9th November 2010 ICEA 1

Jim SteerDirector, Greengauge 21Director, Steer Davies Gleave

ICEA

9th November 2010

The case for High Speed Two (and three and four…)

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High Speed One

European high-speed rail network

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Rail network capacity utilisation: 2008 and 2033

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Why now for High-Speed Rail?

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What should follow HS1?

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Greengauge 21: reports funded by a Public Interest Group

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Public Opinion on HSR

78% of people believe that HSR is essential for Britain’s future

and 95% believe it is an appealing concept

Source: Leading Edge for Greengauge 21: sample over 1,000

Current Government Timescales

• 2015 Hybrid Bill Powers for London – West Midlands (HS2) and start on construction

• [timescale unknown] hybrid bill(s) for limbs of the Y-shaped network

• Mid 2020s HS2 opens

• Mid 2030s (rough estimate) limbs of the ‘Y’ to Manchester and Leeds completed

• More immediately (early 2011) consultation on need for HSR as well as route of HS2

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HSR Strategy formulation

policy objectives

markets

& customers

services

infrastructure

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app

rais

al

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National Economy: Business Services

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New Businesses: VAT Registrations per 10,000 Employees

The case for HS2source Cm 7827

• Capacity

• Connectivity

• Sustainability

• Supporting growth in the regions

• Increasing urban economic productivity

• Supporting growth in Britain’s core cities (shows how GVA/head declines with rail journey time to London)

• Supporting housing growth (MKSM, M11 corridor)

• Supporting London’s long term competitiveness (Mayoral support)

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Costs and Business Case

• Infrastructure capital cost HS2 London to West Midlands between £15.8bn and £17.4bn source: Cm7827, March 2010

• Business case:

• Benefit cost ratio for HS2 2.4:1 DfT, 2009 discount year and prices

• Benefit cost ratio for a national network 3.5:1 Greengauge 21

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next…

• A national HSR network – its business case Greengauge 21

• HS2 – business case DfT/HS2 Ltd

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Fast Forward: a national HSR strategy

Heathrow & London Interconnections Greengauge 21

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Key Business Case Findings

• Benefit cost ratio for:

• the national HSR network 3.5:1

HS-NW to Manchester 2.9:1

Extending HS-NW to Glasgow/Edinburgh 7.6:1

HS-NE to Newcastle 2.0:1

• Marginal case: extending HS-NE to Edinburgh

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Business case breakdown (national HSR network)

£bn PV 2002 prices

Revenues (net) 22.5

User benefits 78.5

Non user benefits (decongestion of road and rail; greenhouse gas reduction)

10.4

Wider economic benefits 14.0

Net costs (capex and opex) 48.1

NPV (excl WEBs) 63.3

BCR 3.5:1

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Widespread economic benefits

HS2 London – West Midlands

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Standard appraisal assumptionssource HS2 Ltd

• GDP assumptions – In line with 2009 Budget

• RPI + 1 for all rail fares to 2033 (reflecting government policy)

• Growth capped at 2033 (proxy for market maturation)

• Rail Industry approach applied

• Air forecasts – Published by DfT in 2009

• TEMPRO based road forecasts

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HS2 Appraisal summarysource DfT

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Category £bn

1 Transport user benefits – business 17.6

2 – other 11.1

3 Other benefits (excl carbon) <0.1

4 Net transport benefits (1 + 2 + 3) 28.7

5 Capital costs 17.8

6 Operating costs 7.6

7 Total costs (5 + 6) 25.5

8 Revenues 15.0

9 Indirect taxes -1.5

10 Net costs to government (7) – (8) – (9) 11.9

11 NATA benefit cost ratio (4) ÷(10) (2.4)

In summary: What are the quantified benefits of HS2?

• Journey time and reliability improvements

• Relief of crowding on classic network

• Release of capacity on WCML (including benefits for short distance trips such as commuting into London/Birmingham)

• Some decongestion on road network

• Some Wider Economic Impacts (WEIs)

Source: HS2 Ltd

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Time Savings

• Non-working time savings (including commuting) around £6 per hour in current prices

• Travel in the course of work – assumption that savings increase overall output by the amount of the time savings, valued at the wage rate plus a mark up

• Rail business time value value implies a current pre-tax wage rate of around £32 per hour.

• Walk/access/egress time savings value set at double the standard in- vehicle value for all non-business travellers. Business values as for in- vehicle values.

• • Evidence suggests VoTTS increases with trip length/duration and hence savings for long distance trips undervalued but not part of DfT method.

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Wider Economic Impacts

• Wider economic impacts are worth £3.6bn

• Increase BCR to 2.7:1

• Imperfect Competition’ results in a further £1.6bn over and above time savings to business

• Agglomeration – firms gain additional benefits from closer proximity but

• DfT Guidance focuses on impacts over (relatively) short distances

• HS2 to Birmingham is too long - but impacts of extensions northward would have bigger impact

• The line to Birmingham still delivers agglomeration benefits of a further £2bn, mainly due to released capacity and road decongestion

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Closing remarks

• HS2 has been compared by DfT with 5 alternative (lower cost rail upgrades) and 4 alternative road investment packages: HS2 is best

• HSR has an excellent match with government policy objectives and has cross-party support

• Studies started in 2001: we’re in the tenth year of examination

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Thank you

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