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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