HS2 is worse value for money than improving existing rail network

HS2 is worse value for money than improving existing rail network

Oliver Gill Chief Business Correspondent | Tuesday 21 September 2021, 6am, Telegraph

Orignal Article

The economic benefit of investing in the UK’s existing railways outstrips the returns from High Speed 2, according to a new report seized on by critics of the near-£100bn project.

For every £1 spent on Britain’s railways, some £2.50 is generated for the wider economy, according to new analysis by Oxford Economics on behalf of the rail industry.

This compares with a crucial go/no-go paper prepared for the Government last year by Doug Oakervee that concluded HS2 would generate returns of between £1.30 and £1.50 for every pound invested.

The economic benefit of spending more money on Britain’s rail network will further undermine the future of HS2’s £32bn eastern leg, whose fate is set to be decided as part of the Chancellor’s comprehensive spending review this autumn.

Sir John Armitt, chairman of the National Infrastructure Commission that advises Boris Johnson on large building projects, said: “Calculation of the amount of money specific schemes will pay back over time is notoriously speculative, but on a broad assessment of economic benefits, improving regional links – especially east to west such as between Leeds, Manchester and Liverpool – is likely to make the biggest difference.”

The Oxford Economics report, commissioned by trade body the Railway Industry Association (RIA), sets out the railways’ economic “footprint” in 2019, chosen because it was the “most recent year of ‘normal’ economic conditions”.

Returns have risen from £2.20 for every pound spent when a similar assessment was made in 2016.

Lord Berkeley, an opponent of HS2 who quit as deputy chairman of the Oakervee review before it was published in protest, claimed that the economic benefits of the project have fallen since.

“Demand for high price long distance travel shows no sign of recovering to anywhere near pre-Covid-19 levels and so the most likely scenario is a return of around 50p for every £1 spent by the taxpayer,” he said. “Spend it instead on regional rail upgrades that might give a return much nearer £2.50 for every £1 spent.”

The findings also come with Mr Sunak due to set out the rail industry’s budget as the country recovers from the pandemic.

Demand for rail services fell to as little as 5pc of pre-crisis levels and has struggled to recover. Passenger numbers are at 59pc of level registered prior to the crisis – compared with 98pc for car use.

Rail bosses are fearful that swingeing cuts are on the way after more than £10bn of taxpayer cash was spent keeping services running.

Talks with union leaders are continuing over job cuts that could register in the thousands.

Some of the biggest operators have already cut back services by a fifth.

But Sir John warned Rishi Sunak not to take the axe to rail investment budgets. 

“Public transport demand continues to face considerable uncertainty as we emerge from the pandemic,” he said. “But underinvesting in rail and other public transport risks a death spiral for services, just at the time we should be trying to lock in more sustainable transport usage.”

A spokesman for HS2 highlighted that the economic returns in the Oakervee review were prepared on a slightly different basis to those by Oxford Economics.

“HS2 is an upgrade to Britain’s entire rail network – a new high-speed railway that will also deliver improved capacity, connectivity and journeys on the existing lines,” he said.

“The construction of HS2 is also playing a vital role in Britain’s economic recovery from the pandemic, with tens of thousands of people working on the project and through the UK-wide supply chain. By providing a cleaner, greener way to travel, HS2 will help cut the number of cars and lorries on our roads, cut demand for domestic flights, and help the country’s push to reduce carbon emissions.”

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