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Step through the obfuscation

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In a letter to Andrew Tyrie MP dated 23 January 2017, transport secretary Chris Grayling stated that if the ‘demand update’ were removed from the calculation of HS2 benefit-cost, the ratio would not fall to 1.1, because the ‘impact of the other changes made when updating the analysis, would be dampened’.

[Chris Grayling’s letter to Andrew Tyrie]

You say that if the demand update were to be removed the BCR for the scheme would fall to 1.1, referring to the step through provided in Figure 1.2 in the latest version of the economic case. However, this would not be the case. Removing the demand update would significantly dampen the impact of the other changes that were made when updating the analysis, so the impact would be significantly smaller than the bar might suggest. In practice this is a rather academic point, given it would ignore the strong growth in long distance rail journeys observed over the last few years.

However, Mr Grayling’s statement seems to be at odds with the ‘step through’ in the phase 2b economic case (below).

DfT, HS2 outline economic case, phase 2b

Diagram from DfT’s HS2 outline economic case for phase 2b, Nov 2016

That diagram presents the effects of the demand update as ‘freestanding’, and as such, removing the update would reduce the assessed BCR by 1.6. Perhaps unsurprisingly, there is no quantification in Mr Grayling’s letter as to what ‘significantly dampen‘ actually means.

Letter from the SoS for Transport to Andrew Tyrie MP about HS2 demand, 23-Jan-2017

Annex to the letter from the SoS for Transport to Andrew Tyrie MP about HS2 demand, 23-Jan-2017 (page 1)

Annex to the letter from the SoS for Transport to Andrew Tyrie MP about HS2 demand, 23-Jan-2017 (page 2)

Annex to the letter from the SoS for Transport to Andrew Tyrie MP about HS2 demand, 23-Jan-2017 (page 3)

Whether annual long distance rail demand is rising at 2%, 3.7%, or 5.5%, is rather less important than Mr Grayling might imagine. That is because:

  • Long distance rail volumes are not very large.
  • The crowded bits of the rail network are mostly the approaches to London, on which most of the traffic is short-distance commuting.

On those approaches, a 2% increase in commuter passengers would, in general, represent a bigger real volume increase than a 5% increase in intercity passengers.

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Written by beleben

May 6, 2017 at 11:22 am

Posted in HS2, Politics

2 Responses

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  1. Extract from Andrew Tyrie MP’s letter of 4 January 2017 to the Transport Secretary:

    ‘The largest impact to the benefit-cost ratio for the full HS2 network comes from more recent outturn demand data from 2011 to 2014 …. without this latest data, the business case suggests that HS2 is scarcely worth the candle.’

    Michael Wand

    May 6, 2017 at 11:57 am

  2. A very important factor contributing to high growth is the TOC’s desire to make more money by selling off surplus capacity at low prices. In a recent press release http://www.mynewsdesk.com/uk/virgintrains/pressreleases Virgin said the increase in demand for travel between Glasgow and London
    “coincided with punctuality reaching its highest ever level since privatisation and the introduction of Virgin’s revolutionary new onboard entertainment streaming service, BEAM. And an increase in availability of £30 fares between Glasgow and London has been credited with driving more customers choosing train over plane on the route.”
    How much surplus capacity does HS2 create? Is HS2 viable with £30 fares? Will business travellers be tempted by onboard entertainment? Shouldn’t we invest in making journeys more reliable and frequent rather than aiming for ridiculously high maximum speeds over short distances? Will saving 30 minutes by cutting out all but one intermediate stop at Preston attract enough people from planes to justify the HS2 offering? I trust Virgin know the answers.

    johnma

    May 6, 2017 at 3:14 pm


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