A wake-up call for the Department of Transport: do the proper sums, HS2 is worth it

The High Speed 2 rail project is under fire on many fronts. The Nimby protests in the affluent Home Counties have been augmented last week by more weighty criticism by the National Audit Office (NAO) of the scheme. At least, this is how the NAO’s work has come across in the media.

But the NAO review of the HS2 project is in many ways much more a criticism of the Department of Transport than it is of the high speed rail link itself. According to the NAO, ‘the Department’s methodology for appraising the project puts a high emphasis on journey-time savings, from faster and more reliable journeys’. Surely this is a sensible thing to do? Faster mean less journey time. It seems obvious.

The problem is that this is a mere fraction of the whole story. It is a purely static way of trying to measure the benefits of major transport infrastructure projects. Immensely complicated models of rail networks exist, in which every single journey can be mapped. Infrastructure investments reduce journey times. So the total time saved can be calculated from the models. Economists over the years have hammered out a consensus on how to put a value on these savings.

The problem is not in how time is valued. The problem goes to the very heart of the approach to which transport planners are wedded. The journeys which are made after the investment are assumed to be the same as the ones which were made before. This approach completely misses the point. Major infrastructure projects have the capacity to transform areas, to make new economic activities possible. Their benefits are dynamic, not static. Successful projects alter dramatically previously existing journey patterns.

Exactly the same problem was encountered in the long struggle to get approval for Crossrail. The purely static benefits of time savings generated by the massive, conventional transport models were never enough to justify the cost of Crossrail.  But the dynamic benefits of building it are huge. London could not survive for long as the world city with a transport system creaking at the seams and bursting to capacity. Eventually, after a lengthy intellectual battle, the Treasury prevailed on the Department of Transport to take into account these dynamic benefits, which justify the costs of Crossrail many times over.

But it looks as if, with HS2, that the Department has slipped back into its old comfort zone. The NAO’s criticism is precisely that it has ‘poorly articulated the strategic need for a transformation in rail capacity and how High Speed 2 will help generate regional economic growth’. In other words, the dynamic effects created by transforming the network.

The North faces many economic challenges. One of these is that it just does not have enough connections, it is not networked strongly enough with the prosperous and dynamic South. The North needs to generate more exports to London and the South. HS2 makes it more connected, and gives it the dynamic potential to meet this task.

Paul Ormerod

As published in City AM Wednesday 22nd May 2013

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e: aobyrne@volterra.co.uk
t: +44 020 8878 6333

Alex O’Byrne, Associate at Volterra, is an experienced economic consultant specialising in economic, health and social impact, economic strategy, project appraisal and socio-economic planning matters.

Alex has led the socio-economic and health assessments of some of the most high profile developments across the UK, including Battersea Power Station, Olympia London, London Resort, MSG Sphere and Westfield. He has significant experience inputting to EIAs and s106 discussions as well as drafting economic statements, employment and skills strategies and affordable workspace strategies.

Alex is also experienced at economic appraisal for infrastructure. He was project manager of the economic appraisal for the City Centre to Mangere Light Rail in Auckland. He also led the economic and financial appraisals of the third tranche of the Transport Access Program for Transport for New South Wales, in which Alex developed and employed innovative methodological approaches to better capture benefits for individuals with reduced mobility.

He is interested in the limitations of current appraisal methodologies and ways of improving economic and health analysis to ensure it is accessible to as many people as possible. To this end, Alex recognises the importance of transparent and simple to understand analysis and ensuring all work is supported by a robust narrative.

Alex holds a BSc (Hons) in Economics from the University of Manchester and he was a member of the first cohort of the Mayor’s Infrastructure Young Professionals Panel.


Senior Partner

e: eevans@volterra.co.uk
t: +44 020 8878 6333

Ellie is a partner at Volterra, specialising in the economic impact of developments and proposals, and manages many of the company’s projects on economic impact, regeneration, transport and development.

With thirteen years experience at Volterra delivering high quality projects to clients across the public and private sector, Ellie has expertise in developing methods of estimating economic impact where complex issues exist with regards to deadweight, displacement and additionality.

Ellie has significant experience in estimating the economic impact across all types of property development including residential, leisure, office and mixed use schemes.

Project management of recent high profile schemes include the luxury hotel London Peninsula, Battersea Power Station and the Nova scheme at London Victoria. Ellie has also led studies across the country estimating the economic and regeneration impact of proposed transport investments, including studies on HS2 and Crossrail.

Ellie holds a degree in Mathematics and Economics from the University of Cambridge.