UK thinktank issues scathing report on HS2

The Institute of Economic Affairs, an independent free market thinktank, has accused the UK government’s flagship £33bn High Speed 2 rail project of ‘flawed economics’ as well as having many other fundamental weaknesses.

The title of the report hints strongly at its content: “High Speed 2: the next government project disaster?” And, indeed, the Institute of Economic Affairs (IEA), an independent free market thinktank, has pulled no punches in its assessment of the UK government’s planned £33 billion (€37 billion; $53 billion) High Speed 2 (HS2) rail project linking London with Birmingham in the Midlands, and Leeds and Manchester in the North.

The report claims that policymakers in favour of HS2 are making their case based on false economic assumptions. For example: “Huge government subsidies on the existing rail network mean that prices and demand levels are severely distorted”. And: “Estimates made by the government of demand growth are very optimistic. The long timescale involved also adds to the uncertainty”.

As an example, the report points to a claim in the Department for Transport’s Command Paper that demand for HS2 would be 267 percent higher by 2033. But, in a more recent Economic Case, it was said that this demand level would be reached 10 years later in 2043.

Other accusations made in the report include “exaggerated time savings”, “fraudulent green credentials” and “false regeneration claims”. On the latter point, for example, the report says that “alleged benefits must be set against the wider economic losses from the additional taxation required to fund HS2”.

Report co-author Dr Richard Wellings, a deputy editorial director at the IEA, says in a statement: “High Speed 2 is another political vanity project – like Concorde and the Millennium Dome – being ploughed ahead with with complete disregard for properly thought-through commecial prospects or the mounting opposition to it.”

He adds: “Proceeding with HS2 plans is a recipe for disaster and, as always, it will be the forever-embattled British taxpayer who will end up footing the bill for this latest white elephant.”

The report demonstrates the tendency for HS2 to polarise opinion, with lobbying groups both in favour of the project and against it both making their voices heard. The Campaign for High-Speed Rail website says the government’s “conservative” business case suggests £43.7 billion in net benefits compared with £17.1 billion in net costs and that “this doesn’t take into account many other wider economic benefits that are harder to quantify”.

The Department for Transport’s consultation process on HS2 runs until 29 July, with a formal decision on whether to proceed with current plans to be made later this year.

Towards the end of last month, it emerged that the government was considering leasing the rail line to the private sector one year after it is completed. While construction of the line would be on the government’s balance sheet, the private sector would be called upon to help fund stations.

HS2 is not expected to start construction until 2017. The first stretch of the line is expected to cost £17 billion, and would connect London to Birmingham. The full scheme is not expected to be up and running until 2026.