Could/should HS2 Eastern leg be shelved?

[Ianno87]

Conversely it could be argued that by building infrastructure it stimulates the economy and therefore the treasury could still think that it's worth doing.

Whilst it would increase our borrowing it's a one off cost unlike (say) paying subsidy to TPE.

Nice to see the EU still being blamed, in spite of us having left it and apparently freeing up "money**" for things like HS2, which is what the various Leave campaigns told us would would a benefit. Perhaps the grass is not greener then?

**Actually government borrowing at negative interest rates set against HS2's future revenue and economic growth, so there is no such need to "cut the cloth" anyway, as it stands up on it's own case.

 

[NoRoute]

Conversely it could be argued that by building infrastructure it stimulates the economy and therefore the treasury could still think that it's worth doing.

The UK deficit was around £300 Billion in the year upto March, the Treasury is probably thinking the UK cannot afford much more stimulation, particularly when any economic benefits are likely to take at least a decade or two to arrive.

Whilst it would increase our borrowing it's a one off cost unlike (say) paying subsidy to TPE.

That assumes that HS2 will make a profit on its operation, which cannot be assumed, if its like the rest of the rail network it will need an operating subsidy which is likely to be on top of the existing network costs.

 

[JamesT]

The UK deficit was around £300 Billion in the year upto March, the Treasury is probably thinking the UK cannot afford much more stimulation, particularly when any economic benefits are likely to take at least a decade or two to arrive.

That assumes that HS2 will make a profit on its operation, which cannot be assumed, if its like the rest of the rail network it will need an operating subsidy which is likely to be on top of the existing network costs.

The two franchises running the long distance services between London and Scotland have traditionally been amongst the franchises that paid premiums to the Treasury rather than requiring subsidy. I would be surprised if HS2 wasn’t the same, given they’ll be running new trains on modern infrastructure with a fairly consistent service.

 

[Nicholas Lewis]

The FT is saying the eastern leg will be "curtailed or mothballed", which appears to be Treasury speak for axed.

The Treasury is worried about "ballooning costs" and poor public finances as a result of the pandemic and want to save £40bn by scrapping the Birmingham-Leeds leg

As a railway supporter this is all very depressing, especially when so much public money has been wasted over the past 12 months.

It also flies in the face of the government's "levelling up" agenda.

There other comments in that article which indicate that other projects in the here and now face more scrutiny

The official added: “The Department for Transport has been told to prioritise, deliver on its efficiency promises and concentrate on what it already has on its plate. Delivery is not going well.

and

The dispute between the Treasury and Shapps is a precursor of a tense few months for the government, as chancellor Rishi Sunak attempts to rein in borrowing as part of his autumn spending review.

Thing is HS2 Eastern Leg will consume 10's of millions pa over the next few years to develop and progress it so cancelling it now isn't going to deal with spend in the here and now. My suspicion is many schemes will be kicked into the long grass now with HS2 Phase 1 consuming ever increasing sums off the Dept of Transport capital budget this will also give GBR time to become establish and to understand traffic levels pots covid as well as what the govt really wants out of them. I suspect Shapps will be gone before end of year as well so that will be an excuse for more delays to other projects.

 

[Purple Orange]

Although trip provide some balance others are reporting the HS2 minister as saying:

HS2 Minister responds to reports of eastern leg being scrapped

There were reports that the phase linking Birmingham to Nottingham, Sheffield and Leeds would be cancelled in a bid to save £40 billion

www.cheshire-live.co.uk

Which would imply that it's likely that the Eastern Arm will look different. How different we'll have to wait and see.

I think this points towards MML electrification and a full TRU. I doubt it means anything resembling full NPR will come along.

 

[camflyer]

That assumes that HS2 will make a profit on its operation, which cannot be assumed, if its like the rest of the rail network it will need an operating subsidy which is likely to be on top of the existing network costs.

Does HS2 need to make a profit? Nobody asks if the M25 or a village bypass makes a profit. Infrastructure investment is about a lot more than getting your money back.

A short delay is understandable if if it allows better integration with NPR but If the Eastern leg is "mothballed" then it's only going to cost more when it is resurrected in 10 years time when they will be calling us short-sighted for not planning ahead.

 

[HSTEd]

That assumes that HS2 will make a profit on its operation, which cannot be assumed, if its like the rest of the rail network it will need an operating subsidy which is likely to be on top of the existing network costs.

Almost every cost factor on HS2 vs the normal network will be in HS2's favour.

The mechanism that maximises recovery for the taxpayer is to push every passenger possible onto HS2.

(The only thing HS2 has against it is capital cost, which ultimately is entirely irrelevant to actual operating costs)

 

[Purple Orange]

Does HS2 need to make a profit? Nobody asks if the M25 or a village bypass makes a profit. Infrastructure investment is about a lot more than getting your money back.

A short delay is understandable if if it allows better integration with NPR but If the Eastern leg is "mothballed" then it's only going to cost more when it is resurrected in 10 years time when they will be calling us short-sighted for not planning ahead.

The operation of the service should at least be breaking even. The cost of the infrastructure (in my opinion) shouldn't be factored in, as the benefits accrued from the capital cost will be felt through economic growth and facilitating businesses to operate for many decades to come.

 

[Gareth]

Nice to see the EU still being blamed, in spite of us having left it and apparently freeing up "money**" for things like HS2, which is what the various Leave campaigns told us would would a benefit. Perhaps the grass is not greener then?

I think he was blaming leaving the EU, not the EU itself. This would be consistent with the poster's previous comments about the UK being a poor country (if it is, few countries aren't) and its history being little but the exploitation of other peoples, with no other achievements of any distinction.

Regardless, I doubt the EU plays much of a role in this, one way or the other. Covid 19, or rather our reaction to it, sure. But HS2 has been seeing rising costs way above the rate of inflation since its conception. The real issue is the UK's ability to plan, design, fund and build significant infrastructure projects.

 

[The Ham]

That assumes that HS2 will make a profit on its operation, which cannot be assumed, if its like the rest of the rail network it will need an operating subsidy which is likely to be on top of the existing network costs

HS2 would be much more likely to make a profit than the existing TOC's.

Let's take London Manchester as an example:

Currently 3*11 coach trains

Future 3*16 coach trains

So HS2 services will need more coaches, right?

Well no, currently each train takes 2 hours each way with half hour turn around at each end so we need 5 units to run the service at 1tph, or 15 at 3tph.

No with HS2 this chances to 1 for each way with half hour turn arounds so a total of 3 units to run the service at 1tph, or 9 at 3tph.

In terms of coach numbers the current diet would therefore need 165 coaches vs HS2 where it would need 144. Now or may well be that there's currently some 9 coach services, if they were all 9 coach services then HS2 would need to lease just 9 more coaches.

However that's only one cost, so let's look at staff time (which is a function of staff costs).

Again with more capacity it's likely that there'll be a need for more staff, however again the journey time comes into play.

Assuming (simplistically) that each crew run with each train then you'll need 5 currently and 3 for HS2, as such if you increase the number of staff from 3 (driver, guard, first class host, with trolly staff covering their costs) to 5 (Driver, two guards, two first class hosts and trolly staff covering their costs) then your staff costs would be the same.

Only they won't, they would be lower under HS2, as drivers generally get paid more then guards and guards more than first class hosts, so even doubling your customer facing staff you'll still have lower staff costs.

As such so far hardly any of the costs have increased significantly and some like staff would likely fall.

However the thing which makes the big difference is that you've broadly doubled the seating capacity of the trains. As such the potential for extra ticket income is significant, even if you discount some of the tickets, the fact that you could easily sell another 200 means that you could fairly easily be bringing more income.

Now given the Avanti had been paying a premium to the government, HS2 would have to do something significantly wrong to start making a loss.

 

[NoRoute]

The two franchises running the long distance services between London and Scotland have traditionally been amongst the franchises that paid premiums to the Treasury rather than requiring subsidy. I would be surprised if HS2 wasn’t the same, given they’ll be running new trains on modern infrastructure with a fairly consistent service.

Yes some of the franchises make a profit and payment to the Treasury but the franchises together don't pay the full cost of maintaining and running the infrastructure, Network Rail only gets 25% of its income from track charges, 70% comes from Government, so if you take the franchise payments and net off the Treasury support to Network Rail, do those routes actually make a profit?

For HS2, if you take the franchise payments and then net off the operational costs of maintaining the stations, track, signalling, all the Network Rail staff needed to run and maintain the HS2 route, will its operation actually generate cash? Even ignoring the depreciation and financing cost of the upto £100Bn of capital sunk into the project.

Does HS2 need to make a profit? Nobody asks if the M25 or a village bypass makes a profit. Infrastructure investment is about a lot more than getting your money back.

Road users generate vastly more in fuel tax duty and VAT than gets spent on the road network. Besides if something isn't making a profit, then at best it's breaking even or worse its losing money, if it doesn't covering its operating costs that means finding money from somewhere to fund it, which is more of an issue given the financial hole the country finds itself in.

The operation of the service should at least be breaking even. The cost of the infrastructure (in my opinion) shouldn't be factored in, as the benefits accrued from the capital cost will be felt through economic growth and facilitating businesses to operate for many decades to come.

Yes I'd agree the capital cost will probably have to be written off, but will it break even when the costs of running and maintaining the whole of the HS2 operation are considered? Not just the running of the trains.

 

[The Ham]

Yes some of the franchises make a profit and payment to the Treasury but the franchises together don't pay the full cost of maintaining and running the infrastructure, Network Rail only gets 25% of its income from track charges, 70% comes from Government, so if you take the franchise payments and net off the Treasury support to Network Rail, do those routes actually make a profit?

Table 7273 - Government subsidy by franchised passenger operator(up to 2018-19) | ORR Data Portal

dataportal.orr.gov.uk

Whilst ICWC pays a premium to the government with its share of the Network Rail Grant it does cost more to run.

However it should be noted that the Network Rail Grant also includes enhancements, so in looking at it like this we are expecting the TOC's to cover the infrastructure (building) costs.

Chances are the break even point would be fairly close if we excluded those building costs.

 

[Purple Orange]

Yes I'd agree the capital cost will probably have to be written off, but will it break even when the costs of running and maintaining the whole of the HS2 operation are considered? Not just the running of the trains.

Maybe it will.

 

[HSTEd]

Yes some of the franchises make a profit and payment to the Treasury but the franchises together don't pay the full cost of maintaining and running the infrastructure, Network Rail only gets 25% of its income from track charges, 70% comes from Government, so if you take the franchise payments and net off the Treasury support to Network Rail, do those routes actually make a profit?

For HS2, if you take the franchise payments and then net off the operational costs of maintaining the stations, track, signalling, all the Network Rail staff needed to run and maintain the HS2 route, will its operation actually generate cash? Even ignoring the depreciation and financing cost of the upto £100Bn of capital sunk into the project.

It will almost certainly consume less public money per passenger kilometer than ICWC, and thus transferring passengers from ICWC to HS2 will save the government money.

The staffing requirements along will be a huge chunk of change saved. Both on the trains and on maintenance due to the reduced WCML maintenance burden.

 

[NoRoute]

It will almost certainly consume less public money per passenger kilometer than ICWC, and thus transferring passengers from ICWC to HS2 will save the government money.

That seems unlikely, even if you ignore the depreciation and financing costs of building HS2 and you assume it breaks even or makes a surplus from operations, the financial situation of what is left of ICWC is likely to sharply deteriorate. ICWC will have lost its most valuable passengers to HS2, any new services are likely to be local services at lower capacity and lower revenues per passenger, the costs of maintaining, staffing and operating ICWC may fall but is it likely they will fall by the same extent as the reduction in passenger revenues? Seems unlikely.

Essentially, a somewhat larger number of passengers are now spread across two railway lines, but costs will have gone up by something approaching double in running two lines, I suspect revenue will increase less proportionately than costs, I think the financial position of HS2+ICWC overall will deteriorate,

The staffing requirements along will be a huge chunk of change saved. Both on the trains and on maintenance due to the reduced WCML maintenance burden.

But that is not logical, having twice the network carrying less than twice the passengers makes the financial situation worse. At various points in its history the UK rail network found itself with more capacity than it needed, financial necessity required it to rationalise that excess capacity to bring its costs down.

 

[HSTEd]

But that is not logical, having twice the network carrying less than twice the passengers makes the financial situation worse. At various points in its history the UK rail network found itself with more capacity than it needed, financial necessity required it to rationalise that excess capacity to bring its costs down.

Well first of all, in an infrastructure sense, it will be rather less than "twice the network".

HS2 is much less complex than comparable capacity legacy routes due to intensive operation and a uniform fleet of trains with identical - or near identical - properties.

Fewer train staff will be required because trains can make more round trips in a given shift, and because the shorter journey times will reduce the demand for expensive-to-provide on train services. Also the adoption of the forbidden three letter staffing acronym.

You could have a train from London to Birmingham with one crew member that can be there and back in two hours. What is the staffing requirement of a Pendo that takes far longer.?


And any rationalisation that does occur would be done to the ancient classic lines that are far more expensive to maintain than a brand new HS2.

 

[Nicholas Lewis]

It will almost certainly consume less public money per passenger kilometer than ICWC, and thus transferring passengers from ICWC to HS2 will save the government money.

The staffing requirements along will be a huge chunk of change saved. Both on the trains and on maintenance due to the reduced WCML maintenance burden.

It might do if you shut WCML down but this isn't going to happen is it. HS2 adds to the burden of running the railway by a considerably amount in both OPEX and CAPEX costs and majority of revenues will be AWC abstraction. This only flies financially if HS2 drives modal shift and that won't be known for sometime with the omens not that good.

 

[The Ham]

That seems unlikely, even if you ignore the depreciation and financing costs of building HS2 and you assume it breaks even or makes a surplus from operations, the financial situation of what is left of ICWC is likely to sharply deteriorate. ICWC will have lost its most valuable passengers to HS2, any new services are likely to be local services at lower capacity and lower revenues per passenger, the costs of maintaining, staffing and operating ICWC may fall but is it likely they will fall by the same extent as the reduction in passenger revenues? Seems unlikely.

Essentially, a somewhat larger number of passengers are now spread across two railway lines, but costs will have gone up by something approaching double in running two lines, I suspect revenue will increase less proportionately than costs, I think the financial position of HS2+ICWC overall will deteriorate,



But that is not logical, having twice the network carrying less than twice the passengers makes the financial situation worse. At various points in its history the UK rail network found itself with more capacity than it needed, financial necessity required it to rationalise that excess capacity to bring its costs down.

However, whilst some existing services will remain not all will (for instance London/Liverpool won't be needed on the classic rail network).

As such we're not going to see a cutting in half of passengers between the existing/HS2 network.

That's before we consider new rail services on the existing network to fill in after the loss of such services.

The other thing to consider, the model is based on HS2 being launched after a doubling of passenger numbers.

Simplistically in 2009 there were 100 passengers using long distance services, by 2035 this doubles to 200. If we then halve that (half to cover costs on HS2 and half to cover the costs on the classic network) then there's 100 passengers covering the costs of the classic network, so exactly what was the case in 2009.

 

[HSTEd]

It might do if you shut WCML down but this isn't going to happen is it. HS2 adds to the burden of running the railway by a considerably amount in both OPEX and CAPEX costs and majority of revenues will be AWC abstraction. This only flies financially if HS2 drives modal shift and that won't be known for sometime with the omens not that good.

I'm not sure you can say for sure how much OPEX will increase.

There are substantial economies to be made in existing WCML operations, especially as the Class 390s will be approaching end of life by the time HS2-1 and 2a open.

Marginal maintenance burdens on the WCML will shrink dramatically, and total rolling stock in operation may also shrink although that is not clear.

EDIT:

You can go from something like 9 classic ICWC services per hour to 4, likely using shorter and cheaper to operate units with fewer train crew.

If passenger numbers really do not recover back towards projections - we could always convert the Class 390s back to 8 cars for their last few years in service......

 

[SuperNova]

A reminder that national finances are not household finances. This country can afford HS2 - it's a century plus worth of investment. Borrowing will be at 0.1% - the treasury are just being as useless as ever.

 

[a_c_skinner]

That's the Sheffield to Leeds NPR plans down the drain if true.

Which raises a thought I've had for some time. HS2 to Toton, (improved) MML to Sheffield, then Leeds via a suitably improved/new line. Leeds south to Sheffield and then the East Midlands is not well served with decent journey times. Leeds to Sheffield seems especially poor and deserving of improvement.

I'm not suggesting this was a useful way to expend my Christmas crayons but it has intrigued me.

 

[JonathanH]

Which raises a thought I've had for some time. HS2 to Toton, (improved) MML to Sheffield, then Leeds via a suitably improved/new line. Leeds south to Sheffield and then the East Midlands is not well served with decent journey times. Leeds to Sheffield seems especially poor and deserving of improvement.

How do you improve the substantial issue of the station in Sheffield and corridors out to Chesterfield and Rotherham which are a fundamental part of the issue with Leeds to Sheffield. Continuing to run Birmingham to Leeds services through Sheffield, even with a high speed route to Toton simply isn't going to improve it much.

To do anything worthwhile at Sheffield is a multi-billion project if it is even possible.

 

[edwin_m]

How do you improve the substantial issue of the station in Sheffield and corridors out to Chesterfield and Rotherham which are a fundamental part of the issue with Leeds to Sheffield. Continuing to run Birmingham to Leeds services through Sheffield, even with a high speed route to Toton simply isn't going to improve it much.

To do anything worthwhile at Sheffield is a multi-billion project if it is even possible.

Indeed. And London to Leeds via HS2 to Trent/Toton, classic route to somewhere north of Sheffield and HS2 to Leeds would be slower than the existing route.

 

[Nicholas Lewis]

A reminder that national finances are not household finances. This country can afford HS2 - it's a century plus worth of investment. Borrowing will be at 0.1% - the treasury are just being as useless as ever.

on that basis the country can afford anything but it that doesn't mean it should just rack up increasing debts. Should interest rates ever increase to just 1%, which would be extraordinarily low for the last 100 years, the interest rate burden would go up 10 fold and rapidly impose strain on govt finances. Also flooding the economy with too much infrastructure work will also put pressure on inflating construction costs further.

That said i can see no logic in binning HS2 Eastern leg now as it isn't going to change the Dept of Transport spend profile very much over the next few years but guess if a decision is made it at least allows plan B to be developed at a lower cost. Should Rail Enhancement Pipeline ever get updated I suggest we will find many of the original projects proposed gone leaving at best TRU as the biggest programme along with some token electrification schemes. The freight schemes being perfect for Treasury low cost but potentially good environmental credentials with ROGs Class 93 looking like a wise decision.

 

[a_c_skinner]

HS2 to Trent/Toton, classic route to somewhere north of Sheffield and HS2 to Leeds would be slower than the existing route.

Yes, probably from the capital. Mind you Sheffield is planned for classic lines from Chesterfield and Leeds to Sheffield needs a solution. I suppose demolishing Chesterfield and Rotherham might be a little intrusive...

It is a big idea (I did use all my crayons on it) but it could improve West and East Midlands to Sheffield and Leeds and onwards. Stand at Leeds with a Rail Rover and heading south other than towards Doncaster is a depressing selection of slow trains.

 

[SuperNova]

on that basis the country can afford anything but it that doesn't mean it should just rack up increasing debts.

That's not the point. Infrastructure investment is always worth it and it's largely those who don't understand the difference between household/national finances that can't grasp that investment. Whether that be HS2, green infrastructure, new reservoirs etc. Over time - these investment are more than worth their weight in gold.

 

[Ken H]

That's not the point. Infrastructure investment is always worth it and it's largely those who don't understand the difference between household/national finances that can't grasp that investment. Whether that be HS2, green infrastructure, new reservoirs etc. Over time - these investment are more than worth their weight in gold.

depends on gilt yields. if the government starts to have trouble selling its debt because buyers fear inflation, then borrowing may become unaffordable. Which is what happened when Wilsons government over-spent and Denis Healey had to go begging to the IMF. And then the lenders start to demand real austerity.

 

[daodao]

Infrastructure investment is always worth it

That is a generalisation that is not automatically valid. Look at the number of duplicated railway lines that were built in the 19th century because railway companies competed rather than co-operated with one another. The Settle and Carlisle line is a classic example.

 

[SuperNova]

That is a generalisation that is not automatically valid. Look at the number of duplicated railway lines that were built in the 19th century because railway companies competed rather than co-operated with one another. The Settle and Carlisle line is a classic example.

Good thing we're not in the 19th century then isn't it?

 

[The Ham]

That is a generalisation that is not automatically valid. Look at the number of duplicated railway lines that were built in the 19th century because railway companies competed rather than co-operated with one another. The Settle and Carlisle line is a classic example.

This is also very different to when governments provide infrastructure, in that they rarely are looking to compete with other governments and certainly not with themselves nor between major cities.

Whilst HS2 does duplicate lines between significant cities, that's kind of the point, as the existing infrastructure isn't suitable (slow compared to driving, lack of capacity, too many conflicting movements, etc.) and so the new infrastructure is therefore being proposed to overcome one or more of the reasons why a new line is likely to better than upgrades to the existing.