More concentration in London

Construction of the HS2 Y network would result in a migration of corporate decision-making away from the north of England, and increased concentration of managerial jobs in London, if French microeconomic research is to be believed. The findings, by Pauline Charnoz, Claire Lelarge and Corentin Trevien, are to be presented at the Royal Economic Society’s annual conference in Bristol in April 2017.

Going loco for Toto at lo-lo

HS2 Ltd chairman David Higgins has a ‘vision’ of people travelling to a new city around Toton parkway, at budget airline-style ‘lo-lo’ prices.

[‘Next arrival on the HS2 line: a brand new city’, Mark Hookham, The Sunday Times, 12 Feb 2017]

“Check every Eurostar — it’s always packed. You know why Eurostar is packed? It’s because it’s run on a Ryanair/ easyJet model,” he said.

However, the vision is not shared by Toton’s MP, Anna Soubry.

Anna Soubry MP described David Higgin’s Toton ‘vision’ as irresponsible nonsense

Is Eurostar always “packed”?

And is it run anything like a low-cost airline?

The Eurostar service depends on billions of pounds of dedicated high-cost infrastructure (i.e. HS1, the Channel Tunnel, and LGV Nord), which means that commercial ‘low-cost’ operation is not possible.

Although Eurostar managed to take a large part of the Paris and Brussels travel market from airlines, that was only possible because of public subsidies running into billions of pounds.

In an interview with The Sunday Times, Mr Higgins predicted that a new city coud be built around the Toton HS2 station.

[‘Next arrival on the HS2 line: a brand new city’, The Sunday Times]

[David Higgins:] “You’ve got two big cities either side of it [Toton HS2]. You’ve got a big university within a very short distance. It will be well under an hour to both London and Leeds. So this is a city.”

Were HS2 to offer travel to ‘a new city’ at Toton at ‘lo-lo prices’ – assuming space for a city could be found – there would be a need for enormous subsidies, to cover HS2’s high fixed infrastructure costs.

Eurostar, terrorism, and Brexit

Cross-channel train operator Eurostar is looking to reduce headcount as it struggles with weak demand on its services in the wake of deadly terrorist attacks in France and Belgium.

[Eurostar aims to cut 80 jobs as traffic suffers after attacks, Reuters, 18 Oct 2016]

The company could not confirm British media reports saying Eurostar would cut two daily trains to Paris and one to Brussels when it unveils its 2017 timetables in December, the spokeswoman said.

“Nothing has been finalised yet,” she said. “We’re looking at all the different options.”

“But we are offering voluntary redundancies, that’s true. We are looking at cutting 80 jobs this year,” she added.

Eurostar introduced new, bigger trains last year, with more seats, which means the reduced number of services may not have an impact on the total seat capacity between London and the continent, British newspaper the Independent said last week.

In July, the train operator, majority-owned by France’s SNCF, reported a 3 percent drop in passenger numbers in the second quarter compared with the same period last year, while revenue fell 10 percent.

Britain’s decision to leave the European Union has also taken its toll, Eurostar has said.

On 13 May 2009 the European Commission approved £5.169 billion of “one-time” UK state aid ‘for the high-speed rail link service between London and the Channel as well as the restructuring of Eurostar’. Despite that massive bailout, and the ‘restructuring’ of track access charges, there must be increased doubts about whether Eurostar, in its present form, is what accountants call ‘a going concern’.

Still feel good

The Treasury would probably like you to believe that the government’s sale of Eurostar last year was a marvellous result for the taxpayer, wrote James Moore.

[The Government needs to work on its sums when selling off state assets, James Moore, The Independent, 20 January 2016]

[…] Last March it agreed to offload the state’s 40 per cent stake for £585m. A further £172m was brought in through the redemption of preference shares, netting £757m for the cash-strapped Exchequer.

But here’s the first problem: the House of Commons Public Accounts Committee (PAC) believes that sum represents only a fraction of the taxpayer’s investment in the business and the high-speed rail link between London and the Channel Tunnel (known as HS1). The National Audit Office says UK taxpayers have spent £3bn on these services.

[…] That could only be considered a good return by people who’d put money into the banking industry before the financial crisis struck. Still feel good about the forthcoming high-speed rail link between London, Birmingham and the North (HS2)?

Javelins between Eurostars

In a Rail Engineer article, HS2 Ltd’s Andrew McNaughton explained how the Channel Tunnel Rail Link’s operating model depended on inefficient capacity utilisation.

[HS2 – The story so far, Nigel Wordsworth, The Rail Engineer, 9 Nov 2015]

[AMcN:] “You can smuggle Javelins between Eurostars because there aren’t many Eurostars, there are big gaps in the service and it’s a very short distance,” explained Andrew. “You’ve only got from Ebbsfleet to Ashford that they have to get along where they’re going slower than Eurostars. The route out to Ebbsfleet is only 230km/h so they’re basically running at the same speed as the Eurostars out through the London tunnels. The faster bit of the route is only between Ebbsfleet and Ashford.”

Unexplained comment deletions on The Rail Engineer story ‘HS2 the story so far’

What were the objectives of HS1?

In 2012 the House of Commons Public Accounts Committee criticised the Department for Transport’s failure to evaluate the Channel Tunnel Rail Link (High Speed 1). Last week, the ‘First interim evaluation’ of the railway was finally published on the Department’s website (Atkins main report | Atkins appendices | Oxera peer review).

[Atkins HS1 First interim evaluation (extract), published on 15 October 2015]

[…] HS1 is a large and complex investment in transport infrastructure so careful specification of what was being evaluated and the counterfactual with which it should be compared was an essential first step in this evaluation. […]

The HS1 Scheme was defined to include:

* A new 109km high speed line connecting St Pancras International in London to the Channel Tunnel at Ashford in Kent (Section 1 opened September 2003; Section 2 opened November 2007);

* New / improved high quality station environments at St Pancras, Stratford, Ebbsfleet, and Ashford, with additional parking and retail provision;

* Re-routing of Eurostar services to the Continent via the new high speed line, instead of utilising existing routes from Waterloo to the Channel Tunnel. This includes an additional stop at Ebbsfleet; and relocation of the international London Eurostar terminus from Waterloo to St Pancras;

* Domestic high speed trains (Class 395) and high speed services to North and East Kent, with associated premium fares;

* A major revision of the Southeastern timetable (December 2009) relating to the classic network (Mainline and Metro Services), and increased fares across the Southeastern network; and

* New high speed rail freight capacity between London and North and South Kent.

As the main aim of this evaluation was to measure the value for money of the investment in HS1 the counterfactual was defined as a hypothetical scenario where no alternative investment to HS1 was made to deliver the objectives for the scheme. This counterfactual was developed for the purposes of this evaluation, and does not necessarily correspond to the counterfactual as understood when the decision to invest in High Speed 1 was made. It has been applied consistently to the assessment of Transport User Benefits, Wider Economic Impacts and Regeneration Benefits. This could be considered an unrealistic assumption; however it was adopted to ensure that the evaluation included the full costs and benefits of HS1. If the assumption had been made that some “do minimum” type investment would have been made in rail capacity along the corridor served by HS1 then the costs taken into account would have been reduced by the cost of this alternative investment, and the benefits taken into account would have been reduced by the benefit of this hypothetical alternative to HS1.

But what exactly were “the objectives for the scheme”? The report doesn’t appear to say. The objectives, such as they were, seem to have been formed after the decision to build had been taken.

Atkins HS1 October 2015 evaluation report: ‘The comparison of estimated monetary values of the costs and benefits of the scheme over the appraisal period provides a central case BCR of less than 1’

What the report does say, is that the HS1 project has a computed ‘central case’ net present value of minus £5.9 billion, with ‘wider impacts’ excluded. Including WEI, the computed NPV is -£4.57 billion.

The case for Midland Main Line electrification

At the time of writing, Network Rail’s website states that, by 2020, the Midland Main Line will be electrified [from Bedford to Sheffield and Corby] and [its] rail bottlenecks removed, improving capacity.

Network Rail’s information on the Midland Main Line improvement programme, viewed June 2015

According to Network Rail, the benefits of electrification are:

[Network Rail]

More capacity for passenger and freight traffic to keep pace with the growing demand for rail.

Improved reliability and performance as we modernise the route using state-of-the-art technology.

Longer, faster and quieter trains and quicker journeys.

Environmentally friendly – greener trains mean the carbon footprint is reduced by up to 11,000 tonnes, equivalent to annual greenhouse gas emissions from 1,828 passenger vehicles.

Stimulating and supporting economic growth as we connect the region’s biggest economies.

However, as with the Great Western, there is very little quantitative information available about Midland electrification, and it does not seem to have been thought through properly. The scheme does not include the Dudding Hill route, the Erewash Valley line, or north of Sheffield, so the freight benefits look minimal.

Currently, there is very little passenger traffic north of Bedford. And in the future, the government’s ‘intention’ is that most or all long distance passengers between London, the East Midlands, and South Yorkshire would be carried by the HS2 Y network. For face-saving reasons, as with HS1, a future government would probably bankroll operation of HS2, with guaranteed long-term subsidies for the operator.

Electrification of the Midland would only make sense, if much more intensive use could be made of the line. Unfortunately, there is no sign of any strategy to allow that to happen. Apart from HS2, one of the biggest obstacles to efficient use of the Midland, is the botched redevelopment of London’s St Pancras terminus. Just four platforms are now available for MML intercity trains there, and there is no obvious way of adding more.