die belebende Bedenkung

Opportunity costs of HS2

with 2 comments

Economics students will mostly be familiar with the idea of opportunity cost: ‘The cost of an alternative that must be forgone in order to pursue a certain action, or the benefits you could have received by taking an alternative action.’

Given the scale of the funding required, it’s apparent that High Speed Two (£17+ billion for phase one alone – just between London and the West Midlands) would crowd out other public transport schemes. Unlike HS2, these schemes would benefit the whole of the country.

Put another way, the opportunity costs of HS2 are immense.

What could be funded with £17,000,000,000?

Although HS2 wouldn’t go anywhere near south Wales, Jim Steer, of high speed rail lobbyists Greengauge 21, claimed

“When you hear about the debate about Heathrow and its connection to High Speed 2, then if there is a station at Heathrow that is a fantastic opportunity to give you a lower cost network to Bristol and South Wales.”

The £17 billion for HS2 phase one doesn’t even include the cost of a station at Heathrow; in 2010, the cost of routeing HS2 into Heathrow was estimated at £2 to £4 billion extra – which is more than the estimated cost of electrification all the way from Swansea to London.

Mr Steer also claimed that for north Wales,

“There is no reason why you couldn’t operate trains on a route to the north-west on the North Wales coast,” he said. “It is not going to be the best return, but it is worth putting your hands up for it.”

and for central Wales

“It is perfectly feasible to look at operating trains on the West Coast mainline and onwards to say Wrexham, or even Aberystwyth. Those are not ludicrous propositions and they can be facilitated through HS2.”

All of which, of course, is absolute drivel. Big fixed-formation HS2 ‘classic compatible’ trains are not going to be a viable proposition on Crewe to Holyhead, or the Midlands to Aberystwyth. If HS2 is funded, there’d be precious little money left for any transport improvements within Wales.

Building high speed rail lines cannot itself alter the economic competitiveness of a particular area. For example:

  • Naples has a high speed rail line to Rome, and northern Italy. But it hasn’t turned the Mezzogiorno into Europe’s boom region.
  • Thanet, in Kent, remains one of the most depressed areas in England, although it’s served by direct High Speed One services to London.

2 Responses

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  1. High Speed 1 services are underperforming to such an extent that SE Trains was authorised to increase their fares by 2 percentage points more than the other TOC’s.

    Curiously the low speed local rail links such as Edinburgh-Bathgate, Stirling-Alloa, Valley Lines Cardiff exhibit the reverse tendency by wildly exceeding the estimates for use – often within a few months of opening. Perhaps it is because they deliver journeys between places people want to be and connect well with the existing rail network?

    Dave Holladay

    February 13, 2011 at 12:33 am

  2. […] economists like riding high speed trains, but can’t come up with a lot of economics to back that up, wrote BBC Newsnight’s Stephanie Flanders (16 May […]

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