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Is High Speed Rail good for Britain?

Proposals for Britain’s high speed railway (HS2) were announced a few weeks ago. We decided to wait and see what the reaction would be. On the whole, the proposals have generated little enthusiasm outside the railway press, with the commonest view being that the investment would be better spent on improving the railways we have already got. Predictably, there has been opposition from NIMBYs in the Chilterns, where the line will pass through and under some of the more salubrious and well-heeled areas.

The HS2 planning team has done a good job, with a route that exploits existing alignments where possible and an interchange in West London so that passengers can avoid going into the centre if they don’t have to.

Advocates claim that HS2 will cost little more to construct than a conventional railway and that upgrading existing lines is not an option since it is disruptive as well as being nearly as expensive. The huge cost over-run for the West Coast Main line upgrade is cited as an example of what not to do again.

However, other costs of a high speed railway are greater – rolling stock, signalling, energy, wear and tear. Doing 200mph consumes four times the energy than going at half the speed. Specially built trains will be needed, instead of ordinary ones. The existing fleet of perfectly good older stock, which has long since been bought and paid for, cannot run on HS2. All these things must be reflected in the fares, which will be at premium rates.

Higher speeds yield diminishing returns. Accelerating from 50mph to 100mph saves 2 hours on a 200 mile journey, but the next 50mph increase wins only 40 minutes. And those time savings are often theoretical. On a high speed railway, every seat must be filled at the maximum possible fare. Charges for “open” tickets will be extortionate, and anything cheaper will be tied to particular trains. People with these bargain tickets will want to turn up long before departure time to be sure not to miss their journey. A slower turn-up-and-go service would be quicker for them. And because the seats in the high speed carriages must be tightly packed in to cover the high cost of the vehicles, the slower train will be more comfortable.

Paying for it
The promoters claim that the economic benefits will amount to over three times the cost. Ultimately, however, any economic benefits, and disbenefits, end up in land values. A high speed railway may enhance land values around the places where the trains stop, but it reduces them all along the route, where property is adversely affected by noise, disturbance and severance. Landowners who lose out will have to stand the loss and the winners will take the gains. If there is an overall increase in land value, there is no direct mechanism whereby the exchequer can recover the value created by the taxpayers’ investment.

Is high speed rail right for Britain? How best to spend those £billions? The decision for HS2 seems to have been made on the starting assumption that Britain ought to have one. Nobody seems to have attempted to look at the costs and benefits of other possible options, such as putting the funds into local transport, or building, for a much smaller investment and risk, a brand new conventional railway with additional stops and running at normal speeds, perhaps on much the same route as HS2. Or if they have, nothing seems to have been published on the subject. It is not good enough.

Aggregate land value changes are probably the most comprehensive way of determining the economic costs and benefits of an infrastructure project. Unfortunately, forecasting techniques for land value changes are poorly developed because economists tend to omit land and its value from their models. Like so many investment decisions, this is being made in the dark.