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Changes to HS2 plans to appease project opponents could almost double costs, says think tank

Out-Law News | 20 Aug 2013 | 9:10 am | 3 min. read

The cost of design changes and additional infrastructure to appease opponents of the Government's proposed national high speed rail link could push the cost of the project up by an additional £30 billion, an economic think tank has claimed.

In a new report, the Institute of Economic Affairs (IEA) said (60-page / 728KB PDF) that the estimated £43bn cost of High Speed 2 (HS2) did not take into account the cost of new trains, additional infrastructure to support the new line and design changes to keep the route away from areas where there is particular opposition.

The group, which previously published a report opposing the project as "economically flawed" in 2011, said that the Government should abandon its plans and instead concentrate on upgrading existing road and rail infrastructure.

"It's time the government abandoned its plans to proceed with HS2," said the report's author, Dr Richard Wellings. "The evidence is now overwhelming that this will be unbelievably costly to the taxpayer while delivering incredibly poor value for money."

However, infrastructure expert Patrick Twist of Pinsent Masons, the law firm behind Out-Law.com, questioned the reasoning behind the IEA's £30bn figure.

"The IEA has a long-standing antipathy to public sector investment in infrastructure and to rail in particular; it has previously suggested that the money for HS2 could be better invested in 1,000 miles of motorway, to be paid for by tolls - an approach that would undoubtedly stir up far greater opposition than HS2 ever could," he said.

"Its criticism of the HS2 project is nothing new, but this latest attack seems to rely even more than usual on assertion rather than evidence. It fails to demonstrate where the figure of £30bn comes from, as it effectively concedes. This figure is attributed in the report to transport schemes linking to HS2, yet elsewhere in the report they concede that such schemes will probably never be built," he said.

The initial London to Birmingham phase of HS2 is scheduled for completion in 2026, and will cut journey times between the two cities to 45 minutes with trains running at up to 250 miles per hour, according to the Government. A proposed second phase of the project envisages the construction of an onward 'y network' connecting the line to Manchester and Leeds, as well as a spur to Heathrow Airport, by 2033.

New legislation which will allow development to begin in 2017 will be introduced to Parliament later this year, following the announcement of the High Speed Rail (Preparation) Bill as part of the Queen's Speech. If approved, the Bill would allow for quicker construction and design expenditure. It would also give Parliamentary authority for ecological surveys and other preparatory work to take place, and allow for compensation payments to property owners living along the route.

According to the IEA, Government estimates of the costs and benefits of HS2 "suggest the schemes are poor value for money compared with alternative investments in transport infrastructure". Both HS2 itself and its 'add on' transport schemes will be "heavily loss-making in commercial terms", suggesting that the decision to build the project has been a political one and partly the result of lobbying by city councils, engineering firms and other special interests, it said.

"Ministers appear to have disregarded the economic evidence and have chosen to proceed with the project for political reasons," the report said. "An analysis of the incentives facing transport policymakers provides plausible explanations for their tendency to favour a low-return, high-risk project over high-return, low-risk alternatives."

"A group of powerful special interests appears to have had a disproportionate influence on the government's decision to build HS2. The high-speed-rail lobby includes engineering firms likely to receive contracts to build the infrastructure and trains for HS2, as well as senior officials of the local authorities and transport bureaucracies that expect to benefit from the new line," it said.

As well as an additional £30bn to cover new roads, tram lines and road upgrades to connect to the route, extra tunnels and other design changes to "buy off opposition" and the cost to the taxpayer of regeneration schemes around new stations and in towns along the route, the IEA said that current estimates did not include the cost of new trains to run on the line. These would cost another £7.5bn, bringing the total cost of the project close to £80bn, it said.

Infrastructure expert Patrick Twist said that the IEA was "quite right that money spent improving local transport so as to maximise the benefits of HS2" would fall outside of the project's budget. However, he said that that was not a reason for this additional investment not to go ahead.

"The real waste would not be making this investment, but rather failing to ensure that the benefits of HS2 are fully captured by linking it into an integrated transport network," he said.