The Heseltine – Overman discussion brought to a conclusion?

13 November, 2013

Evan Davis moderated a discussion that tried to get to the heart of the HS2 debate (Radio 4, Today Programme, 12th November 2013).

Usefully dismissing attempts to re-define the HS2 scheme costs ever upwards from its actual £28bn (+£14bn contingency = £42bn total), Lord Heseltine talked about the incidental consequences of major rail investment, explaining that if he had suggested when he was arguing the case for HS1 that it would stimulate the private sector development that has actually materialised (valued at over £10bn several years ago, and still continuing), he would not have been believed.

But Professor Henry Overman argued that HS2 may not represent good value (with its benefit cost ratio at 2.3) and that there could be better ways to spend the money. When Evan Davis asked what better transport schemes should be considered, Henry pointed to the recently published strategic case which sets out the alternatives to HS2, including upgrading existing railways instead of building new ones. These alternatives have a better BCR, he said, mentioning 3.1 for an alternative to the full Y network.

After the now routine joshing about people with slide rules who undertake the complex task of estimating such values, Michael responded by pointing out that the BCRs for HS2 assume that all growth stops in 2036 just three years after HS2 is built; if this very cautious assumption is relaxed the HS2 BCR is over 4. This is the more sensible basis on which to consider HS2.

Ah yes, but then it’s wrong to be selective, and it would be necessary to look as well at the higher BCRs for the alternatives to HS2 on the same basis; the BCRs for the alternatives would rise too, countered Henry. Yes, but the point Henry didn’t mention is: by not as much!

We need to continue to explore this point, because for ‘those of us like me’ as Henry put it that consider the BCR to be an important guide to decision-making, the question of the best alternative with a sensible growth assumption is important.

In the recent technical report by Atkins on the alternatives to HS2, the question of their ‘future-proofing’ beyond 2036 is addressed:

“While the [upgrade] packages are likely to be relatively future proof in relation to downside risks (where lower demand can be accommodated through reduced crowding and de-scoping of some interventions), there is likely to be less scope to address higher demand growth, or continued growth beyond the ‘cap year’ (i.e. 2036). Given that, even on the basis of current demand forecasts, peak crowding levels are high, increases in demand would probably require additional capacity to be found.

There is scope within the existing packages, particularly for MML, ECML and Cross Country, to provide some extra capacity through train lengthening but there is more limited scope to increase capacity through frequency enhancements without further considerable infrastructure investments. Discussions in this study did not identify any obvious further infrastructure investments which were likely to boost capacity and offer value for money.” see HS2 Strategic Alternatives Atkins Final Report, Department for Transport, 28 October 2013 emphasis added

In other words, while with HS2 there is spare capacity to accommodate further demand growth after 2036, with the upgrade options it would be necessary to make further investments. The implication is that the BCR of the strategic alternative is unlikely to improve in the same way that it does for HS2. If you believe that demand is likely to continue to grow in the longer term, then HS2 which adds more capacity than upgrades will also offer a better BCR.

The Radio 4 discussion moved on without this important level of detail to explore another point. Would not HS2 be expected to have the same type of transformative effect that the Jubilee Line Extension has had on Canary Wharf and other places, asked Evan Davis, but for the north of England? Henry’s answer here – while expressing sympathy with the policy aim – was to suggest that urban transport schemes such as the Victoria Line and the Jubilee Line Extension (built with much lower BCRs at the time than HS2, he might have added) were different in that they served many stations whereas HS2 would only serve a few.

This reflects a common misunderstanding of HS2. True, the number of new HS2 stations will be few (eight) but then there are many other existing stations to which new high-speed rail services will run (thirteen at the very least) and a further even bigger number of stations where services on existing lines, freed from the need to carry non-stop intercity trains, will be hugely improved. The Jubilee Line Extension has eleven new stations, of which only five were to places without a London Underground line already, by way of comparison.

The geographic spread of beneficial impacts of HS2 and the number of immediate station catchment regeneration opportunities is very much wider than is achieved with typical urban rail projects. This is a material point because it is generally agreed that the better connectivity that transport investment provides, along with a responsive local planning and business environment, can extract the type of regeneration benefit that Michael Heseltine set out to achieve, and delivered, with HS1.