9th November 2010 ICEA 1 Jim Steer Director, Greengauge 21 Director, Steer Davies Gleave ICEA 9 th November 2010 The case for High Speed Two (and three and four…)

9th November 2010 ICEA 2 High Speed One

European high-speed rail network 9th November 2010 ICEA 3

Rail network capacity utilisation: 2008 and th November 2010 ICEA 4

9th November 2010 ICEA 5 Why now for High-Speed Rail?

9th November 2010 ICEA 6 What should follow HS1?

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Greengauge 21: reports funded by a Public Interest Group 9th November 2010 ICEA 8

9th November 2010 ICEA 9 Public Opinion on HSR 78% of people believe that HSR is essential for Britain’s future and 95% believe it is an appealing concept Source: Leading Edge for Greengauge 21: sample over 1,000

Current Government Timescales 2015 Hybrid Bill Powers for London – West Midlands (HS2) and start on construction [timescale unknown] hybrid bill(s) for limbs of the Y- shaped network Mid 2020s HS2 opens Mid 2030s (rough estimate) limbs of the ‘Y’ to Manchester and Leeds completed More immediately (early 2011) consultation on need for HSR as well as route of HS2 9th November 2010 ICEA 10

HSR Strategy formulation policy objectives markets & customers services infrastructure 9th November 2010 ICEA 11 appraisal

9th November 2010 ICEA 12 National Economy: Business Services

9th November 2010 ICEA 13 New Businesses: VAT Registrations per 10,000 Employees

The case for HS2 source Cm 7827 Capacity Connectivity Sustainability Supporting growth in the regions Increasing urban economic productivity Supporting growth in Britain’s core cities (shows how GVA/head declines with rail journey time to London) Supporting housing growth (MKSM, M11 corridor) Supporting London’s long term competitiveness (Mayoral support) 9th November 2010 ICEA 14

Costs and Business Case Infrastructure capital cost HS2 London to West Midlands between £15.8bn and £17.4bn source: Cm7827, March 2010 Business case: Benefit cost ratio for HS2 2.4:1 DfT, 2009 discount year and prices Benefit cost ratio for a national network 3.5:1 Greengauge 21 9th November 2010 ICEA 15

next… A national HSR network – its business case Greengauge 21 HS2 – business case DfT/HS2 Ltd 9th November 2010 ICEA 16

9th November 2010 ICEA 17 Fast Forward: a national HSR strategy

Heathrow & London Interconnections Greengauge 21 9th November ICEA

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9th November 2010 ICEA 23 Key Business Case Findings Benefit cost ratio for: the national HSR network 3.5:1  HS-NW to Manchester 2.9:1  Extending HS-NW to Glasgow/Edinburgh 7.6:1  HS-NE to Newcastle 2.0:1 Marginal case: extending HS-NE to Edinburgh

9th November 2010 ICEA 24 Business case breakdown (national HSR network) £bn PV 2002 prices Revenues (net)22.5 User benefits78.5 Non user benefits (decongestion of road and rail; greenhouse gas reduction) 10.4 Wider economic benefits14.0 Net costs (capex and opex)48.1 NPV (excl WEBs)63.3 BCR3.5:1

9th November 2010 ICEA 25 Widespread economic benefits

HS2 London – West Midlands 9th November 2010 ICEA 26

Standard appraisal assumptions source HS2 Ltd GDP assumptions – In line with 2009 Budget RPI + 1 for all rail fares to 2033 (reflecting government policy) Growth capped at 2033 (proxy for market maturation) Rail Industry approach applied Air forecasts – Published by DfT in 2009 TEMPRO based road forecasts 9th November 2010 ICEA 27

HS2 Appraisal summary source DfT 9th November 2010 ICEA 28 Category £bn 1 Transport user benefits – business – other Other benefits (excl carbon) <0.1 4 Net transport benefits ( ) Capital costs Operating costs Total costs (5 + 6) Revenues Indirect taxes Net costs to government (7) – (8) – (9) NATA benefit cost ratio (4) ÷(10) (2.4)

In summary: What are the quantified benefits of HS2? Journey time and reliability improvements Relief of crowding on classic network Release of capacity on WCML ( including benefits for short distance trips such as commuting into London/Birmingham) Some decongestion on road network Some Wider Economic Impacts (WEIs) Source: HS2 Ltd 9th November 2010 ICEA 29

Time Savings Non-working time savings (including commuting) around £6 per hour in current prices Travel in the course of work – assumption that savings increase overall output by the amount of the time savings, valued at the wage rate plus a mark up Rail business time value value implies a current pre- tax wage rate of around £32 per hour. Walk/access/egress time savings value set at double the standard in- vehicle value for all non- business travellers. Business values as for in- vehicle values. Evidence suggests VoTTS increases with trip length/duration and hence savings for long distance trips undervalued but not part of DfT method. 9th November 2010 ICEA 30

Wider Economic Impacts Wider economic impacts are worth £3.6bn Increase BCR to 2.7:1 Imperfect Competition’ results in a further £1.6bn over and above time savings to business Agglomeration – firms gain additional benefits from closer proximity but DfT Guidance focuses on impacts over (relatively) short distances HS2 to Birmingham is too long - but impacts of extensions northward would have bigger impact The line to Birmingham still delivers agglomeration benefits of a further £2bn, mainly due to released capacity and road decongestion 9th November 2010 ICEA 31

Closing remarks HS2 has been compared by DfT with 5 alternative (lower cost rail upgrades) and 4 alternative road investment packages: HS2 is best HSR has an excellent match with government policy objectives and has cross-party support Studies started in 2001: we’re in the tenth year of examination 9th November 2010 ICEA 32

Thank you 9th November 2010 ICEA 33