HS2 Bill tops FORTY THREE BILLION POUNDS without any trains!

Published 8th July 2013

Contingency and history repeats itself – rail.co.uk explains why lessons should not be forgotten.

George Osborne, Chancellor of the Exchequer has announced that the cost of building High Speed 2 (HS2) has potentially increased by 30% from £32 billion to £43 billion. Rail.co.uk looks at why this should be. But first, some statistics provided by HS2 and The Government to be considered.

The official message is clear, the extra money may not be needed as we have allowed a contingency fund for the project. This is a curious thing to say as every major project on rail and roads includes a 40% cost uplift as a contingency so are they saying that they forgot about this, or made a basic miscalculation?

History lesson ignored

The London & Continental consortium selected by the Government to build the Channel Tunnel Rail Link (HS1) failed to raise enough funds to construct the link and in 1998, Railtrack rode to the rescue. Because of the funding crisis, the line’s opening was delayed and built on two sections, but nobody today complains about the line nearly 20 years after construction of section 1 through Kent.

So is history merely repeating itself 15 years on?

Engine for growth?

The Government says that HS2 will be an engine for growth and this to an extent, cannot be argued with. The construction of the line will obviously generate direct employment as well as a huge supplier base creating indirect jobs. The Government says that HS2 will generate over £50 billion of benefits for the UK economy along with 100,000 jobs. With suppliers the core cities group predict it will actually underpin over 400,000 jobs.

Some estimates suggest HS2 will add £4.2 billion to the economy but this is unclear if this is in total or annually. What is certain is that it will act as a catalyst to city centre regeneration so long as local authorities follow the Government’s investment. This means that the line will be built but local authorities must play their part in attracting business around stations served by the line. This has been done around Kings Cross/St Pancras and in France at Lille and Lyons for example.

Regional Centres of excellence?

A recent visit to Ashford was made by rail.co.uk looking at the effects of HS1 twenty years after construction was underway. Research suggests that High Speed 1 has boosted property prices with London commuters moving out to take advantage of the reduced journey-time since ‘Javelin’ services commenced which have also provided some new railway employment in a traditional railway town at the Hitachi ‘Javelin’ depot there.

But the town some locals argue, has not matched the pace of HS1 and they go to Canterbury or Faversham for an evening or day out. So Ashford has not become a destination because of its high speed links with little to attract visitors.

French Lesson

The French equivalent, Lille, on the other hand is booming because the local authorities have had the vision to develop the city to attract tourism and has become a place to visit. It is also served by TGV’s and similar trains from across Europe.

This is why places like Birmingham and Manchester are lobbying for the link because it will boost their economy creating jobs. It is equally understandable why people who live along the route – especially in the Chilterns – are against the line as they will see little direct benefit from it. Or will they?

Traffic Congestion

The UK’s railways are rapidly becoming very congested in every sense and HS2 will provide valuable capacity on the East Coast and West Coast Main Lines plus the Midland Main Line and Cross Country routes north of Birmingham. This is because the fastest trains will use the high speed line allowing more stopping services to use the other routes so passengers from Milton Keynes and Bedford for example, will enjoy enhanced services with the extra train paths and more seats available.

More freight services will use rail as more freight paths are created by moving services to the new line. So this all means that the Objectors will benefit even if they are committed road users as each freight train can remove up to 70 HGVs off the road. So really everyone does stand to benefit, as will the environment.

And of course, as journey times reduce, domestic flying demand will shrink offering new slots at UK airports which can be used for long-haul flights further driving the economy. So taxpayers will benefit when an overall view is taken, and not just rail passengers and the environment.

The price of new trains

The cost of trains to operate on HS2 is not included in the revised cost estimate. High Speed trains have to be built to conform to European Union standards which means that on the face of it, they are very expensive at a million pounds a carriage. But, they are very safe, very fast, can be operated through the Channel Tunnel and into mainland Europe providing competitive rail travel for up to 600 miles when measured in time terms against air travel.

Two years ago Eurostar announced that they had placed a new train order with Siemens for £525 million for 10 trains which will be able to travel on any high speed line at up to 225mph. Day trips by rail between Manchester, Birmingham, Paris and Brussels and even Amsterdam will become a reality, via HS1 and HS2 eventually!

The new trains to be built for HS2 will be able to run on ordinary lines as well thus maximising their route availability and places served. Equally, German ICE and French TGV trains should be able to operate in the UK on our High Speed lines, something to relish.

Who pays for the trains?

Since privatisation, trains have been owned by Rolling Stock Leasing Companies known as ROSCOS. There are three main ROSCOS, Angel Trains, Porterbrook and Eversholt Leasing. Some argue that they have a captive market and therefore carry no business risk but the reality is that although risk is limited, they can catch a financial cold if the trains do not perform as planned as with many Alstom built a decade ago and went off lease as Southwest Trains and Great Western sought other trains to fill their gaps.

The train operating companies lease the trains from the ROSCOS and many contracts for new trains also include a long term servicing and maintenance package, which to a degree masks the actual purchase price of each train.

So when a company like Virgin, London Midland or First Group say that they have invested so many billions of pounds in fleets of new trains, this is a bit disingenuous as the ROSCOS have made the investment and lease them to the operators.

Lord Deighton to lead HS2 economic taskforce

The former London Organising Committee top man, Lord Deighton has been appointed to head up a taskforce to maximise the economic benefits – including job creation – generated by the HS2. He is Commercial Secretary to the Treasury and has a hugely successful track record in business and infrastructure delivery, including last year’s spectacular Olympic and Paralympic Games.

They said

Transport Secretary, Patrick McLoughlin, said: “HS2 provides a once in a generation opportunity to drive growth, generate jobs, and secure our country’s future prosperity. We need to squeeze every possible benefit from this vital project, leaving no stone unturned.

“That is why we are setting up a Growth Taskforce and that is why I have asked Lord Deighton, the man who delivered the Olympics, to lead it.

“I recognise HS2 is a huge project and I am determined to get maximum payback from the investment. This is about far more than just a new railway and, through the work of the Taskforce, we will be able to identify many of the wider economic benefits it can deliver.”

Commercial Secretary to the Treasury, Lord Deighton, said:

“I know from experience that big projects can bring big rewards – boosting business, inspiring innovation and creating jobs. HS2 is of vital importance to this country’s growth and will help us compete in the global race. “I am very pleased to take on the role of Chair of the taskforce, which will have a relentless focus on unlocking the huge economic potential of this historic project. I look forward to getting on with the job.”

Last Chance to voice your opinion

Don’t forget, consultation on the route of HS2 closes on 11 July 2013 and HS2 engineers and environmental specialists have been refining the design of the route to ensure that it is as efficient, cost effective and environmentally friendly as is practicable, whilst minimising impact on communities.

Written by Phil Marsh

External Links

• HS2 Website
• HS2 Website: DESIGN REFINEMENT CONSULTATION
• Stop HS2 Website