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Hodge Counting the Cost of High Speed Rail

Blog post   •   Jul 06, 2012 11:49 BST

We've had another bout of high speed rail bashing today. Margaret Hodge's Public Accounts Committee (PAC) implies that the case for HS2 - the proposed new 225mph line from London to Birmingham and beyond - is flawed. They think that the line could end up costing taxpayers like you and I much more than we've bargained for.

They're right that we need to properly count the costs and benefits of building HS2. But we also need to count the costs of the jobs that won't be created if we don't build it.

How much is too much?

The PAC slaps the Government on the wrists for wildly overestimating how much money the first British high speed line, HS1, would make carrying Eurostars from France to London. Not as many people as expected are making the trip from the capital to the continent, leaving taxpayers with a bill of £10.2bn over the next 60 years.

The PAC criticises the Government's estimates of how much money your time is worth (£54/hr if you're on business, £7/hr if you're a commuter). This is important for working out the benefits our investment has bought - but risks missing the bigger issues.

It's the economy, stupid

Hodge says: "It is nonsense that the Department [for Transport] does not have a full understanding of the wider economic impact and regeneration benefits of transport infrastructure". 
It's those wider economic impacts and regeneration benefits that are too often forgotten. The Treasury rightly frets about the upfront costs of big investments but, as Will Hutton argued recently, this can mean that benefits like jobs and growth get ignored.

Relocation, relocation

Let's take an example. A major multinational business is thinking about where to put its UK offices. It looks at Manchester, which has flights to the USA and the Middle East. But it's only 8mins quicker to get to meetings in London from Manchester than from Paris. And it'll be much easier to get a seat on the train because the London-Manchester line is packed already. So why not just go to Paris?

Big companies do make decisions like this. Google recently decided to move to King's Cross, next to the Eurostar terminal at St Pancras.

If our hypothetical multinational goes to Paris rather than Manchester, then so do the jobs it creates, both directly and in its supply chain. For example a consultancy in Leeds won't be able to win work with them, and therefore won't take on new employees in the coming years.

Counting the costs

The Government is getting better at counting these kinds of benefits. Justine Greening is likely to give the go ahead for the rest of the Northern Hub rail scheme in the next few weeks on the basis of the £4.2bn worth of wider economic benefits (and up to 30,000 new jobs) it will create.

If they're going to win the argument on HS2, ministers like Greening need to keep convincing people to judge the plans on a similar basis.

It's quite easy to count the costs of building HS2. But it's just as important to count the costs of those jobs that might never come to the UK if we don't build it.

This article first appeared on the Huffington Post.

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