opportunity for an about-turn, but white elephants are very difficult to kill off once born!
« Last Edit: January 11, 2012, 07:57:56 GMT by petagny »

 

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