Is HS2 a defining issue for Jeremy Corbyn’s campaign?

Much of the success of Jeremy Corbyn’s campaign has been down to the perception that he speaks the truth as he sees it – he says what he believes, without fear or favour, and this sets him apart from the other candidates.
But is this true in respect of HS2? A week or two ago, newspapers reported that Corbyn was about to state his opposition to HS2, saying that it was a project to turn regional cities into dormitories for London businesses. But then, in the event, he did not, and his Northern Future policy paper made no reference to HS2 when discussing transport. The word was that Corbyn had been ‘got at’ by trade union interests who support HS2 (1). Then, a couple of days ago, a statement from Corbyn’s camp made a positive reference to high speed rail (though not to HS2 specifically).
We cannot know what has actually been going on, unless Corbyn issues a precise and clarifying statement. Does he support HS2, and if so why?
If he does, he will be joining those, from Lord Adonis and the Prime Minister, for whom HS2 has become a prestige, legacy project, not the white elephant it actually is; those representing interests which would directly gain from HS2, such as the leaders of some northern and midland cities which would have an HS2 station; and those in the rail industry for whom any train is a good train.
But he will be setting himself against the great bulk of the evidence, which shows that HS2 is very bad value for money(2); that it will do little or nothing to bridge the north-south divide(3); that there are many other parts of the rail network which are more congested and have more need of investment; and that nearly all other forms of transport investment are more effective in creating jobs and supporting local communities than high speed rail (4). These views are those of academia (5), of commentators from the left (eg the New Economics Foundation (6)) and the right (eg Simon Jenkins (7); even of the House of Lords recent committee of inquiry into the economics of HS2 (8).
There would be far better ways of spending the £50bn or more which HS2 would cost. The New Economics Foundation has undertaken detailed analysis which documents how the money could be used to upgrade the existing inter-city network, overhaul regional rail, improve walking and biking infrastructure at the same time as upgrading the national broadband network (9) This approach would support jobs and skills in the rail industry more widely across the country, thus meeting the TUC’s ‘five tests’ for high speed rail (10)much better than HS2 does.
Of course, there are some supporters of HS2 who argue that it is not a case of having either HS2 or other transport investments – we can have both. The problem with this is twofold. First, it is not the case that HS2 and other transport projects are both good investments. HS2 is a bad investment in any terms. To give just two examples: HS2 would mean a decline in classic rail intercity services in places like Coventry which it bypasses; and the cost of each job created by HS2 (even accepting the government’s inflated figures) would be about £350-£400,000, compared to about a tenth of that for jobs created by local regeneration projects(11). Secondly, we are now beginning to see, as regional lobby groups begin to generate programmes for secondary packages of transport investment to support HS2, that whole regional transport budgets will be skewed towards HS2, to the inevitable detriment of competing projects. At the same time, the financial demands of these programmes shows that the true cost of HS2 will be much more than that of the line itself (12).
So where does Jeremy Corbyn stand on HS2? Is he with the vested interests or with the evidence?
Notes
1. See for example Manuel Cortes, TSSA General Secretary: http://labourlist.org/2015/08/jeremy-corbyn-is-right-we-need-a-peoples-railway/
2. Paul Salvesen, author of Railpolitik and Colne Vallet CLP
3. Professor John Tomaney, Evidence to Transport Select Committee
4. This was the conclusion of Labour’s Commission on Sustainable Transport.
5. Such as LSE Professor Henry Overman ; http://cep.lse.ac.uk/pubs/download/cp361.pdf
6. David Theiss, High Speed 2: One track mind? Considering the alternatives to HS2
New Economics Foundation 2013
7. See http://www.theguardian.com/commentisfree/2015/jun/26/hs2-vanity-project-network-rail and http://www.theguardian.com/commentisfree/2015/jun/02/hs2-not-useless-railway-stupidest-cameron-tories-mistake
8. http://www.publications.parliament.uk/pa/ld201415/ldselect/ldeconaf/134/134.pdf
9. http://www.neweconomics.org/publications/entry/high-speed-2-the-best-we-can-do.
10. http://touchstoneblog.org.uk/2010/03/five-tests-for-high-speed-rail
11. https://hs2theregionalimpact.wordpress.com/2014/09/24/hs2-and-the-north-south-divide-the-mirage-of-jobs-and-growth/
12. For example the Midlands Growth Strategy requires £3.3bn. http://centreofenterprise.com/hs2-growth-strategy/

HS2 and the North-South divide: The mirage of jobs and growth

Ever since Transport Secretary Philip Hammond claimed that linking England’s main cities via high speed rail could help break down the north-south divide., the government and supporters of HS2 have consistently claimed that HS2 will have a transformational impact of this kind.

The HS2 Growth Taskforce says that “HS2 could be much more than a railway. It could be an exciting and transformational opportunity, particularly for our cities in the Midlands and North….HS2 can help rebalance the economy.”

Such claims have however been challenged just as consistently by independent experts:

‘‘Taking the evidence in the round it is very difficult to substantiate the argument that high speed rail is likely to have a positive impact on regional inequalities.’
Professor John Tomaney, University College London

‘In most developed economies high-speed railways fail to bridge regional divides and sometimes exacerbate them. Better connections strengthen the advantages of a rich city at the network’s hub: firms in wealthy regions can reach a bigger area, harming the prospects of poorer places.’ The Economist

What is the current evidence as to whether the employment impact of HS2 would significantly reduce the North-South divide?

HS2 and job creation: Recent evidence

The job creation impact of HS2 falls into two parts: job creation from regeneration schemes linked to the construction of HS2, concentrated around stations, and that arising from the wider impact of HS2 on the economy.

Jobs from regeneration
Current government estimates of job creation directly associated with HS2 are as follows (1) :

Of these the construction jobs are temporary, and the operational jobs are small in number. The regeneration-related employment estimates are more significant, and the vast majority of these would be around stations in the Midlands and North.
However, as the government admits, many of these will not actually be new jobs, but relocations from elsewhere. Moreover, they are not necessarily directly attributable to HS2: while their location is a direct consequence of the location of HS2 stations, they will depend heavily on other public and private regeneration investment.

Wider employment benefits

In addition to possible job creation through HS2 station-related regeneration, it is argued that there will be ‘wider economic benefits’ in terms of growth and jobs.

There are two main recent sources of evidence for the wider economic benefits accruing from HS2.

The 2013 report by KPMG, HS2: Regional economic impacts, claims that HS2 could generate £15bn productivity gains for the GB economy in 2037 when the full Y network opens, with a further positive effect in following years. However the employment implications of this are not spelled out by KPMG (and it is of course quite possible that productivity gains would not translate into employment growth).

Moreover, the methodology utilised by KPMG has been severely criticised by independent experts. Professor Henry Overman of the LSE, erstwhile adviser to HS2 Ltd, in a commentary titled ‘HS2 Regional Economic Impact: Garbage in……?’, says the report does things which are ‘technically wrong’ but are crucial for their findings. Key parts of their methodology ‘does not have a firm statistical foundation’, ‘is essentially unfounded’ and ‘produces estimates of effects that are meaningless’.

KPMG also make clear that the economic impact of HS2 would produce losers as well as winners, especially in places and regions distant from HS2 stations. These need to be set against the headline-catching ‘£15bn gains’.

Estimates of wider potential regional employment impacts have also been made for the HS2 Growth Taskforce (2). Table 2 combines these with the station-related jobs to show the total jobs claims for station-related regeneration and wider economic impact (henceforth the ‘official estimates’).

If this data is taken at face value, it suggests that HS2 would have some impact on the north-south employment divide. The estimate for London is greater than that for any other region/city, confirming that London would be the biggest beneficiary of HS2, but it is between 66,500 and 43,000 lower than that for the whole of the Midlands and North.

Problems with the official data

The official estimates cannot however be taken at face value, for a number of reasons:

• The estimates of job creation for the Growth Taskforce are not independent. They come from organisations with vested interests, such as Centro in the West Midlands, for whom this is a possible opportunity to lever in major further packages of regional transport investment, and thus are of questionable credibility.

• The estimates are dependent on these very substantial additional regional transport investment packages. If these are seen as jobs created by HS2, this effectively massively increases the cost of HS2. On the other hand if these costs are not incorporated in the bill for HS2, neither can HS2 justifiably claim these ‘wider economic impact’ jobs, which are only tangentially dependent on it.

• Moreover, there is no new government money for the regeneration proposed and so money would have to be taken from existing funds, threatening other regeneration possibilities across the region. Effectively, a big slice of future regional transport investment and regeneration would be diverted to try to support HS2 rather than to meet local needs.

• In addition, the intention of the Growth Taskforce is to show how the supposed growth and jobs benefits of HS2 can be more widely spread, by means of city-region regeneration and transport strategies centred around HS2 stations. But this means that the primary beneficiaries would be the core cities in each region, creating new disparities between the big cities and other areas. Thus for example of 51,000 jobs in the West Midlands half would be in Birmingham and Solihull, with the rest of the region fighting over the scraps.

• Much more account needs to be taken of jobs lost due to HS2. These are largely excluded from consideration by HS2 Ltd, but would be substantial. They include jobs destroyed in businesses directly impacted by HS2, and others such as jobs lost in train operating companies which lose business to HS2.

• The cost of each job created by HS2 would be eye-wateringly expensive. Taking the jobs in Table 1 (as these are the only ones for which costs are available), would, on the basis of government figures, each cost somewhere between £420,000 and £350,000. The real figure would be much higher if temporary and relocated jobs were excluded. Applying the average cost per job in the wider economy to the sum which HS2 will cost would create 4 times as many jobs, while the cost per job for a standard local economic regeneration project is probably around £35,000. There are much better ways of spending the money allocated to HS2 which would bring more jobs and growth across the whole country (3).

• Finally, these estimates of the job creation potential of HS2 are far below earlier estimates which were crucial in building the case for HS2 in the Midlands and North. Probably the most widely cited source of this type was undertaken for Greengauge 21 by KPMG in 2010 (4) . This showed gains by Northern and Midland regions (with the exception of the East Midlands) but also – in contrast to the contemporary official estimates – substantial losses in the Southern regions. Political and policy support for HS2 was thus built initially on claims that HS2 would have a far more substantial impact in narrowing the North-South divide than current estimates.

HS2 jobs claims in context

Even if we were to ignore these many awkward questions about the official jobs claims for HS2, to what extent would they reduce the North-South employment gap? Asking this question highlights an important absence from the much of the debate about the impact of HS2 on North-South employment disparities: to wit, any benchmark of the scale of existing regional disparities against which to measure claimed impacts of HS2.

There is not a benchmark which is directly comparable to the official data. A comparison can be made however which still offers a valuable contribution to policy debate.
An authoritative independent forecast of employment change by region over the next decade indicates employment growth in all regions, but much greater in the Southern regions than those of the Midlands and North . The North-South divide is projected to widen significantly, by about 380,000 jobs or about 35,000 a year (5).

How does this compare with the current official claims? We cannot be precise, as the latter are for an unclearly specified future period, while the regional employment forecasts are for the next decade. All the same, a comparison provides very illuminating orders of magnitude. The official HS2 jobs claims show a narrowing of the North-South divide by 43-66,500 jobs. If we were to assume that these occurred over a decade, that would mean roughly 4,300 – 6,600 jobs a year – compared to the 35,000 a year by which the regional employment forecasts suggest the divide is currently widening. The impact of HS2 – even ignoring all the deficiencies of the official estimates noted above – would not come anywhere near stemming the current widening of the jobs divide, let alone start to close it. This fundamentally questions any statement that HS2 could bring ‘transformational change’ to the economic geography of the UK.

Conclusions

Assertions that employment growth attributable to HS2 will significantly reduce the North-South employment divide are unsustainable:
• Official forecasts of the regional employment implications of HS2 produced by government or by supporters of the project are subject to very serious omissions and qualifications.
• Even so, they are much more modest than previous estimates which were crucial in building the case for HS2 in the North and Midlands.
• Even when the official claims are taken at face value, any reduction in the jobs gap would fail by a large margin to stop the North-South divide widening, let alone produce ‘transformational change’.
• The jobs created by HS2 and possible associated investment would be primarily concentrated in the core city regions, especially around HS2 stations, creating new disparities within regions.
• HS2 is a very wasteful means of job creation. The £43bn cost of the scheme could be used much more cost effectively to create many more jobs across the whole country.

Footnotes

1. http://www.hs2.org.uk/what-hs2/economic-benefits-jobs
2. Atkins, Maximising the Growth and Regeneration Benefits of HS2: Final Report, March 2014. It should be noted that the data varies region by region in terms of its origin and geographical coverage.
3. See for example New Economics Foundation, High Speed 2: The best we can do? June 2013
4. KPMG, High Speed Rail in Britain: Consequences for Employment and Economic Growth. Greengauge 21, 2010
5. Cambridge Econometrics, Economic Prospects for the Nations and Regions of the UK, January 2014.

HAS THE TGV REGENERATED FRANCE’S PROVINCIAL CITIES? WHAT ARE THE LESSONS FOR HS2?

HS2 is, at £50bn plus, the largest single infrastructure investment in the UK’s history. Probably the most critical of the benefits currently claimed for HS2 centre around its potential role in regenerating the economies of large parts of the Midlands and the North.

In terms of an evidence base, these arguments tend to rely heavily on government commissioned research based on forecasts of future economic impact based on untested methodologies. These are naturally controversial, having been challenged by leading academics .

Nearly 30 years ago France became the first European country to invest in a high speed rail network – the TGV. If high speed rail can indeed play an important role in ‘rebalancing’ regional economies, then, after thirty years a study of French cities and their surrounding Departments and Regions should provide some clear evidence of this.

In considering which regeneration measures to apply, a longitudinal assessment of relative rates of unemployment over the thirty years seems arguably the most appropriate.

The first TGV lines connecting Paris with Lille, Lyon and Marseille
were established in the early 1980s. Therefore there should have been ample time for the regenerative impact of high speed rail to be reflected in observable relative improvements in the local and regional economies.

Lille

When considering Lille it is firstly crucial to remember that it is located at the cross roads of the European high speed rail network. It therefore benefits from high levels of accessibility and frequency of service.

Leading transport expert Roger Vickerman of Kent University observes:
“…. the biggest gains in accessibility accrue to the major access points to the network. These are first, the major metropolitan areas such as London or Paris, and secondly major interchange points, such as Lille or Lyon.”

The arrival of the TGV was accompanied by significant related invertment in local infrastructure. In 1983 by the opening of the VAL (Light automatic vehicle) the first driverless metro system in the world. In 1999 this was linked to Roubaix and Tourcoinq areas at that time the longest metro link in the world.

Lille has certainly seen a significant growth in jobs particularly as a result of the large Euralille development developed around the TGV station. The first phase of the Euralille development included offices, a large shopping centre, an hotel, a student hall of residence, a business school, a music venue, a Convention centre and a large urban park. Separate new housing developments were built in the vicinity of the project. The cost of the first phase of the project was estimated at around 5 billion francs (£500 million).

When all of these factors are taken into account Lille should have been ideally placed to show a dramatic increase in prosperity on the back of the TGV. The reality as evidenced by the unemployment figures produced by INSEE (the French National Institute of Statistics) shows that this has failed to materialise. Quite the reverse, relative unemployment has worsened in and around Lille since the TGV arrived.

Unemployment trends 1982-2013 for the Department and Region within which Lille sits are given in the above graph Over the period, the difference in unemployment rates with the average for the rest of mainland (metropolitan) France has widened from around 2- 2.5% higher in 1982 to around 3.5% higher in 2013.

Latest figures for the much smaller Lille metropolitan area (taken as the employment zones (EZs) of Lille and Roubaix-Tourcoinq, the latter being by far the more poverty stricken) are only available from 1999. The latest Q3 2013 figures for these two areas are 11.5% and 15.7% ,1.0% and 5.2% respectively above the national average. In 1999 these figures were 1.4% and 3.9% which shows that central Lille appears to have benefited marginally whilst the poorer districts of Roubaix/Tourcoing have lost out.

The point is that, even with the sort of large scale investment that has happened in the ‘Euro-Lille’ complex, there has been no dramatic transformation of the economic fortunes of the area, as is implied by the claims of proponents of HS2, quite the reverse. The above figures (including those for the EZs) only serve to underline the findings of much academic research which shows that any ‘benefit’ is restricted to a small area of new investment on and around the stations and that, arguably, much of this has been displaced from less attractive locations elsewhere in the same region.

Lyon

Turning to the case of Lyon, this is an area which has traditionally been amongst more prosperous parts of France. It has not suffered the depredations of the decline of traditional industries on anything like the same scale as the North East of France.

Nevertheless, if claims for the wider regenerative benefits of the TGV are to be believed, some further decline in absolute and relative levels of unemployment might be expected within the Rhone Department, over 75% of the population of which live within the Lyon area.

In fact the reverse is true: unemployment in the Rhone department has increased by over 4% since the arrival of the TGV (from an average of 5.4% 1982-6 to 9.7% in 2013. It has also increased in relative terms as the graph above illustrates, in 1982 the rate was 1.4% below that for mainland France and by 2013 this had narrowed to only 0.8% below.

The picture for the region of Rhone Alps within which Lyon is located is similar. Its prosperity relative to the rest of France measured in terms of unemployment rates has actually remained unaltered (at 1.2% above the rate for mainland France) since the arrival of the TGV in the early 1980s.

In summary it seems clear from the French experience that high speed rail has had no discernible impact in reducing regional unemployment disparities. The only ‘benefits’ have been limited numbers of additional jobs at key locations close to stations and the evidence suggests that this may have been at least partly at the expense of investment displaced from poorer, less attractive parts of the same region.

HS2 – a divisive project of a divisive government

A divisive government

The Conservative-led coalition has proved to be a divisive government. It has presided over an era of austerity for the vast majority, while bankers continue to earn big bonuses.
The recent so-called ‘recovery’ led by a new house price bubble in London has had little impact on the insecurity and falling living standards of many households, especially outside the South East.

“Councils covering the 25 most deprived areas of England are bearing the brunt of cuts, while the 25 overseeing the least deprived spots are relatively unscathed.” Peter Hetherington, The Guardian, 5 February

This north-south divide will not disappear any time soon.

“Because the economic growth of London and the southern regions is expected to remain stronger than growth in the other regions of the UK, this (north-south) differential is not expected to narrow.” Cambridge Econometrics, Economic prospects for the nations and regions of the UK, January 2014

HS2 – a divisive project

HS2 is presented by the government as an ‘engine for growth’ – a silver bullet to bridge the North-South divide. In reality however the reverse is true – it will enhance the dominance of London and its impact on economic growth is highly questionable.

The clear consensus of research studies, both in the UK and abroad, is that new transport investments such as HS2 primarily benefit the dominant economic centre which they connect.

“Taking the evidence in the round it is very difficult to substantiate the argument that high speed rail is likely to have a positive impact on regional inequalities.” Professor John Tomaney, Evidence to Transport Select Committee reviewing recent research

Increasing numbers of local authorities are realising that possible growth around stations in core regional cities will be at their expense.

HS2 would not have a ‘transformational ‘ economic impact as the government claims. This is because new transport investment in an already well-connected infrastructure tends to relocate economic activity more than create new growth. Even the discredited government-commissioned KPMG report on the regional impact of HS2 showed that many localities away from the route would suffer economic losses.

The lack of convincing evidence for HS2 has been highlighted by the Public Accounts Committee and the National Audit Office, while the government refuses to release the Major Projects Authority report which graded HS2 red-amber.

Meanwhile, the focus by government on the supposed capacity constraints on the West Coast Main Line hides serious problems on other parts of the rail network. It is not credible to suggest that, given the continuing constraints on public expenditure, we can have our cake and eat it- both HS2 and competing improvements to the national network and to commuter services.

Despite the PR hype for HS2 from the government, opinion polls routinely show that HS2 is unpopular with voters. People see HS2 as being for the few, paid for by the many.

A majority (55%) of the British public oppose HS2. Among Labour voters the proportion is 60%.
YouGov, September 2013

As with much else, this government is out of touch with the people.

The one nation alternative

The alternative to HS2 could be called the one nation alternative. It would recognise the constraints on public spending, and so prioritise value for money. It would look to spend scarce resources in ways which bring benefits across the country.

Important principles for a one nation alternative were set out by Labour’s Sustainable Transport Commission, abolished by this government, which showed that local transport investments produce much better social and employment returns than ‘grands projets’.

Recent studies show how such principles can guide an alternative to HS2.

The New Economics Foundation has undertaken detailed analysis which documents how the money for HS2 could be used to upgrade the existing inter-city network, overhaul regional rail, and improve walking and cycling infrastructure at the same time as upgrading the national broadband network – http://www.neweconomics.org/publications/entry/high-speed-2-the-best-we-can-do.

Even in the North, commentators do not see HS2 as a top priority.

A major programme of investment (across the country) that combined network electrification, complementary enhancement (eg four tracking on certain corridors) and a selective re-opening programme could be achieved quickly and would have a far greater economic impact than HS2.
Paul Salvesen, author, Railpolitik and Colne Valley CLP

Value for scarce public money or a vanity project?

Influential voices across the political spectrum have been seduced by this glossy project with its superficial connotation of a high-tech prosperous future. But it is increasingly obvious that support for HS2 comes principally from a limited range of vested interests.

As we come up to crucial decisions such as the second reading of the Hybrid Bill, and with severe constraints on public spending for the foreseeable future, now is not the time to give HS2 the green light. Far better for Labour to put down a marker against reckless spending and in favour of public value.

Labour should reconsider its position on HS2 say councillors

Labour councillors meeting at the Association of Labour Councillors in London on 1-2 March think that the Labour Party should reconsider its support for HS2, according to a survey conducted at the meeting (1). 66% of respondents took this view, with only 26% disagreeing and 9% unsure. Thus although 38% of respondents were in favour of HS2, the majority were either against (25%) or undecided (38%) with these two groups wanting a review of current Labour policy.

These findings suggest that the support for HS2 by Labour nationally is not reflected at local level, where increasing numbers of councillors are realising that HS2 will not benefit their localities. 52% of respondents took this view.

Other important findings from the survey were:
• Asked whether HS2 would improve the UK’s competitiveness, rather more respondents said yes (38%) than no (34%). But rather more (45%) thought that HS2 would not reduce regional disparities that those who thought it would (40%).
• A large majority (62%) think that HS2 is poor value for money and the resources would be better spent elsewhere, against only 13% who disagreed. Thus even some supporters of HS2 think that it is not a good way to spend public money.
• The region from which respondents come (London and South East, Midlands and North, other regions) makes relatively little difference to whether they were for or against HS2 or whether they thought it would reduce regional disparities.
• Among respondents from authorities on or very close to the proposed route, only those from locations where a station would be located were in favour of HS2.

Overall, these findings suggest that local support for the party line on HS2 is distinctly flaky. The Labour leadership, nationally and in the big cities, is not carrying the party with them. Moreover, Labour councillors themselves lag behind their electorate – the latest YouGov poll shows 60% of Labour voters oppose HS2.

Note
1. 48 participants at the conference responded to the survey. The respondents included council Leaders and Cabinet members and other councillors, from local authorities across the regions of Britain, and from both Labour-controlled and Conservative and LibDem controlled councils. No claim is made for the respondents’ representativeness of the wider body of Labour councillors – indeed their participation in the ALC conference means they are likely to reflect the views of more active and informed councillors.

Prominent supporter of HS2 admits economic case is not rigorous

Bridget Rosewell of the Volterra consultancy has joined in the debate triggered by the KPMG report on the possible economic benefits of HS2. Rosewell rejects the criticisms of the KPMG study by Professors Overman and Graham that the KPMG work is insufficiently rigorous and the conclusions too optimistic (1).
Notably, Rosewell does not engage with the specific criticisms of KPMG’s methodology made by Overman. Instead, in a rambling argument, she makes a series of controversial claims.

She appears to dismiss a statistically rigorous approach to estimating economic benefits, arguing that the available data is messy and imprecise, and ‘statistical rigour is not a substitute for careful consideration of what the issues might be and what the statistics might miss’.

This displays confusion about what constitutes rigorous methodology. A rigorous approach is precisely one which assesses the strengths and limits of the data available, utilises it appropriately while making transparent how it is used, and draws appropriate conclusions which are justified by the methodology and respect the limits of the data. The criticisms of the KPMG work are that it fell far short of such a rigorous approach.

Rosewell then seems to try to rubbish serious methodological problems with estimating the economic impact of transport investments, such as the problem of causation, ie does the economy generate the transport system or the other way around? Here she says she finds it hard to envisage the former. In fact, she need look no further than the Jubilee line extension to London Docklands, which followed on from, and clearly was a case of government responding to, economic development in Docklands.

More dissing of the possibility for a rigorous methodological approach then leads to the punchline. Rosewell ‘judges’ that Crossrail will ‘generate total output returns of around £80bn on an investment of £15bn’ and therefore HS2’s investment of ‘around £40bn should, based on analogy like this, generate £200bn in new jobs, incomes, additional commuting to productive centres, taxes, dividends and so on. This kind of broad, historically informed analysis is in line with the sort of results that KPMG have generated’.

Now this is curious, because it was Bridget Rosewell’s Volterra who helped to produce the assessment of the economic benefits of Crossrail. This has been updated several times, and the latest (2007) version estimates the GDP benefits over 60 years from Crossrail under three economic scenarios – high, mid and low (2). The (unlikely) high figure is only £67bn, while the low one is £36bn, and all of these are considerably higher than the earlier estimate in 2005 of £20bn. This raises two issues. In the first place, Buchanan/Volterra’s work on Crossrail purports to employ the kind of rigorous methodology which Rosewell now seems to dismiss. Secondly, none of the figures are anywhere near the £80bn which Rosewell now ‘judges’ to be valid. So where does this ‘judgement’ come from? Surely not just from a desire to come up with a figure which helps to bolster the much-criticised KPMG work?

The conclusion to be drawn from this is that ‘judgement’ must not be allowed to substitute for a rigorous assessment of the case for and against HS2, in which both quantitative and qualitative data and evidence are carefully and honestly analysed. Where ‘hard’ evidence can usefully be supplemented by Judgement, the basis upon which the judgement is made needs to be set out fully and transparently.

1. http://volterra.co.uk/statistical-rigour-and-hs2
2.The Economic Benefits of Crossrail. Colin Buchanan and Partners with Volterra. 2007

The Alice in Wonderland world of HS2 economic growth claims

Claims about the impact of HS2 on economic growth get more weird and wonderful by the day.

In the Telegraph today, ‘leading economist’ Bridget Rosewell says
“If we take the KPMG £15bn, my guess is that we can add at least 25pc to that on how market access creates new growth that we haven’t thought about.”

This is a remarkable double. First, she endorses the KPMG claims which have been so thoroughly trashed (see http://blogs.lse.ac.uk/politicsandpolicy/archives/36335). Then she ‘guesses’ there could be 25% more. So the methodology for calculating HS2’s economic impact appears to be according to a formula of 100% error + 25% guess.

And if this wasn’t enough to be getting on with, in the same Telegraph article we find the Secretary of State for Transport standing on his head:
“Mr McLaughlin said the true benefits of HS2, which could cost as much as £50bn to build, could not be calculated properly by financial models. “We’re not building this [to be used] for five years or 10 years, this railway will be being used in 100 years,” he said. “Sometimes you can’t get that on a benefit cost ratio analysis. When you look at the benefit/cost ratio for the Jubilee line in London it didn’t stack up but if it hadn’t been built nor would Canary Wharf have been built.”

In fact, the construction of Canary Wharf began in 1988 and the Jubilee Line extension was authorised in 1990. So it was the London Docklands development that led to the Jubilee line extension, not the other way around.

In other words, the Secretary of State said “if I have to stand on my head to justify HS2, I will do so”.

HS2 and the Manchester lobby

As the Conservative conference meets in Manchester, it is appropriate to look at the role of the Manchester lobby for HS2, led by figures such as Graham Stringer MP and the Leader of Manchester City Council, Sir Richard Leese.

It was Leese who, when Ed Balls expressed scepticism about the escalating costs of HS2, called this a ‘cheap shot’. Quite what is cheap about a concern for the balance between costs and benefits of HS2 is not clear. But it should come as no surprise that Labour criticism of any questioning of HS2 should come from Manchester. Manchester is a leading member of the Core Cities Group of major provincial cities which has been a cheerleader for HS2, making highly exaggerated claims (such as that HS2 would ‘underpin 1m jobs in the provincial city regions, though it turned out that these jobs were not real but part of an over-optimistic economic scenario, and in any case referred to the period up to 2020, well before HS2 might start to operate). Cities like Manchester are also close to Greengauge 21, one of the longest established cheerleaders for high speed rail.

And of course, Manchester would get a station, and with it, according to the government, some regeneration activity and associated employment. So it is no surprise to find Manchester supporting HS2. What is perhaps more important is the role which the Manchester plays in backing arguments that HS2 will benefit not just Manchester but the wider city region or ‘the North’.

This is of course critical for political support in the regions. But it is not the case. Even Sir Peter Hall, a proponent of HSR, admits that while it may boost major cities, it may not help their surrounding old-industrialised regions. Indeed, given that in already well-connected countries like the UK new transport investments will mostly induce business relocation rather than ‘new’ economic growth, any gain to Manchester may represent pain to Bolton, Bury, Burnley and Blackburn.

This gets to the heart of the problem with supporting HS2 on the grounds that increased ‘connectivity’ will improve ‘competitiveness’ and thus economic output, as does the recent KPMG report for HS2 Ltd (1). One problem is that improved competitiveness and productivity may not mean more jobs. Indeed, it may mean the reverse – more output produced by fewer workers. This may explain why KPMG do not extend their (in any case flawed ) analysis to talk about employment. The second problem is that competitiveness is not a process from which all firms/places/people win. The essence of competitiveness is that it produces losers as well as winners. The competitiveness of the Chinese economy in recent decades has deindustrialised parts of the USA, and has also intensified disparities between urban and rural China, creating prosperity for some and accentuating abject poverty for others. This may seem obvious. But it applies to HS2. Increased connectivity might well benefit some people in some places, especially in locations most able benefit, most notably London but also other major cities with stations including Manchester. But there are bound to be losers – the Boltons, Burys, Burnleys and Blackburns. The proponents of HS2 try to get round this uncomfortable fact by claiming that associated investment in local transport networks will enable the whole of city regions to benefit. But this is akin to arguing that Bolton, Bury, Burnley and Blackburn can all win the Premiership at the same time as Manchester (United or City). Further investment associated with HS2 may possibly spread the limited economic benefits a bit more widely. But they cannot overcome the inherent nature of competition. If it’s not Bolton which loses, it may be Burnley. Or, indeed, in the unlikely event that the whole Manchester city region were to gain in competitiveness, it may be Wales, or East Anglia (2).

The moral of this tale is that the Manchester lobby should be seen for what it is – a lobby for Manchester. Not for the Burnleys or Blackburns, Boltons or Burys, who should beware of a wolf in sheep’s clothing.

Notes
1. See http://blogs.lse.ac.uk/politicsandpolicy/archives/36335
2. I am aware of the argument that economic growth may ‘raise all boats’. But this could only be the case in an economic system in which competition was not a core driver. So far, attempts to institute such a system have not proved able to maintain competitive levels of growth in the long term.

HS2 and the trade unions: An open letter to Frances O’Grady

Dear Frances O’Grady

In the Guardian (Letters, Saturday 21 September) you joined with the rail trade unions in supporting HS2, asking for the project to be handed over to Network Rail, and calling for a national transport strategy.

I can understand why the TUC might want to support member trade unions. I also share your concerns about the incompetence of HS2 Ltd. But the interests of the TUC and the rail unions are not the same. HS2 has big implications for public spending and thus for other unions. The rail unions support HS2 because they think that if it is cancelled it will not be replaced by other rail investment. However this position is not compatible with calls for a national transport strategy. HS2 is a stand-alone project, poorly connected to the rest of the rail network. It does not address the most serious problems of capacity and congestion on the network, which lie elsewhere, on commuter lines for example. It was initiated by Lord Adonis, an unelected technocrat, and is failing to stand up to the scrutiny of elected politicians on the Public Accounts Committee and of democratically accountable institutions such as the National Audit Office. Thus if you support a national transport strategy then HS2 should, at least, be sidelined until we have one.

Why else might the TUC support HS2? Surely you do not believe the government’s claim that it will be an ‘engine for growth’? The KPMG report which attempts to substantiate this claim has been comprehensively trashed by experts – see http://blogs.lse.ac.uk/politicsandpolicy/archives/36335 for example. The government itself claims that it will create 100,000 jobs. Even leaving aside inconvenient facts such as that many of these are likely to be not new jobs but relocated from elsewhere, if HS2 costs £43bn, each of these jobs will cost £430,000 of public money. This is absurd – jobs created through regeneration projects probably cost on average about £33,000 each.

And of course, there would be far better ways of spending the £43bn. The New Economics Foundation has undertaken detailed analysis which documents how the money could be used to upgrade the existing inter-city network, overhaul regional rail, improve walking and biking infrastructure at the same time as upgrading the national broadband network – http://www.neweconomics.org/publications/entry/high-speed-2-the-best-we-can-do. This approach would support jobs and skills in the rail industry more widely across the country, thus meeting the TUC’s ‘five tests’ – http://touchstoneblog.org.uk/2010/03/five-tests-for-high-speed-rail – much better than HS2 does. Labour’s Commission on Sustainable Transport (abolished by the government) demonstrated clearly how this kind of package would be much more effective in promoting local and regional growth than one stand-alone megaproject. Surely this is what the TUC should be backing, not HS2?

Mike Geddes

The regional impact of HS2: More smoke and mirrors

Debate about the regional impact of HS2 has been revived by the release by government of KPMG’s report, HS2: Regional Economic Impacts. KPMG claim that HS2 could generate £15bn in productivity gains for the GB economy in 2037 when the full network opens (to Leeds and Manchester as well as London to Birmingham), with a further positive effect in following years. Moreover city regions like the West Midlands will experience an improvement in their competitive position relative to London and the rest of the UK.

As might be expected, this has been seized on gleefully by key figures in Birmingham. Jerry Blackett of the Birmingham Chamber of Commerce Group is quoted as saying that ‘the KPMG report is a ringing endorsement of everything those of us who support HS2 have been saying’. Mr Blackett is, as usual, engaged in ‘boosterism’ – bigging up positive news in order to create a bubble of optimism around the city economy. But of course we all know what happens to the economy when bubbles burst. So should we join with the Birmingham boosters in welcoming the KPMG report?

Well in the first place, we should note that this is not the first time consultancy reports have been produced with eye-catching headlines about the regional economic benefits of HS2. Not so long ago, Volterra and Arup undertook a study on the basis of which the Core Cities Group (which includes Birmingham) claimed that HS2 could underpin £44bn of GVA (gross value added) and 1m additional jobs in our major urban areas. The only problem was that the Volterra/Core Cities figures turned out to be no more than a hypothetical and highly unlikely ‘best case’ economic scenario for the period up to 2020 – well before HS2 could be operating and so in no way a result of it!

KPMG also have previous form on this. Earlier work for Greengauge 21, the pro-HS2 lobby group, suggested that high high speed rail would help to bridge the north-south divide, creating more jobs and higher wages in the North and Midlands, especially in the core cities, than in London and the south, which might actually see relative losses.

It is notable however that the government and HS2 Ltd have not directly associated themselves with such claims until now, leaving that to regional boosters. There are excellent reasons for this. Studies such as that by KPMG for Greengauge were criticised by impeccably independent experts. The Institute for Transport Studies at Leeds University thought they exaggerated the role of transport investments in driving employment and questioned whether London would lose out. Indeed the great majority of experts take the view that the most dynamic centre (in this case undoubtedly London) is likely to be the principal beneficiary of new transport investments like HS2. A study by Imperial College commissioned by HS2 Ltd said that the order of magnitude of national economic ‘agglomeration’ benefits from high speed rail is likely to be very small. A cross-national review of the evidence by Professor John Tomaney of Newcastle University found that “the impacts of high speed rail investments on local and regional development are ambiguous at best and negative at worst”, while Professor Roger Vickerman, commenting on the much-hyped parallel case to HS2 of the supposed economic benefits of HS1 in Kent, says ‘they are not visible to the naked eye’.

So does the new KPMG report turn this around? Absolutely not. Experts are already trashing their methodology and conclusions. One of the biggest names in the field, Professor Henry Overman of the LSE, in a commentary titled ‘HS2 Regional Economic Impact: Garbage in……?’, says the report does things which are ‘technically wrong’ but are crucial for their findings. Key parts of their method ‘does not have a firm statistical foundation’, ‘is essentially unfounded’ and ‘produces estimates of effects that are meaningless’. This may well explain why KPMG are so curiously coy about their own work, saying in the preface that ‘all users are advised to undertake their own analysis ….before making any decision ….based upon information in this report’. Hardly a glowing endorsement of their own product!

So what can we conclude? First, that the government is getting desperate in making the case for HS2 if it needs to rely on ‘evidence’ like this. Secondly, that HS2 may well produce a bit of new regeneration around the (very few) stations, but will do little or nothing for anywhere outside these locations and will be absurdly expensive in employment creation terms.

Brummies have always had a reputation for straight talking and common sense. Hopefully they will see through the smoke and mirrors which the government and some local voices are forced to rely on to prop up the collapsing case for HS2.

This blog first appeared on http://www.thechamberlainfiles.com/