HS2 Questions

Examining the issues around the proposed High Speed 2 route

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

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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 


Written by hs2questions

July 3, 2012 at 11:30 am

Posted in Uncategorized

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