High-speed rail attacked as costs spiral

THE HS2 high-speed rail project - which is to connect London with Birmingham, Manchester and Leeds - came under renewed attack as a public spending watchdog said the apparent benefits were dwindling as the costs spiralled.

In a withering assessment of the proposed £50 billion link, the Commons public accounts committee accused the Department of Transport of failing to present a “convincing strategic case”.

Instead it was based on “fragile numbers, out-of-date data and assumptions which do not reflect real life” with no evidence it would aid regional economies and not simply “suck” even more activity into London.

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It also warned an “unrealistic” target of securing the necessary legislation by 2015 risked a repeat of costly errors such as the botched West Coast mainline franchise award.

And it demanded an urgent explanation of how quickly the Department would plug significant gaps in the commercial and major project expertise in its teams.

Transport Secretary Patrick McLoughlin rejected the findings, insisting the the case was “absolutely clear” that without HS2 key rail routes would be “overwhelmed” by rising passenger numbers.

“The project will free up vital space on our railways for passengers and freight, generate hundreds of thousands of jobs and deliver better connections between our towns and cities,” he said. “HS2 is a vital part of our plan to give Britain the transport infrastructure it needs to compete.”

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David Cameron has announced a campaign to bolster support for HS2 in the face of what he called an “unholy alliance” of sceptics.

Recent critics have included Labour’s Alistair Darling who first approved it as chancellor, and the Institute of Directors which dismissed it as “a grand folly”.

It is also fiercely opposed by some Tory MPs - many representing communities which will be disrupted by construction work and train noise along the route.

The Government’s commitment to HS2 has been questioned in recent days after the Treasury’s top civil servant, Sir Nicholas Macpherson, said there was “no blank cheque” for the project.

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Official estimates of the cost were increased by £10 billion to £42.6 billion earlier this year, and some observers have argued that even this sum is too low. The Institute for Economic Affairs think-tank put it as high as £80 billion.

But the Prime Minister said he was “passionately in favour” as fresh figures were promised to back the case.

The first phase of the scheme between London and Birmingham is due to open in 2026 with an extension to Leeds and Manchester scheduled to operate from 2033.

Calling for more detailed evidence to back the case, the MPs concluded: “The Department has yet to demonstrate that this is the best way to spend £50 billion on rail investment in these constrained times.”

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There was also insufficient evidence “that this is the most effective and economic way of responding to future demand patterns, that the figures predicting future demand are robust and credible and that the improved connectivity between London and regional cities will enhance growth and activity in the regions rather than sucking more activity into London”, they found.

Evidence used to show the benefits to commuters was so out of date that it failed to recognise business travellers were able to work on trains using laptops and other mobile devices.

And the scale of the contingency built into the budget - at £14.4 billion the equivalent of a third of the total - appeared to be “compensating for weak cost information”, it suggested.

A case in favour of phase two should be “prepared using up to date information and realistic assumptions, particularly on the benefits to business travellers”, the report recommended.

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The committee’s Labour chairman Margaret Hodge said: “The pattern so far has been for costs to spiral - from more than £16 billion to £21 billion plus for phase one - and the estimated benefits to dwindle.”

She criticised the “ambitious and, in our view, unrealistic” plan to present the High Speed Rail Hybrid Bill to Parliament by the end of the year and have Royal Assent by 2015.

The report pointed out that was a “much tighter” timescale than for the High Speed 1 or Crossrail projects, which were considerably smaller undertakings.

“In my committee’s experience, not allowing enough time for preparation undermines projects from the start,” Mrs Hodge said.

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A rushed approach contributed to the failure of the InterCity West Coast franchise award,

She complained about “unfounded” claims in the media by “unnamed departmental sources” that figures in the National Audit Office on which the committee based its findings were incorrect despite it being pre-approved as accurate by the Department before publication.

But a DfT spokesman said in fact the dispute was lodged publicly by Mr McLoughlin who said the NAO “depends too much on out of date analysis and does not give due weight to the good progress that has been made since last year”.

Matthew Sinclair, chief executive of the TaxPayers’ Alliance campaign said the business case for HS2 “is weaker than ever”.

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“Week by week, the calls to ditch this project are getting louder and the sooner that the Government shunts this white elephant into the sidings for good, the better for the taxpayers who will otherwise be saddled with an eye-watering bill.”

Stop HS2 Chair Penny Gaines said: “The Public Accounts Committee report has not a single good thing to say about HS2. We are told the Prime Minister has personally ordered a fightback on HS2. We hope he actually takes note of what this report says and cancels HS2.”

Hilary Wharf, director of the HS2 Action Alliance, said: “We have doubt that the Government will continue to plough ahead with HS2 despite PAC’s devastating criticism. How much longer do they think the taxpayer will listen to their bleatings about this £50 billion white elephant being vital to the future of the UK’s economy?”