How does the WCML franchise debacle impact on HS2?

The West Coast Mainline (WCML) franchise debacle has a significant impact on HS2.

 

The problem as DfT have admitted it is:

“The flaws stem from the way the level of risk in the bids was evaluated. Mistakes were made in the way in which inflation and passenger numbers were taken into account, and how much money bidders were then asked to guarantee as a result”.

 

So essentially its about risk and how to cope with it.  It’s a bigger problem now in the new franchise structure, introduced by the Coalition, because franchises are longer, typically 15 years. DfT can’t just re-feed the four different WCML bids into their model, as its their model that is bust.

 

The link between the WCML franchise and HS2 is around capacity. The claims about capacity are inconsistent.

 

First Group project a doubling in demand by 2026.  They say they can accommodate this without any more capacity on the southern part of WCML ie just the already extended 11 car Pendolinos.  They say the franchise has unused capacity and they start with just 35% seat occupancy.

 

But this leaves the opportunity in 2026 to increase capacity by extending all of the fleet to 11 car and then to 12 car (excluding Liverpool) and to rebalance first and standard class accommodation, as its standard class that suffers overcrowding, i.e. the 51m alternative.

 

In effect, the DfT are accepting that there is no need for HS2 on capacity grounds.

 

The Government has now admitted that there are fundamental problems with the way DfT evaluates projects and makes decisions. The parallels with HS2 are very relevant:

 

• On the consultation process, by their own admission with lost responses

• On the business case on numerous matters, such as not applying the latest forecast model, not incorporating pricing, not applying their own research into value of time, not adequately assessing rail and non rail alternatives; undervaluing landscape losses
• On the environmental case, which led to take legal action as they have not followed the correct process.

It was only the legal action that Virgin took that led to the errors and incompetence of DfT to be exposed. Expect similar revelations as a result of our HS2 legal challenges on 3 December.

 

A further twist was revealed in an interesting article by Sue Cameron in the Telegraph today:

 

“Yet by yesterday afternoon rumours were starting to circulate in Whitehall that ministers may have been better informed about some of the details of assessing franchise bids than it first appeared. The DfT says mistakes were made in the way projections for inflation and passenger numbers were calculated. Unconfirmed reports suggest that ministers were told months ago that the method being used to forecast inflation in the West Coast bids was the same as that being used for HS2, the London-to-Birmingham high-speed rail project. There are also claims, again unconfirmed it must be stressed, that ministers were warned that if the method for calculating inflation was changed for both projects then HS2 would no longer be viable”.

 

When will Norman Baker get up to speed on High Speed 2?

Norman Baker says HS2 is good for the environment and needed for capacity reasons.

It seems he is exceptionally poorly briefed on HS2 for a senior minister. His view that HS2 will benefit the environment is two years out of date – even the Green Party are against it. And the idea that we are running out of capacity is over a year out of date. The 51m alternative meets DfT demand forecasts. Furthermore, First Group say they will start their franchise with only a 35% loading and will easily cope with a doubling of demand to 2026.

As someone who championed the growth of telecommuting, it seems strange that he is supporting such an old fashioned and inefficient transport project, especially as the benefits, calculated using DfT guidelines, are only 40p for every £1 of subsidy. The alternatives cost 1/10th as much and produce over £5 of benefit for each £1 cost. HS2 is unnecessary and bonkers.

HS2 BCR is now 0.13 so why are the Government still throwing good money after bad?

Philip Hammond once said that if the HS2 benefit cost ratio (BCR) fell below 1.5  - £1.50 of benefit for every £1 invested – the project would need to be re-examined.

The BCR now stands at 0.13 for Phase 1 and 0.2 for the full Y. In other words, the costs far outweigh the benefits. By comparison the BCR of the 51m “Optimised Alternative” is 5.17, over £5 of benefit for every £1 of investment.

The official BCR has been adjusted downwards four times, from 2.4 to the current declared figure of 1.2 for phase 1 and 1.3 for the full Y. However, using the new forecast handbook PDFH 5.0 instead of the old PDFH 4.1, which the Government have avoided doing, cuts both BCRs by 0.4. Applying the latest DfT research on the value of time savings – a paper that was quietly buried – cuts the BCRs by 0.3. Applying the November 2011 GDP forecasts cuts off another 0.1. This alone brings the BCR to under 0.5.

Further adjustments, mainly using incorrect businessmen’s earnings (which Oxcera said was one third too high), brings the BCR down to 0.13 for Phase 1 and 0.2 for the full Y. Just 13 pence of benefit while 87 pence is squandered.

Even this may prove an overestimate. The Major Projects Authority designated HS2 “Amber/Red” meaning successful delivery in in doubt. Unsuccessful delivery in key areas means more cost as this is rectified. Technical Director Andrew McNaughton hopes that HS2 Ltd will not need to use the “Optimism Bias” built into the figures. But given the high risk rating, this sounds like a the wishful triumph of hope over the reality of delivering a complex project which depends in part on technology not yet available.

The last remaining argument – the need for more capacity – was killed by the latest RUS which shows long distance trains into Euston are the least busy in London; and by the 51m “Optimised Alternative” which leaves trains less crowded than with HS2.

So why are HS2 Ltd still recruiting staff at salary ranges of up to £170k pa? When will HS2 Ltd get off the gravy train and leave the Government to invest in the infrastructure we actually need to create jobs and growth?

More information: http://www.hs2actionalliance.org/index.php/business-case/bc-review-feb-2012 

Official figures show HS2 is a dead duck

David Cameron said he leads a government that doesn’t keep ploughing into a brick wall, it has the common sense to change its mind.

HS2 has reached a brick wall. Three killer facts have emerged from the government itself. No government with common sense could possibly continue. It’s only a matter of time, though every week of delay means more good money thrown after bad and less time to implement the better and more affordable alternatives.

 

Official killer fact #1: the business case has collapsed

 

The official business case has fallen apart. The benefit cost ratio (BCR) for phase 1 has fallen from 2.4 in March 2010 to just 1.2 today and 1.4 for the whole Y. A fifth downgrade is expected to be released in the summer incorporating the new, lower GDP figures.

 

Even the official BCR of 1.2 (and falling) massively overstates that case. Using the latest Passenger Demand Forecast Handbook (v5.0) cuts the BCR by 0.4. Using the correct figure for business passengers’ earnings cuts it by a further 0.3. And assuming time is not wasted on trains cuts the figure further still. The true figure is likely to be under 0.3, i.e. 30p of benefit for every £1 invested.

 

Even 1.2 is well below acceptable limits for government funding and well below the alternative proposed by 51m, which has a BCR of over 5.

 

 

Official killer fact #2: “successful delivery in doubt”

 

The BCR above relies on successful delivery of the project. However, the Major Projects Authority has given the HS2 project an Amber / Red rating, meaning: “the successful delivery of the project is in doubt, with major risks or issues apparent in a number of key areas.”

 

 

Official killer fact #3: the capacity crunch is a myth

 

The July 2011 Rail Utilisation Strategy shows that long distance services in to Euston are at just 60% of capacity for the three hours of peak morning demand, and just 64% in the busiest hour. This makes Euston the least busy long distance service; Paddington and Waterloo are both over 100% in the peak hour. Furthermore, Euston utilisation will fall as new carriages are added this year. And as the 51m alternative delivers more capacity than the DfT forecast, there is no capacity crunch on the West Coast Mainline for many decades, if at all.

 

 

So HS2 is not needed and makes no economic sense. The Government should abandon the project now before more money is wasted. Instead, David Cameron should have the common sense to take a fresh look at the more affordable alternatives, which will increase capacity and cut journey times for more people, and more quickly, than HS2, as well as creating the jobs and growth we urgently need.

There is absolutely no capacity case for HS2

AGAHST Federation submission to APPG for High Speed Rail

 

1. Peak time trains from Euston are half empty and spare capacity will increase

Official data on peak loading has been repeatedly refused. However, a peak time survey of Intercity trains from Euston to the Midlands and North validated by an independent market research company[1] came to the following conclusions.

• The average loading across all peak trains (16.30 – 18.59) was 56%.
• Loadings on the peak Manchester and Liverpool services were on average less than 45% full.

The load factor will reduce to even lower levels in 2012 as two extra carriages are to be added (providing 51% more standard class capacity) and significant improvements in the Chiltern Line into Birmingham are resulting in a transfer from the West Coast Main Line (WMCL).  Quick and easy access to free Wifi on the Chiltern Line is a factor in this transfer as business people opt for on-board productivity over time savings.

 

2. There are specific capacity problems that can be solved relatively inexpensively

The same survey noticed some specific problems within the overall 56% loading:

• There was a significant difference between trains making an extra stop at Milton Keynes (average loading 107%) and other trains. Milton Keynes trains appear crowded.
• The first trains after 19.00 (7 trains from 19.00 – 19.30) – when much cheaper off peak tickets are allowed – had higher loadings (average 67%).

On the WCML, there are problems of crowding on trains to Milton Keynes and Northants. This cannot wait until 2026 and can be solved at a cost of £243m through a grade separation at the Ledburn junction bottleneck.

The ‘fare cliff’ problem of high loading on the first off peak trains after 7pm also needs to be dealt with.

 

3. More urgent capacity problems elsewhere on the network should be the focus of investment

There are more urgent capacity issues: for example, some peak Reading to Paddington trains are at 200% loading.

The real capacity issue is around commuter trains into London from the South West and South. Some of these trains are also very slow.

There is also a capacity problem for commuters into Birmingham, which can be solved through four tracking and longer trains. Although this will cause some disruption this will be small compared to HS2 construction and total rebuild of Euston.

Investing so much in what are already our fastest and least crowded mainline services is a gross misallocation of resources.

 

4. WCML will not be full for many decades, if ever

WCML will not be full within the next ten years, despite claims by Government and Network Rail (NR):

1. NR use a misleading technical sense of ‘full’[2], and although both say it’s full, their own forecasts of rail demand do not support it[3].

• Government have re-based their demand forecasts (to 2011) to take account of the recent growth in rail traffic as a result of the massive service improvement that accompanied the completion of the £9bn WCML Route Modernisation and the December 2008 timetable – with faster more frequent services and the restoration of reliable weekend services.  But this ignores the fact that the growth was concentrated in the off peak services – which requires no additional capacity to accommodate it.
• If it were true that WCML were full then the rail alternatives would be the only way of developing capacity sufficiently quickly to accommodate extra demand without excessive crowding developing.

HS2 does not provide more capacity for 15-20yrs ie well after WCML is claimed to be full.

Given the very rapid increase in the use of Skype, webinars, web meetings, especially in Asian countries that already have much faster broadband speeds than the UK; the Government encouragement of telecommuting; and the arrival of holographic 3D virtual meetings[4], business travel may begin to decline and therefore the WCML never reach capacity.

 

5. Forecast growth is optimistic

Forecast growth is inflated by the DfT because they have avoided using the latest models, i.e. the lastest GDP forecasts and PDFH 5.0, both of which cut demand estimates.

Furthermore, the DfT forecast doubling of demand (which is required to attempt to justify HS2 and which has required several changes to dates to achieve) is optimistic.

• Population growth (19% to 2037) only accounts for less than one fifth of the doubling
• DfT admit total journeys by all transport modes are declining not increasing, with no increase per person in long distance domestic travel in the UK since 1995[5].  So growth in rail depends on a shift from other modes. But it is not credible that modal shift can just continue indefinitely.
• Rail may also grow by much less, as it relies on a relationship between economic growth and long distance domestic travel that for all travel modes collectively seems no longer to exist[6].

 

6. The ‘OA’ alternative to HS2 delivers more than the DfT (inflated) forecast

The 51m ‘Optimised Alternative’ (OA) to HS2 delivers more than DfT’s forecast long distance capacity requirement.

• The OA enables a tripling in capacity from a 2008 base, comfortably accommodating the Government forecast of doubling in demand to 2037.  The Transport Select Committee (TSC), Atkins (for DfT) and NR all accept OA is able to deliver this capacity[7]and NR confirm the illustrative timetable demonstrating its feasibility is sound
• The OA is entirely based on existing technology, unlike HS2.  With the same technological developments as HS2, there is the prospect of even greater capacity.

Despite this, Government, TSC and NR all claim that the OA does not provide sufficient capacity:

• TSC questions if it can meet peak demand, referring to the ‘recent dramatic growth’ in WCML as evidence – but as noted above this growth was in fact achieved predominantly in the off peak
• NR says it does not deliver the capacity needed for forecast growth in suburban demand
• Government observe that OA makes no contribution to inner suburban capacity into Euston[8].

But inner suburban demand was not the problem OA addressed, nor did Government’s own alternatives consider it.  It is a new issue raised because OA is overwhelmingly superior to HS2.  51m were not invited by NR to discuss their OA, and have since shown how it can meet commuter demand into Euston. No one would seriously suggest a new high speed railway just to relieve commuter overcrowding.

 

7. HS2 has capacity problems and is high risk

It is HS2, rather than the existing rail system alternatives, that has capacity problems:

• The HS2 trains serving places beyond the high speed network (on the existing network) have less capacity than those trains they replace[9]. This means that HS2 trains would be impossibly crowded with the additional demand induced by HS2.
• The Feb. 2011 consultation business case of 18 trains/hr was groundless.  An FOI investigation confirmed that the only documented assessment that HS2 Ltd had prior to consultation showed that 18 trains/hr was not possible[10].  HS2 Ltd commissioned their studies after the consultation began.
• The service pattern for the Y now assumes a maximum of 17 (not 18) trains/hr, and does not reduce off-peak (as previously).  This is because 2 trains/hr (each way) are planned for Heathrow, which carry few people, leaving an increased demand to be carried by fewer trains.  It is doubtful that such an intensive service could operate, or be reliable (due to an inability to recover from perturbations).

 

Furthermore, if rail demand doesn’t grow as predicted, as HS1 found (running at just over a third of forecast), then:

• Because HS2 is an all or nothing project, we would have a new railway running at a large loss, requiring an even larger subsidy for generations to come.
• In contrast, the alternatives can be implemented quickly and in stages, with more capacity only created – and paid for – if it is needed. It also addresses commuter overcrowding long before 2026.

 

I acknowledge with thanks the research from HS2 Action Alliance in preparing this document and the development of the ‘OA’ alternative by 51. Further information is available in our document “A Better Railway for Britain” available at www.betterthanhs2.org .

 

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[1] Customer Research Technology Ltd, 30.11.2011

[2] HofC Transport Committee, High Speed Rail, 10th Report of Session 2010-2012,Para 32, Page 19.  ‘Full’ is when, at certain times of day, it would not be possible to provide train paths for extra services which train operators wanted.

[3][3]  Network Rail forecast in WCML RUS; DfT’s forecast of doubling by 2037

[4] http://www.musion.co.uk/Cisco_TelePresence.html

[5] From the National Travel Survey, table NTS0307

[6] This is a development found in other developed economies.  Crozet in an OECD discussion paper observed:  ‘……In Germany, the UK, Italy and France, domestic passenger traffic has been more or less flat since the early 2000s.‘ ‘(The Prospects for Inter-Urban Travel Demand’, Y. Crozet — Discussion Paper 2009-14 —  OECD/ITF, 2009,  section 2.2)

[7] HofC Transport Committee Report, High Speed Rail, 10th Report of session 2010-12 pages 92/3; Network Rail’s Review of the Strategic Alternatives to HS2, November 2011, Section 2.3.3, page 17 and section 2.3.2 page 13; High Speed Rail Strategic Alternatives Study Update by Atkins, January 2012

[8] ‘The economic case for HS: Value for money assessment’. January 2012, section 10.11, page 24

[9] HS2 ‘classic compatible’ trains have 550 seats, compared to 600 on an 11-car Pendolino, 664 with 11 car, and about 649 for 10-car IEP trains.

[10] Work by Systra for Greengauge 2 (reported in October 2009), and a series of workshops documented by Greengauge 21 (‘High Speed 2 Interfaces’ July 2010) that DfT and HS2 Ltd attended, both of which show that a maximum of 15-16 trains per hour might be achievable, instead of the 18 trains per hour that was accepted without evidence by HS2 Ltd and their Technical Challenge Group in September 2009.

 

 

Campaign Director appointed to strengthen fight to stop HS2

7 February 2012 – The AGAHST Federation (Actions Groups Against High Speed Rail Two) has appointed Deanne DuKhan as Campaign Director with immediate effect. The role is full time and will strengthen the campaign and build on growing public and media opposition to HS2.

Previously head of the AGAHST Parliamentary Liaison Group, Deanne was appointed by and reports to a new Campaign Board which brings together AGAHST, HS2 Action Alliance, Stop HS2 and Transport Sense.

To allow for the growing number of action groups, AGAHST is now organised in regional groups, currently South and Central, with NW and NE forums to be added as the route to Manchester and Leeds is announced.

Jerry Marshall, Chair of the Campaign Board:

“Deanne is the right person for the next stage of the campaign, as we take new legal and political action. Momentum against HS2 is building and the new business case is even worse than before, with a net benefit ratio under 50p for every £1 invested when up-to-date information and assumptions are used. It is only a matter of time before Government comes to its senses and begins to invest in our real rail needs, create jobs and growth, and abandons this vanity project.”

Open letter to Justine Greening

12 January 2012

 

Rt Hon Justine Greening MP

House of Commons

London

SW1A 0AA

 

Dear Secretary of State

You said you would look at HS2 rationally. And yet you ignore your own department’s evidence that our alternative generates over £6 return for every £1 invested compared with under £2 return on HS2. Furthermore, half the stated benefits from HS2 are from the erroneous assumption that time is unproductive on trains, which your predecessor recognised was not the case.

Network rail also agree that our alternative meets HS2 Ltd demand forecasts and had to produce a new forecast to make the case.

Not so long ago you said with reference to Heathrow Runway 3:

“We have had a consultation, to which residents have responded overwhelmingly by saying that they do not want the plan to go ahead. Despite all those points, Ministers still seek to override people’s will. That is deeply worrying.”

Yet now as a minister you have completely ignored and buried the consultation response on HS2, which was massively against HS2 on every question.

In particular, on compensation, your predecessor promised that householders affected by a national strategic project would be fairly compensated. The consultation offered three options and response was overwhelmingly in favour of the property purchase bond. Yet you have offered the worst possible scheme, an extended hardship scheme that will leave thousands trapped in their homes until 2027.

You and your Government have engaged in the very worst of the “weasel words”, fiddling the figures and reneging on promises that have brought politicians into such contempt. This must be deeply disappointing for those MPs who are men and women of integrity and who seek to make rational decisions for the good of the country.

As country after country in Europe and Asia discover the folly of inappropriate, politically driven High Speed Rail projects, we will continue to work hard to inform the public, the media and your colleagues of this damaging and wasteful decision.

Yours sincerely

 

Jerry Marshall

Chairman, AGAHST Federation