Back to Basics – the Yes campaign have it wrong and always have

Building additional rail capacity in a mature economy such as the UK is in essence a 20th century approach to 21st century problems, an approach which is lazy and  lacking in vision. The next 20-30 years will require considerable structural change in the economy to respond to dynamic factors such as climate change (its reduction and mitigation), technological change with advances in artificial intelligence and cybernetics and structural changes to industry connected with two apparently contradictory forces – one leading to increased globalisation and another stressing increased localisation and local sourcing. The transport network in all its forms needs to be revitalised and integrated to facilitate these changes. Building a new railway line in comparison to these challenges is dull, unimaginative and pedestrian, incorporating the thinking of the past and not the future.

As someone with a Degree and Masters degree in Economics and a former consultant with one of the big four accountancy firms currently living in the West Country I read Professor David Begg’s arguments for HS2 with interest.

He states that the Victorians who built the railway system required huge amounts of self-belief, vision and bravery. This may be true, but they also did so to make profits with no regard for the large number of people who died building the railways and the impact on communities (e.g pollution) who were affected. This is because these inconvenient “externalities” did not have to be factored into the cost of building.

At least, however, the early railways did make a profit. The current situation according to a recent report by Sir Roy McNulty is that it costs Britain 40% more to operate its railways and our fares are 30% higher than in France, Holland and Sweden. The current subsidy from the taxpayer to network rail is in the region of £5.2 billion per annum. Hence every time a train runs it is costing the taxpayer money. Worse, since railways primarily are not fuelled by green energy every train that runs adds to the problem of global warming, the costs of which (an inconvenient externality again) are not directly borne by the railways but will run into hundreds of billions for future generations, in terms of the cost of combating the effects of climate change. In this context the less rail journeys that are made the better (unless it can be proved that there is always diversion from other less efficient transport forms).

Professor Begg argues that costs will be offset by rail revenues. Both costs and revenues are notoriously hard to predict over such a time period. For example many public sector projects find that capital costs are 50% or 100% higher than originally projected. The Eurotunnel was twice its original capital cost while the Scottish parliament building was about 10 times the original projection. Projected revenues from rail travel are also likely to be a work of fiction over such a time period. Add in the impact on climate change and Professor Begg’s figures will not look so rosy.

Professor Begg points to the investment in HS1 as being a success, but the areas he mentions were subject to large regeneration investments in addition to the railway, and have the advantage of being in the south east which is the fastest growing and most prosperous region in Britain. The figures for employment and housing that he directly attributes to HS1 I would dispute, and are linked to the other factors mentioned above. For example Brighton has received little regeneration money and train times to London are much as they were 50 years ago. Its local economy has still flourished as have many areas in the orbit of London where there has been no new rail investment .

Professor Begg indicates that long distance rail travel is booming. But as indicated above rail travel is heavily subsidised by the taxpayer (doubly in the case of passengers travelling on business as the cost can be offset against corporation tax), and operators seek to fill capacity at non peak times with less than average cost prices.  Also every time a train runs there is the externality of climate change, storing up incalculable costs for future generations. Would you be happy to subsidise Easyjet passengers who might like to fly cheaply from Manchester to London just for the hell of it?

Professor Begg indicates that this investment will boost growth in the regions – there is no guarantee of this. Economists like Professor Begg were responsible for previous growth initiatives in the regions which have as he points out abjectly failed. There is no reason to believe that this will be any different.

Professor Begg is disingenuous in offering the only alternative to this investment as spending money on roads in the south east. There are in fact many better uses for this money. I would firstly suggest some is used to sort out the current mess which is Britain’s public transport system. The current rail system is fragmented and costly, and does not connect very well with other transport infrastructures (largely because of the impact of privatisation supported by Economists like Professor Begg). A number of small but effective investments throughout the country could improve efficiency, capacity and reduce travel times. They may even be self financing, but obviously not as sexy as this “grand project” All public investments should seek to support targets for greenhouse gas emissions (80% reduction by 2050). In that context investments should encourage less rail travel, more localisation and organisations using technology solutions such as video conferencing to reduce travel. We can all see how opening up cheap air travel may have had some short term benefit for some airport areas, but this is dramatically outweighed by the long term climate change costs. Once rail capacity is built it will have to be filled whether journeys are important or not. Once they have the capacity the cost of carrying an additional passenger is negligible so they will fill trains with below average cost customers rather like cheap airlines. Given the current way our rail system operates a high public subsidy would be a virtual certainty. It is also the case that north-south rail links are currently amongst the fastest  in Britain – other than Bristol try taking a train down to the west country – you may find it quicker using a coach and horses.

Of course Professor Begg and other consultants who derive their incomes from Government sources (or from transport interests) will support this project because it is in their financial interests to do so (think men with funny handshakes). Government ministers will support it because it is a legacy project (think Millennium Dome and Tony Blair’s legacy in Iraq). However, this project is not in the national interest and will put costs of all kinds upon our children and grandchildren.

This is a guest post by John Capper BSc, BA, MSc, MBA.

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