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HS2's economic benefits falling
Transport Secretary Patrick McLoughlin said that the HS2 scheme is "a long-term solution to a long-term problem"
The estimated economic benefit of the £50 billion HS2 high-speed rail project has fallen in recent months, promoters of the scheme said today.
The benefit-cost ratio (BCR) for the full two-phase project is now estimated at 2.3 compared with a figure of 2.5 given in August 2012.
This means that for every £1 spent, the wider economic benefit of the entire scheme will produce a benefit of £2.30 compared with £2.50 estimated last year.
Presenting the new figure today in a publication called The Strategic Case For HS2, the HS2 Ltd company said the new BCR was based, partly, on a recalculation of the number of business travellers using the 225mph trains and the amount of work they do on trains.
The reduction of the BCR is sure to be seized on by opponents of the scheme, including councils and residents' groups in Tory heartlands through which the London to Birmingham first phase of the line will pass once completed in 2026.
While Labour is questioning the cost of the project, HS2 Ltd and the Government remain passionately supportive, with Transport Secretary Patrick McLoughlin saying today that the scheme was "a long-term solution to a long-term problem".
He added that without it the West Coast, East Coast and Midland main lines were likely to be "overwhelmed", while having the scheme would "transform inter-city travel, radically improve commuter services into London and other major cities and increase the amount of rail freight".
Today's report also drew on one published by Network Rail and engineering company Atkins which said there would be 14 years of weekend engineering work on the railways if HS2 did not go ahead.
The strategic case document said the line was vital to make more equal the North-South divide. By completion of the full scheme around 2032/33 with the building of a Y-shaped route north of Birmingham to north east and north west England, there would be a trebling of the number of train seats an hour into Euston station in London.
Also, at present there are 13 trains an hour on the West Coast main line. Building HS2 would increase the number on the West Coast corridor to 30 an hour.
The 400m long trains, carrying 1,100 passengers, would run at the rate of 14 an hour for the first phase of the project and this would increase to 18 when the full line is completed.
HS2 Ltd director-general David Prout said the strategic case was based on HS2 travellers paying the same rate of fares as "normal" travellers. Pressed on whether there would, in fact, be a premium fare for those using the new line, Mr Prout said it would be his firm intention to advise ministers to have the same fare structure for HS2 as for existing long-distance travellers.
HS2 would produce London-Birmingham journey times of just 49 minutes, with London-Manchester coming down to one hour 8 minutes and London-Leeds down to one hour 22 minutes.
Mr McLoughlin said: "We need a radical solution and HS2 is it. A patch-and- mend job will not do - the only option is a new north south railway.
"HS2 brings massive benefits to the North, is great for commuters and the alternatives just don't stack up.
"Now is the time to be bold and deliver a world-class railway which Britain deserves and can truly be proud of. Future generations will not forgive us if we fail to take this opportunity."
The Government said the revised BCR for HS2 was "similar to Crossrail and higher than the BCR ratio for some other major projects when approved, such as Thameslink and the Jubilee Line extension".
It added that the BCR for HS2 will increase to 4.5 (£4.50 of benefits for every £1 spent) if rail demand continued to rise until 2049.
Other benefits of the railway included in the document are estimates from Network Rail that more than 100 cities and towns could take advantage of new or improved services as a result of capacity released on the existing rail network. These include:
:: Additional commuter services into London from places such as Watford, Milton Keynes, Rugby and Northampton;
:: New commuter services into Birmingham, Leeds and Manchester;
:: New longer-distance services, for example providing new and better links between Bradford and London; Lincoln and London; Shrewsbury and London; and Leeds and Cambridge;
:: More capacity for rail freight, with at least 1,000 lorry-loads a day carried on the network.
In addition, the Government will aim to ensure that all towns or cities which currently have a direct service to London will retain broadly comparable or better services once HS2 is completed.
The Government intends to launch a study to recommend how this can be done and also how services can support long-term economic growth.
Stop HS2 campaign manager Joe Rukin said: "As we expected, the Government have pulled some random figures out of the air in a desperate attempt to con the public.
"As if by magic, they expect us to believe that, after three years, the economic case for HS2 has risen like a phoenix from the flames. They surely must realise that everyone is going to see through this cynical attempt at spin."
He went on: "Every case they have put up for HS2 so far has been torn apart, and this one will be no different. It is really quite sad that Government think throwing everything at an expensive PR exercise will all of a sudden create support for HS2. They are just looking increasingly desperate and should give it up."
Philippa Oldham, head of transport at the Institution of Mechanical Engineers, said: "This business case offers welcome clarification of the benefits of rolling out HS2.
"HS2 provides the step change required to help to remove the bottlenecks in our transport infrastructure by increasing our capacity limits and helping to bridge the north-south divide.
Michael Roberts, director-general of rail industry organisation the Rail Delivery Group, said: "Through the hard times and the good, demand for rail travel has boomed. There are a million more services and half a billion more passengers on the railway this year than there were a decade ago.
"By 2020, a further 400 million journeys will be made annually. There is a capacity challenge not just on the West Coast Main Line but on the railway more generally. That is why we must plan for a network which can move more people and freight across the country safely, reliably and efficiently."
He went on: "Later this week, the Office of Rail Regulation will confirm a multibillion-pound programme for the next five years to maintain, renew and enhance the existing rail network. We will need to sustain such commitment in the longer term, and to look seriously now at options for new lines which can form integral parts of the network in future.
"We therefore welcome the vital contribution made by today's report in helping understand how rail can achieve its wider ambition to play a growing role at the heart of a modern, green economy."
Shadow transport secretary Mary Creagh said: "Labour has always supported HS2 because we must address the capacity problems that mean thousands of commuters face cramped, miserable journeys into cities like Birmingham, Manchester, Leeds and London.
"However, we cannot give a Government that is mismanaging this, or any project, a blank cheque. Our message to David Cameron is clear. Get a grip on this project, get control of the budget and get it back on track."
Graeme Leach, chief economist and director of policy at the Institute of Directors (IoD), said: "This is the fifth official attempt that's been made to convince the country of the economic case for HS2, and we welcome the efforts to deal with the concerns voiced by critics.
"The IoD has long supported key infrastructure projects but we cannot support the inefficient use of taxpayers' money, particularly if it comes at the expense of other much needed infrastructure improvements or wider investment projects."
He went on: "As things stand, just 27% of IoD members feel the high-speed rail project represents good value for money. The reduced cost-benefit ratio and the optimistic construction costs will not go far to settle these concerns.
"The Department for Transport have today put a lot of weight on the expected increase in regional productivity brought about by the project, and yet 70% of IoD members surveyed say that the scheme will have no impact on the productivity of their business."
CBI chief policy director Katja Hall said: "This new business case goes some way towards helping people understand the need for the HS2 and will also reverse some of the damage done by ministers' previous obsession with journey times.
"We need a modern railway line to tackle the looming capacity crunch on the West Coast mainline and the alternatives don't stack up."
She added: " HS2 will better connect eight of our 10 biggest cities and boost regeneration along and beyond the route, but we also need complementary road and rail investment to improve local networks.
"We would urge politicians on both sides of the House to back this important project."
Jonathan Isaby, political director of the TaxPayers' Alliance, said: "This is yet another attempt by the Government to make the numbers behind HS2 stack up, but yet again they have been found wanting.
"Those in charge of HS2 have consistently overestimated the benefits of the new line and underestimated the burgeoning bill for the project."
Lawrie Quinn, chairman of the Railway Engineers Forum, said: "The updated business case is hugely welcome, and paints a compelling picture of the wide-ranging economic and transport benefits that HS2 will bring.
"As many of us who have worked on big infrastructure projects like this will know, the business case will become even stronger as the project goes on and as more businesses gear up for HS2 and look to invest in our growing UK cities."
The British Chambers of Commerce said: "HS2 is the only scheme that can transform capacity on Britain's overstretched railways.
"As this crucial report shows, make-do-and-mend schemes that upgrade existing lines would lead to crippling delays, overcrowded trains, and off-peak travel chaos for years on end."
Shadow chancellor Ed Balls said: "We have supported HS2 and there is a case for new investment in a new North-South rail link.
"But when you have got a project of this scale - £50 billion potentially - you have got to know that it is really value for money.
"In the last couple of years the Government has been all over the place and the costs have got out of control. So my message to David Cameron and George Osborne is 'Get a grip - you shouldn't be cheerleaders, you should be taking a hard-headed look at costs and benefits'."
He told BBC Radio 5 Live he would not make a snap decision on whether to back the scheme on the basis of the figures in the latest report.
"I'm not going to say within an hour whether we are persuaded by these - that would be completely irresponsible.
"That's the kind of flibbertigibbet Treasury which we are seeing at the moment from George Osborne."
Stressing that Labour had supported HS2 "in the past", he said the costs had to "stack up".
Mr Balls said: "There isn't a blank cheque for this project and if David Cameron and the Transport Secretary want to be cheerleaders for a big infrastructure project, fine.
"The Chancellor should be standing up for value for money for the taxpayer and I think at the moment he is leaving a vacant chair where the Chancellor should be."
Sarah Hayward, leader of Camden Council in north London, said: "The report released today is further proof that the Government doesn't know why it is building HS2, what the true costs are going to be and what the benefits are.
"The reality is that even with today's revised strategic case from HS2 Ltd, the project will deliver a decade of blight to Camden."
She went on: "Camden stands to lose up to 500 homes, with schools, businesses and open spaces devastated by the project.
"Contrary to the claim that HS2 will 'drive city centre regeneration', plans for Euston station will cost jobs, growth and pass up a once-in-a-lifetime opportunity to redevelop a crucial area within the capital.
"It's time for the Government to listen to the real concerns that are being voiced by those who are opposing the scheme."