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Posts Tagged ‘cost-benefit

HS2 and wider economic costs

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Some years ago, the concept of ‘wider economic benefits‘ was introduced into British cost-benefit appraisal, where it has proved particularly helpful to rail projects.

The neutral term ‘wider economic impacts’ is often used, but in practice, items recognised in extended appraisal tend to be benefit-, rather than cost-oriented. In the August 2012 Economic Case update, HS2 Ltd stated that its high speed rail Y network had a benefit cost-ratio of 1.9 before wider economic impacts, and 2.5 when they are included. However, HS2 assessment of wider economy impacts is strangely selective about what is, and is not, monetised.

On 6 June 2012, the Birmingham Post reported that “Birmingham Airport could move to be closer to HS2”.

Birmingham Airport passenger terminals could be moved more than half a mile east to be closer to the planned HS2 interchange.

The airport’s runway and airside operations would remain where they are while handling operations – such as check-in, baggage handling and security – would move closer to Birmingham International station, according to chief executive Paul Kehoe.
He told a New Civil Engineer’s Airport Design and Engineering conference in London, that he wanted to embark on a consultation about moving the terminals.

“This could result in moving the airport one kilometre eastwards,” Mr Kehoe told delegates. “It may sound daft but it has to happen.

In West London, construction of HS2 would entail widespread disruption of the road network. Although the work would be phased, there is no getting away from the fact that HS2 construction would have negative economic consequences, but there is no recognition mechanism in HS2 Ltd’s appraisal process.

Disruption in West London, Camden, and Birmingham is monetised at £0 in the HS2 Economic Case, and the costs of reconfiguring transport infrastructure (e.g. re-locating Birmingham Airport, providing tram access to HS2 at Curzon Street, rebuilding Euston LUL concourse), are considered external to the scheme boundary by HS2 Ltd.

HS2 Ltd’s position is not credible. Economic appraisal of its high speed rail scheme should be conducted with a view to capturing the extent of costs, as well as benefits.

Written by beleben

November 1, 2012 at 12:25 pm

Posted in Great Western, High speed rail, HS2

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Unexpected candour

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Back in 2008, Centro’s chief executive Geoff Inskip wrote to the Birmingham Post, explaining that plans to extend the Midland Metro tramway remained a top transport priority.

The business case for the Phase One extensions through the Black Country and from Snow Hill to Five Ways is very strong, confirmed by an independent study by the CEBR which shows that the significant and lasting economic benefits that the new lines will bring to the region undoubtedly stack up.

This includes the creation of up to 5,300 jobs and a boost to the West Midlands economy of £178 million a year — as well as providing a major tool in managing congestion.

In fact, the “independent” CEBR (Centre for Economic and Business Research) study mentioned by Mr Inskip was commissioned by Centro itself — but it didn’t explain how building a few kilometres of tram line would create thousands of permanent jobs across the West Midlands.

The existing 20.2 km Midland Metro, between Birmingham and Wolverhampton, only carries 5 million passengers annually (a third of what Centro had forecast) and there has been no growth in usage since its opening in 1999. By 2011, cost increases and the recession had cut Midland Metro expansion down to a few hundred yards in Birmingham city centre.

When bus re-routeing is included, the curtailed Stephenson Street tram extension is costed at £143 million, and Centro’s priorities have shifted to ‘Birmingham Sprint’ bus rapid transit, and long distance high speed rail. It turns out that CEBR has an opinion on HS2, and it’s unexpectedly candid — and ‘off-message’.

You can imagine that a programme that involves spending £36 billion will find a large number of vested interests supporting it. And indeed supporters of high speed rail have been vociferous in their support for the proposed HS2 high speed rail link. But looking at the economics issues dispassionately, the sums don’t add up. CEBR has checked the demand forecasts, the economic case and the financial sums carefully.
Our analysis is that the benefit cost ratio is only 0.5 rather than the official and implausible 2.0. The financial deficit which will require a government subsidy is likely to be £18 billion rather than the official claim of £14 billion. This seems a major waste of money when spending is being cut and taxes raised.
If the project goes ahead it will be a triumph for spin and vested Interests over economic good sense.

Written by beleben

February 24, 2012 at 1:18 pm

HS2 and West Midlands journey time disbenefits

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The February 2001 HS2 Y network Economic Case states that

(section) 4.3.22 It is difficult to analyse exactly where, geographically, the benefits of HS2 (London – West Midlands) would accrue. Our modelling tells us where trips start and finish, but that does not necessarily tell us where the benefits would fall. We can identify business people travelling from Manchester for meetings in London. Whether it is the Manchester business person who benefits, or the London based firm/client they are meeting is harder to identify.

Well, how about at least monetising the disbenefits from service reductions, that would be incident on users of the ‘classic network’? So far as I can tell, the model cannot do that either. Although HS2 Ltd’s documents includes savings in operating costs from reduced West Coast Main Line operations, the concomitant journey time disbenefits don’t appear to be included.

This is nonsensical. If services from (and to) Coventry and the Black Country are reduced in number, or slowed down, those effects should be monetised, and included in the HS2 economic appraisal.

HS2 and Heathrow, part 4

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In HS2 and Heathrow, I conservatively estimated the cost per journey of a high speed rail link into Heathrow at £25 for the link alone, i.e., excluding operating costs and operator’s return, and rest-of-journey costs.

I can update that estimate, using HS2’s latest cost forecast for the Heathrow spur (£3.1 billion) and data from ‘The Heathrow Opportunity’ (by Greengauge 21), which stated that 3.4 million people used Paris Charles de Gaulle Airport TGV station in 2008. Assuming the same volume of trips were made on the Heathrow HS2 spur, and using HS2 Ltd’s £3.1 billion price tag, gives a revised cost per single journey of around £45.

HS2 Ltd has said that the spur has a “PV of £2.1 bn”. Which would suggest that, even with the company’s rose-tinted assumption set, the estimated net benefit is minus one billion pounds.

Written by beleben

August 2, 2011 at 3:31 pm