Accounts Committee tells Government 'to revisit its assumptions on HS2'
6 July, 2012 – The Public Accounts Committee has reported on the sale of HS1 and identified serious issues on the debt, the forecasts used and other assumptions that also expose weaknesses in the case made for HS2. The Report tells the Department for Transport to revisit their assumptions on HS2 and develop a full understanding of benefits and costs of High Speed travel compared to other alternatives.
Hilary Wharf, Director High Speed 2 Action Alliance (HS2AA) says “The fact that over-optimistic and unrealised forecasts for passenger demand on HS1 has left us with a £4.8bn debt – likely to be over £10bn by 2070 – is bad enough, but that lessons have not been learned for HS2 and errors are being repeated with much bigger numbers and greater debt is wholly unacceptable”
“We welcome the recommendations of this Committee that calls for DfT to rework its business case using more realistic assumptions.”
“We see three clear messages for HS2, that Margaret Hodge, Chair of the Committee, identifies:
1. On forecasting: that the root of the problem for HS1 was the ‘inaccurate and wildly optimistic forecasts’ of passenger numbers, with just a third of the original forecast being achieved. And for HS2, DfT’s ‘unrealistic assumptions about ticket prices’ (that do not assume a premium price) are exaggerating the passenger demand forecasts. It therefore calls for a rework of the HS2 forecasts and Benefit Cost Ratio (BCR).
2. On time saving benefits: that some of DfT assumptions about benefits of faster travel are ‘simply untenable’, in particular the ‘simplifying’ assumption that all time spent on trains is assumed unproductive. This skews appraisals in favour of long distance transport. It calls for more work to be done to get it right.
3. On alternatives: that there is insufficient understanding of the regional impacts of alternative infrastructure investments, such as transport compared to high speed broadband. It calls for more evaluation of alternative options (including local rail) and urgently developing a full evaluation framework for major projects.
“We support the need to re-look at the pricing assumptions. Pricing clearly affects demand – if premium prices are assumed one might expect far fewer new passengers (that currently account for 24% of HS2 passengers) or less modal shift (11%). On top of that the £7bn saving assumed for existing services will be under threat if more people choose not to switch to HS2.”
“Yet again we have a report that says the DfT have got it wrong on how they value time saving benefits. People do work on trains. And this is distorting the decision making process in favour of long distance rather than regional rail improvements. They call for more research yet DfT for 2 years sat on the research they had commissioned that embarrassingly no doubt told them to halve the value being used, as our recent advertisement shows”.
“HS2 is a hugely expensive project and its clear the Public Accounts Committee believes DfT needs to go back to the drawing board. It’s very encouraging to see the Committee agree with so many of the points we have been making.”
Note for editors:
HS2 Action Alliance is a national organisation making the powerful case against HS2. It is a not for profit organisation working with over 70 local groups, who believe HS2 does not represent an effective answer to the UK’s transport, economic or environmental needs. They have undertaken detailed evaluations of the business case for HS2. The latest update is on the website. A series of advertisements have been published highlighting the ever diminishing business case, the alternatives and most recently some hidden reports.
The Public Accounts Committee (PAC) has been highly critical of the HS2 business case and the assumptions it includes around passenger forecasts and projected costs. HS2 was given an Amber/Red grading by the Cabinet Gateway process with the Major Projects Authority. The Chair of the PAC described this as “not good enough”.
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