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Michael Heseltine and HS2

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In The Independent, Michael Heseltine was reported as saying HS1 had attracted '£10 billion of private development around the new station sites at Ebbsfleet (in north Kent), Stratford (in east London) and Kings Cross'The cost to taxpayers of Britain’s first high speed rail line north of London could be ‘cut by up to £10 bn – around a third of the budget – under proposals that are to be examined by ministers’, the Guardian reported.

[‘HS2 cost could be cut by one-third under private sector concession plan’, by Nicholas Watt, chief political correspondent, The Guardian, 12 Nov 2013]

In a move that would smooth the way for Labour to offer wholehearted support for HS2, the transport secretary Patrick McLoughlin is to study plans to raise extra private sector funds by selling a 30-year concession on the high speed tracks.

The proposal, to be outlined by the former Tory deputy prime minister Lord Heseltine in a speech on Tuesday night, could raise up to £10bn in private funds towards the £42bn cost of the project, which includes a contingency reserve of £14.4bn.

[…]
The former deputy prime minister will ask: “Why does the government need to hang onto the track? We have a clear precedent. This government sold a 30-year concession in 2011 for HS1 to a Canadian pension fund for £2.1bn.

“I understand that at the same ratio, something in the order of £10bn could be realised for a similar concession on HS2. Sir David Higgins, the incoming chair of HS2, has been asked to report on how to reduce the £42.6bn cost. He should consult appropriate institutions about the financing of the project in part during construction in order to ensure their participation in the long term concession. He should also explore the possibility of accelerating the whole project thus offering further savings.”

The concession would award a lease over the tracks, which would then earn revenue from the rail operators.

The Heseltine scheme would not lead to upfront savings to the taxpayer. It would lead to eventual savings after the line has been built.

The cost estimate for HS2 is £50 billion; trains are not optional, and one way or another, would have to be paid for. The “Heseltine scheme” to accelerate HS2 construction would increase costs to the taxpayer, not decrease them.

As with HS1, HS2 operation would require ongoing public subsidies. Without subsidy, no HS2 trains would run. So the value of a 30-year HS2 lease to a private buyer is dependent on guaranteed ongoing subsidies from the taxpayer to support operation of the line. Without guaranteed income from Southeastern subsidies, the HS1 lease would have been effectively worthless.

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Written by beleben

November 12, 2013 at 1:17 pm

Posted in HS1, HS2

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3 Responses

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  1. To simply lump in the cost of rolling stock in with the infrastructure is very, very misleading as it will effectively replace existing trains on some services, reduce the need for extra conventional rolling stock and could allow cheaper replacements in future. The size and exact cost of the fleet is also likely to be determined by whoever operates the trains, likely the private sector, who based on current practice will also fund them. HS2 treats the cost of rolling stock no differently to Thameslink, Crossrail or any other similar project – you can’t just re-write the rules to inflate the cost of the project.

    Chris

    November 12, 2013 at 2:33 pm

    • For any given course of action, costs have to be compared against benefits.

      There can be no doubt that the cost of rolling stock needed for HS2, is part of the cost of the HS2 scheme.

      And it could be argued that if additional WCML commuter trains to Milton Keynes count as a benefit of the HS2 scheme (it is, in the Strategic Case), the cost of that additional commuter rolling stock should be included in HS2’s overall expenditure (it isn’t, in the Strategic Case).

      Clearly, the cost of rolling stock for a package like Rail Package 6 is part of the cost of Rail Package 6. However, [1] the cost of trains for RP6 is bound to be much lower. 250 km/h trains are cheaper to buy and run, than 400 km/h ones. That is why Deutsche Bahn’s ICx trains are being designed for a maximum of 249 km/h.

      Other reasons why HS2 would result in higher rolling stock costs: [2] the large quantum of generated journeys, and [3] the duplication of half-empty carriages between London and Yorkshire, etc, in the off-peak.

      beleben

      November 12, 2013 at 3:11 pm

  2. […] Part one […]


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