"HS2 Back on Track" - front page of Sunday Express - private sector plan to build Birmingham to Manchester

[AlastairFraser]

By running a very small number of trains and ruthlessly cutting services that do not pay their way.

In addition, HS1 track access charges are not based upon full cost recovery of the cost of building the railway.
The HS1 concessionaire paid a small fraction of the actual cost of the railway when obtaining the concession.

I don't envisage the HS2 operator to operate any additional services that don't individually make a profit either. The difference with Eurostar is that there is significantly more traffic up for grabs, so there will be more services by default.

On your point about HS1, how else do they expect to recover the cost of funding the railway then?

 

[HSTEd]

I don't envisage the HS2 operator to operate any additional services that don't individually make a profit either. The difference with Eurostar is that there is significantly more traffic up for grabs, so there will be more services by default.

Well, I hope you won't miss the evening and early morning trains or any kind of regular clock-face timetable.
Comparatively few trains on Intercity West Coast currently make an actual profit once full infrastructure charges are factored in.

On your point about HS1, how else do they expect to recover the cost of funding the railway then?

The people in charge of the concession don't care about the cost of funding the railway, they only have to pay back the £2.1bn they paid for the concession.

The government ate the rest (~70%) of the cost of actually building the railway.

 

[AlastairFraser]

Well, I hope you won't miss the evening and early morning trains or any kind of regular clock-face timetable.
Comparatively few trains on Intercity West Coast currently make an actual profit once full infrastructure charges are factored in.


The people in charge of the concession don't care about the cost of funding the railway, they only have to pay back the £2.1bn they paid for the concession.

The government ate the rest (~70%) of the cost of actually building the railway.

Firstly, they could fill those trains with a clever advance pricing structure to cover their costs, I'd usually criticise this but it suits the HS2 model better than most of our railways.

Secondly, that's a fair point, although I understand Eurotunnel was not built on this model and that may be a more suitable basis for a private sector financed version of HS2 Phase 2a.

 

[Bletchleyite]

I don't envisage the HS2 operator to operate any additional services that don't individually make a profit either.

Additional ones no, but they'll have most of the present Avanti service on there, it won't look like an SNCF "chuck darts at a clock" timetable.

 

[HSTEd]

Secondly, that's a fair point, although I understand Eurotunnel was not built on this model and that may be a more suitable basis for a private sector financed version of HS2 Phase 2a.

Eurotunnel also went bust multiple times, so it's hardly an attractive model for private sector developers.

 

[AlastairFraser]

Eurotunnel also went bust multiple times, so it's hardly an attractive model for private sector developers.

The demand on cross channel services is more discretionary however, so it is a significantly more vulnerable sector than HS2 will be operating in.

Additional ones no, but they'll have most of the present Avanti service on there, it won't look like an SNCF "chuck darts at a clock" timetable.

With the current Avanti timetable, demand is significantly suppressed as a result of capacity limitations, so they'll have no problem filling more at a price.

 

[BRX]

By running a very small number of trains and ruthlessly cutting services that do not pay their way.

In addition, HS1 track access charges are not based upon full cost recovery of the cost of building the railway.
The HS1 concessionaire paid a small fraction of the actual cost of the railway when obtaining the concession.

EDIT: They paid £2.1bn out of a ~£6.8bn cost, with the latter roughly comparable to the cost of HS2 Phase 2A.

They paid £2.1bn to operate it for 30 years. It seems a little misleading to present this as paying a "small fraction of the actual cost" because if you were looking at recouping the construction cost surely you'd be looking at a period longer than 30 years. After the 30 years, the government still owns the assets and can let another concession if it wants.

 

[HSTEd]

They paid £2.1bn to operate it for 30 years. It seems a little misleading to present this as paying a "small fraction of the actual cost" because if you were looking at recouping the construction cost surely you'd be looking at a period longer than 30 years. After the 30 years, the government still owns the assets and can let another concession if it wants.

In the private sector, interest rates on capital are such that 30 years is effectively forever.

Over several decades interest costs rapidly swamp the repayment of principal and the repayments stop shrinking as loan length grows.

If a private sector operator had built HS1, they'd be looking at making their money back in 30 years or less.

 

[Bald Rick]

Then how does E* manage it with the Channel Tunnel and HS1?

By running a very small number of trains and ruthlessly cutting services that do not pay their way.

In addition, HS1 track access charges are not based upon full cost recovery of the cost of building the railway.
The HS1 concessionaire paid a small fraction of the actual cost of the railway when obtaining the concession.

EDIT: They paid £2.1bn out of a ~£6.8bn cost, with the latter roughly comparable to the cost of HS2 Phase 2A.

And it‘s not just Eurostar paying either. There’s a reason why Southeastern requires so much more Government subsidy compared to other LSE TOCs…

 

[AlastairFraser]

And it‘s not just Eurostar paying either. There’s a reason why Southeastern requires so much more Government subsidy compared to other LSE TOCs…

I understand the situation with E* is much worse than with HS1, given HS1's fees are a lot cheaper per km than Eurotunnel.

 

[Nottingham59]

And it‘s not just Eurostar paying either. There’s a reason why Southeastern requires so much more Government subsidy compared to other LSE TOCs…

I understand the situation with E* is much worse than with HS1, given HS1's fees are a lot cheaper per km than Eurotunnel.

That's because the Channel Tunnel is the monopoly supplier, and can extract the lion's share of the value available from that market.

It's why I think that Phase 2a could well get relaunched with private capital. Because Colwich is such a bottleneck, a private sector 2a could charge what it liked and HS2 would have no alternative but to pay.

I'm sure clever bankers are already devising track access regimes that guarantee a return on capital for external investors, like the water industry with it regulated asset base. Sunak will be able to boast that he has saved HS2 without recourse to public capital, the mayors are happy, and it's a triumph for Conservative Capitalism. The fact that the travelling public or future governments are compelled to pay inflated track access charges for the next 50 years will be quietly brushed under the carpet. Just like PFI.

 

[Bald Rick]

Because Colwich is such a bottleneck, a private sector 2a could charge what it liked and HS2 would have no alternative but to pay.

They couldn‘t charge what they like, in the same way neither HS1 nor Eurotunnel can. They are regulated.

 

[Nottingham59]

They couldn‘t charge what they like, in the same way neither HS1 nor Eurotunnel can. They are regulated.

Sure, they're regulated. So are water companies and so is National Grid. Private investors won't invest until they get regulatory regime that gives them a guaranteed return on capital. And you can bet they will be working hard to develop proposals for the government and the mayors that can be dressed up to please the politicians but still allow the bankers to extract value from the situtation.

 

[HSTEd]

Sure, they're regulated. So are water companies and so is National Grid. Private investors won't invest until they get regulatory regime that gives them a guaranteed return on capital. And you can bet they will be working hard to develop proposals for the government and the mayors that can be dressed up to please the politicians but still allow the bankers to extract value from the situtation.

Such plans would have to get the Treasury to go along with committing something like another billion pounds a year in public subsidy forever.

Given how large the subsidy bill already is, that will not be easy.

 

[Nottingham59]

Such plans would have to get the Treasury to go along with committing something like another billion pounds a year in public subsidy forever.

Given how large the subsidy bill already is, that will not be easy.

Yep. But that won't stop the Tories from doing it if they thought it could be spun to their advantage...

 

[Technologist]

Sure, they're regulated. So are water companies and so is National Grid. Private investors won't invest until they get regulatory regime that gives them a guaranteed return on capital. And you can bet they will be working hard to develop proposals for the government and the mayors that can be dressed up to please the politicians but still allow the bankers to extract value from the situation.

You can structure a RAB to make it incentivise behaviours which in theory means that it outperforms a direct procurement.

The basic method would be that the competitors for the programme basically bid a price and a rate of return escalator. When they reach milestones they are re-imbursed for the cost but the rate of return that they make on those costs decreases if they go over budget and increases if they go under budget.

The taxpayers still need to pay back the RAB at each stage otherwise you are funding the railway on commercial interest rates for the duration of its build which will make it massively more expensive. Whether you use the RAB as a vehicle for build or build and operation is a choice.

I’d suggest that you might want to just use it for build otherwise you might end up with the same gold plating as on HS2 as it would make sense for all the contractors to put lots of cost into the build phase estimate which gets paid off anyway to reduce their liability for the repairs during operation. However it might also mean that the risk/benefit of such choices would be properly evaluated as the RAB structure would stop anyone going bankrupt.

The difficulty with RAB is that it makes sense for a nuclear power plant or a sewer because those items are expected to fully pay back their costs from users. So the build costs of Sizewell C will be paid up front by electricity bill payers, in exchange they get 60 years of low cost electricity. In the case of a railway line the taxpayer will need to pay back the costs which diminishes the benefit vs direct procurement.

Better solutions I think would be that regional authorities pay more when they are direct beneficiaries of the scheme and schemes which put levies on property values around the stations (or grant land rights to the railway developer).

 

[AlastairFraser]

That's because the Channel Tunnel is the monopoly supplier, and can extract the lion's share of the value available from that market.

It's why I think that Phase 2a could well get relaunched with private capital. Because Colwich is such a bottleneck, a private sector 2a could charge what it liked and HS2 would have no alternative but to pay.

I'm sure clever bankers are already devising track access regimes that guarantee a return on capital for external investors, like the water industry with it regulated asset base. Sunak will be able to boast that he has saved HS2 without recourse to public capital, the mayors are happy, and it's a triumph for Conservative Capitalism. The fact that the travelling public or future governments are compelled to pay inflated track access charges for the next 50 years will be quietly brushed under the carpet. Just like PFI.

Well, if that what is required to make this very poorly implemented project somewhat useful, then so be it.
We are between a rock and a hard place with this facade of a government, and sometimes difficult choices have to be made.

 

[Krokodil]

If the full 10 or 11 platforms are built at Euston then you can run 18tph, of which a good chunk were allocated to eastern arm services. These paths are where you'd get your future Chester/North Wales or similar services

As I recall, one of the 2tph Liverpool services was booked to have a Lancaster portion attached to it, to split at Crewe. The other one (which was due to be a single set throughout) could have a Chester (and beyond) portion attached, if electrification happened.

I’ve seen it claimed that although ballast is cheaper to install, the whole life costs of slab track are less.

The Treasury of course is not known for its long-term thinking.

 

[Snow1964]

BBC reporting 3 options being considered

The mayors of Greater Manchester and the West Midlands have unveiled three options to improve rail connections between the two regions following the scrapping of the planned HS2 link.

Andy Burnham and Andy Street confirmed they were working with a private consortium of businesses to draw up the plans.

They said they were looking at three alternatives: enhance the West Coast Main Line; bypasses at the most congested parts of the line; and a completely new line possibly following the track of the cancelled HS2 route.

During a joint press conference in Birmingham on Wednesday, the mayors said they were currently assessing the cost and benefits of each option.

Conservative mayor Mr Street said: “There is a real benefit in one of those three…and we believe there is a substantial way forward.”
Both agreed the increasing congestion on the area's railways and the M6 meant something had to be done to free up capacity, particularly for freight.

“There is no question that better connectivity provides better economic opportunity,” Mr Street added.

Labour’s Mr Burnham said doing nothing was “not an option” due to the current issues with capacity on the network.
“Doing nothing will be damaging to economic growth in the regions and would mean the West Midlands and Greater Manchester are set back when compared to other areas of a similar size,” he said.
“It would also leave the UK with a major headache in the future.”
The proposed bypasses would be built at the northern and southern ends of where the cancelled HS2 route between Birmingham and Manchester would have been.

Mr Street said if a new line was built then it would be predominantly for passengers and would help to free up capacity for freight on the existing West Coast Main Line.

The Tory mayor said it would possibly follow the cancelled HS2 route but the trains would be of a lower specification and slower, to make construction cheaper.

No further specifics about the options or how much they would cost have been revealed.

Mayors unveil North West to Midlands rail options after HS2 line scrapped

Three alternatives are drawn up to improve connections between the North West and West Midlands.

www.bbc.co.uk

 

[Arkeeos]

BBC reporting 3 options being considered

So the lowest spec Stafford bypass and likely a branch north of chelford to the HS2 manchester tunnel, is what I would imagine when they talk about bypasses.

That + a branch to south of Tamworth gives you at least a somewhat functioning network that utilises the infrastructure more intensely, I guess.

It also seems to confirm that the Mayors are choosing the original NPR option, which probably means that at least something is going to happen between Manchester and Handsacre.

 

[MTR380A]

BBC reporting 3 options being considered

The Tory mayor said it would possibly follow the cancelled HS2 route but the trains would be of a lower specification and slower, to make construction cheaper.

I don't quite understand what it means. So the new track will follow the HS2 route but artificially made to support slower trains only? How would that save money? Even so, how much can be saved? And there will be another type of trains that operate on this new bypass?

 

[LNW-GW Joint]

We've been told for a decade that reducing the high speed spec for HS2 would save little money.
But now it seems it's the main reason the new line would be "cheaper".

That the consultancy firms/contractors are involved, and NR and HS2 Ltd are cooperating with DfT's agreement, is good news.
Private finance isn't usually Andy Burnham's scene, but he knows the public purse is empty (or diverted to Network North).

I wonder if the Sandbach-Northwich line alignment will find a use for the new line - a mostly rural 8 miles, but single track with awkward junctions at each end.
But it could tie into the planned HS2b alignment south of Northwich, and on to Rostherne and Manchester.

 

[Snow1964]

I don't quite understand what it means. So the new track will follow the HS2 route but artificially made to support slower trains only? How would that save money? Even so, how much can be saved? And there will be another type of trains that operate on this new bypass?

What it probably means is will be similar alignment, but with some sharper radius curves to minimise earthworks and expensive long skew bridges etc

Probably looking at restricting it to about 160-200mph (260-320 km/h) rather than the 225-240mph (360-400km/h) alignment, as doesn't look like trains wouldn't go that fast anyway.

Might also see it as useful for non-London services that can skip north midlands stops which might run 40-60 miles on new line, think of cross between Kent Javelin trains and cross country service (won't be that, but should give you indicative idea)

 

[Bald Rick]

If its used, it will be the same alignment.

 

[JKF]

Yes, just the time taken to redesign certain parts of the route for slower speeds would likely cost more in consultancy fees, planning, land purchase, increased overall construction costs due to delay etc. than anything saved on a few redesigned earthworks. Just get on and build it as planned. It’s asinine that it was ever stopped in the first place.

 

[The Planner]

I very much doubt any of its changed. The bypass is clearly Stafford and that will be about it.

 

[Snow1964]

I very much doubt any of its changed. The bypass is clearly Stafford and that will be about it.

Tend to agree, I see it as a build phase, basically HS2 phase 2a (ending south of Crewe) and an ambition of later section to link it to Northern Powerhouse Rail.

 

[Manutd1999]

We've been told for a decade that reducing the high speed spec for HS2 would save little money.
But now it seems it's the main reason the new line would be "cheaper".

Indeed - either this new project has got it sums wrong, or HS2 has some very difficult questions to answer.

 

[MTR380A]

Indeed - either this new project has got it sums wrong, or HS2 has some very difficult questions to answer.

As far as I recall, the saving through speed reduction is something around 10% only. There might not be any saving left due to extra work required for re-design, planning permission etc.

 

[Peter Sarf]

As far as I recall, the saving through speed reduction is something around 10% only. There might not be any saving left due to extra work required for re-design, planning permission etc.

Would it therefore have to be only easy savings. I am assuming using ballast instead of slab track would not require any re-design ?.

Not necessarily a worthwhile cost saving but at least something that is easier than a re-alignment about ten years later and makes use of all the existing design work.