23 Nov 2012

Greengauge forecasts HS2 boost to regions

Pro-HS2 research group Greengauge 21 says it thinks the rest of the country will benefit more than London from the high-speed link. In its evidence to the Independent Transport Commission, the organisation cites better connectivity to the ‘gateways for global commerce’, the main international airports and also the Channel Tunnel for access to the European HSR network.

This prediction is a statement of faith more than anything else. What counts are door-to-door journey times. I am sceptical whether HS2 is the best way of achieving wothwhile improvements, as it is the local networks that are just as important. One reason for the appeal of the south-east is its proximity to Europe by road, which is the most frequent freight mode.

Improved rail services could help to relieve the motorway network by taking some traffic off. Improved intermodal freight would help the north somewhat. The simplest way of rebalancing the UK economy would be through the tax system, so that it favoured areas of disadvantage, with a bigger contribution coming from areas of geographical advantage.

These things tend to balance out anyway as rents and house prices reflect the advantage of location. If HS2 really does what its supporters claim, it will push up commercial rents and house prices away from the London area, thereby making it a giveaway to property owners at the expense of the taxpayer.


  1. Greengauge21 and their reports should be laughed out of the room. Despite claims of independence the entity's entire raison d'etre is the promotion of any high speed rail development in the UK. That organisation's slavish representation of any information as positive evidence towards the need for high speed lines in the UK is an insult to intelligence.

    One part that stood out for me was the claim that a high speed line will have a greater benefit to 'the provinces' (and reduce the north-south divide) since - according to their argument - the benefits of being connected to London does not apply to London - therefor London benefits less.. (pages 10 and 11).

    quote "So on balance, the accessibility and connectivity gains that HSR brings might be expected to help stimulate development and the economies of the provinces proportionately more than London, since some of the beneficial effects do not apply to the capital."

    This is insane, and the same level of logical reasoning that was used in the middle ages to ascertain witchcraft ("if she floats..")

    Another claim is that "Lille benefitted from being a HSR hub station, and secured major advantages in redevelopment terms" (page 11) - no evidence given for this broad claim - though the claim is so often repeated perhaps it is true. In reality unemployment in Lille is around 15%, essentially unchanged from 1990 before the line was built. There has of course some changes in Lille over the last 20years - not least the construction of a shopping centre associated with the new train station. There's little evidence of any benefit beyond the obvious employment caused by such a development. One report states that 90% of business reported no change from the TGV. see "ITF Round Tables The Wider Economic Benefits of Transport" (R. Vickerman, pub. OECD, 2008).

    A real world financial comparison is HS1 - cost to build £5.8bn, leased for 30 years for £2.1bn - that corresponds to a dividend of 1.2% per year. I'm not aware of any other benefits to an investor arising from HS1. These are real "cost to benefit ratios" that can be confirmed from real world balance sheets. Lets assume HS2 is 4 times more succesful than HS1 - that's a CBR of 5p in the pound over a 30year period..

    1. The lease of HS1 means that at the end of the lease it has to be returned in the state that it was leased in. Therefore the value of HS1 does not decrease over the 30 year lease, and in fact is likely to go up as more services use it. Which means that at the end of the lease the owners of the line can lease it out again for another 30 years having almost repaid the construction costs and will have not had to carry out any maintenance themselves.

      Also if the highspeed line to Lille had not been built how do you know that unemployment wouldn't have risen between 1990 and 2010? Given the 1990 unemployment rate for France as a whole was 9.0% whilst the rates for the last three years are 9.8% (2010), 9.7% (2011) and 9.9% (2012) essentially 9% higher than the 1990 rate, it could be argued that Lille would have seen a higher unemployment rate (maybe above 16%) if it was not for the highspeed line.

    2. That is conjecture. The construction of high speed lines should not be judged on its ability to reduce unemployment. The causes of unemployment are another matter and the cure is another thing again, but political parties are mainly concerned to keep it lower than the point at which there is social unrest. Otherwise they don't really care.

    3. I have to pick up on the fuzzy thinking in the anonymous comment above - it is true that after the 30 year lease the line can be re-let (or whatever) - this is why I made the comparison with a dividend on an share investment

      but - it is not true that "[it has] almost repaid the construction costs" - I stated the figures pretty clearly - after 30 years £5.8bn - £2.1bn will remain unpaid - or £3.7bn - over 60% unpaid. How people can delude themselves in so close proximity to the facts is a mystery.

      As regards unemployment - I said "around 15%" ie approximately - unemployment has risen from 1990 to 2006 - by 0.6% - over the same period unemployment in France as a whole rose less 0.5%. This is an excellent example of someone attempting to claim that HSR has a benefit - when the plain facts show nothing of the kind - like some sort of drug - reality flies out of the window.

      So - unemployment rising at a higher rate than the national average - in a city with HSR - but this fact will be ignored - there will be mitigating factors - as ever - stated without evidence - that show otherwise. I've got used to it..

  2. "it will push up commercial rents and house prices away from the London area, thereby making it a giveaway to property owners at the expense of the taxpayer."

    That is as maybe, until the property is sold (stamp duty), rented (income tax/corporation tax), lived in (council tax), and so on.

    At which point the government receives extra income, meaning there is some benefit to the government, although not as much as the property owners (although many owner occupiers will not really see much benefit, unless they sell and move to a cheaper area).

  3. The government indeed receives a little bit of extra income when properties are sold or a UBR revaluation takes place. But most of the external value of infrastructure ends up in landlords' pockets and not with the business who are intended to benefit from these projects funded at taxpayers' expense.