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HS2 and rail subsidies

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According to the Department for Transport’s HS2 Financial Case (October 2013), HS2 operations “are expected to make a significant operating surplus on a standalone basis”.

[HS2 Financial Case, Oct 2013]

[…] The analysis concluded that after the introduction of HS2, the overall operating position to Government, in the reference case, would be an improvement in the annual subsidy/premium balance for railways. This is a benefit for the taxpayer. The analysis suggests it would generate an additional premium to the taxpayer of around £300m a year in the medium term once it reaches steady state, based on the assumptions in the Economic Case, including demand being capped in 2036-37. The analysis suggests this would be comprised of an operating surplus for HS2 services of around £2.8bn and an additional subsidy requirement for classic services of around £2.5bn (due to abstraction by HS2), in the reference case.

Neither the HS2 Financial Case nor any other of the October 2013 documents gave any explanation of how these figures were arrived at. Needless to say, disaggregated / standalone financial data for existing high speed rail lines is difficult to find. For example, France’s TGV network is part of the wider national system, and there is no way of ascertaining income and expenditure for individual services or lines.

Meaningful ‘national system’ financial performance is also hard to come by, but the Amtrak E-08-02 report (2008) found that “when all revenues and expenses for the entire passenger train system are taken into consideration, European Passenger Train Operations operate at a financial loss and consequently require significant Public Subsidies”.

There is no evidence to support the Department for Transport’s expectation that HS2 operations would make a significant ‘operating surplus’ on a standalone basis. It seems much more likely that the very high speed network would require substantial public subsidy. As is plain to see, the Department has not been willing to provide any details of the so-called HS2 operating surplus.

DfT

DfT letter about releasing details of projected HS2 and classic rail operating income and expenditure, page 1

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DfT letter about releasing details of projected HS2 and classic rail operating income and expenditure, page 2

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DfT letter about releasing details of projected HS2 and classic rail operating income and expenditure, page 3

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DfT letter about releasing details of projected HS2 and classic rail operating income and expenditure, page 4

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DfT letter about releasing details of projected HS2 and classic rail operating income and expenditure, page 5

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Written by beleben

June 10, 2015 at 9:29 am

Posted in HS2, Politics

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