Leaked HS2 report claims scheme ‘fundamentally flawed’ - FT

[HSTEd]

The price will be a significant dissuader. It's already viable to commute Manchester to London daily, though it's a bit of a long journey it's doable if you do some work on the train, but it is incredibly costly so only senior management etc would be able to afford it. HS2 won't change that.

HS2 removes essentially all the capacity constraints, and floods the market with cheap to provide seats.
We should see the price of such tickets fall substantially

 

[Bletchleyite]

HS2 removes essentially all the capacity constraints, and floods the market with cheap to provide seats.
We should see the price of such tickets fall substantially

No, we won't, not any more than the fact that VTWC would rather leave seats empty than reduce the price.

I would put an Anytime Return from Manchester to London (now there's a substantial sum) on there being no reduction in peak time fares on that route - most likely an increase.

Yield management is about increasing yield (income from the resources you have), not maximising bums on seats.

There are categorically not going to be annual season tickets from Manchester to London for about five to six grand (which is about the most the market will presently bear).

 

[HSTEd]

Yield management is about increasing yield (income from the resources you have), not maximising bums on seats.

The bulk of the costs of operating trains on HS2 will be unrelated from the number of trains actually run. ie they will be things like capital payments.

That means that you need to run as many trains as possible with as many seats as possible to amortise away that portion of the operating costs, which will dominate over marginal costs relating to the operation of an extra seat.

There are categorically not going to be annual season tickets from Manchester to London for about five to six grand (which is about the most the market will presently bear).

So you propose the Government will heavily subsidise, and be seen to subsidise, a half empty railway?
It has to drive all LM, Chiltern and conventional ICWC trains out of the market, and will price accordingly.

If it increases peak time fares, it will hurt it's market share and lose huge amounts of income, and cost the Government money as it now has to pay the higher cost of operating a low speed train (in terms of reduced premiums or increased subsidies)

 

[Bald Rick]

The bulk of the costs of operating trains on HS2 will be unrelated from the number of trains actually run. ie they will be things like capital payments.

I think you misunderstand Government accounting.

The bulk of the costs of operating trains on HS2 will be entirely related to the number of trains actually run.

The bulk of the total cost of HS2 will be things like capital repayments.

It will be in the interests of the HS2 operating company to maximise return on its whole operation, which let us not forget will also include the residual WCML service. This will be to pay the premium back to Government (which may well be substantial).

Note however that this return does not include the repayment of the capital for construction of the railway, that is being paid for by Government.

 

[yorksrob]

I think you misunderstand Government accounting.

The bulk of the costs of operating trains on HS2 will be entirely related to the number of trains actually run.

The bulk of the total cost of HS2 will be things like capital repayments.

It will be in the interests of the HS2 operating company to maximise return on its whole operation, which let us not forget will also include the residual WCML service. This will be to pay the premium back to Government (which may well be substantial).

Note however that this return does not include the repayment of the capital for construction of the railway, that is being paid for by Government.

Now there's a surprise. The Government is happy to gift capital funding for HS2, but reopening schemes such as Uckfield-Lewes, which would cover their operating costs (reference 2008 reopening study) are expected to pay for their capital as well.

 

[The Ham]

The thing is reducing prices cash result in more income. Let's take an extreme example, if you have a train ticket for a 100 mile journey that costs £200 you may get 10 people but it, however if the ticket was only £5 you'd probably have 2,000 people. In doing so your income would be £10,000 rather than £2,000.

Obviously there's a point at which it would cost more, as you would need to provide more capacity. However there's probably a mid point where by providing cheaper tickets attracts more income without requiring extra spending. This is likely involve trying to have almost as many bums on seats as possible.

 

[matacaster]

.......will never be built.

Just what I and millions of others suspect, it will start at London and end in Birmingham, mainly for the London commuters.

Exactly!
The Y-shaped northern bits are only there in the stated plans to make northerners think that it is a UK project that benefits them and so they should be happy to contribute. It will NEVER go north of Birmingham.

Don't forget, it's all about capacity, NOT SPEED! So lets look at Birmingham to Leeds, there are several lines which could be reinstated (Midland line between Normanton and Rotherham could be reinstated comparatively easily - originally removed because there was TOO MUCH capacity). This route was as fast or faster than going via Wakefield Westgate. Alternatively, just reinstate the curve Pontefract Monkhill to Baghill. So loads of CAPACITY between Leeds and Sheffield at comparatively little cost and also between Leeds and Doncaster via Pontefract and Shaftholme junction, but that would need to be upgraded / underpinned to obtain reasonable speeds in an area of mining subsidence. To get to Birmingham, use Midland route from Claycross via Derby and if capacity too little, take LNWR route from Winchnor, through Lichfield and Bescot. Between Manchester and Birmingham, reinstate line through Peak district and go south via Ambergate and Derby.

Going towards Scotland, the Settle Carlisle could be widened out to UIC and electrified. The cost could be contriolled by shutting it for a year and handing it over to contractors (much cost is payments to operators who cannot run services)

Are there any issues in the above - yes, of course, but there is easily available CAPACITY north of Birmingham which, while costing billions would be doable and much cheaper than HS2 Y sections. The real solution to traffic demand in London is to spread the economy throughout the country instead of insisting ever-more people work in London and commute ever longer distances.

 

[70014IronDuke]

Exactly!
The Y-shaped northern bits are only there in the stated plans to make northerners think that it is a UK project that benefits them and so they should be happy to contribute. It will NEVER go north of Birmingham.

Let's say you are correct - the north will still benefit from the increase in paths on the WCML. OK, it won't benefit as much as the originally proposals - but it will still benefit.

... Going towards Scotland, the Settle Carlisle could be widened out to UIC and electrified. The cost could be contriolled by shutting it for a year and handing it over to contractors (much cost is payments to operators who cannot run services) ... .

You reckon you could rebuild the S&C to UIC and electrify within a year? Good luck with that - I thnk you should read about the problems the Midland had building the line. I can't imagine working on Blea Moor tunnel in January is any easier now than it was in 1864.
Not that I think it will ever be electrified.

 

[LeeLivery]

Exactly!
The Y-shaped northern bits are only there in the stated plans to make northerners think that it is a UK project that benefits them and so they should be happy to contribute. It will NEVER go north of Birmingham.

Don't forget, it's all about capacity, NOT SPEED! So lets look at Birmingham to Leeds, there are several lines which could be reinstated (Midland line between Normanton and Rotherham could be reinstated comparatively easily - originally removed because there was TOO MUCH capacity). This route was as fast or faster than going via Wakefield Westgate. Alternatively, just reinstate the curve Pontefract Monkhill to Baghill. So loads of CAPACITY between Leeds and Sheffield at comparatively little cost and also between Leeds and Doncaster via Pontefract and Shaftholme junction, but that would need to be upgraded / underpinned to obtain reasonable speeds in an area of mining subsidence. To get to Birmingham, use Midland route from Claycross via Derby and if capacity too little, take LNWR route from Winchnor, through Lichfield and Bescot. Between Manchester and Birmingham, reinstate line through Peak district and go south via Ambergate and Derby.

Going towards Scotland, the Settle Carlisle could be widened out to UIC and electrified. The cost could be contriolled by shutting it for a year and handing it over to contractors (much cost is payments to operators who cannot run services)

Are there any issues in the above - yes, of course, but there is easily available CAPACITY north of Birmingham which, while costing billions would be doable and much cheaper than HS2 Y sections. The real solution to traffic demand in London is to spread the economy throughout the country instead of insisting ever-more people work in London and commute ever longer distances.

Whilst I've always been skeptical of the Yorkshire branch (the Midland Main Line is fine, just electrify it), I'd be very surprised if the Manchester section isn't built. That said, I've always thought London - Manchester should've been one phase.

Let's say you are correct - the north will still benefit from the increase in paths on the WCML. OK, it won't benefit as much as the originally proposals - but it will still benefit.

Will it? As I understand the Manchester approach is nearing capacity, if not already there. If HS2 to Manchester isn't built, growth in Gtr. Manchester will be stuffed.

 

[The Planner]

To get to Birmingham, use Midland route from Claycross via Derby and if capacity too little, take LNWR route from Winchnor, through Lichfield and Bescot. Between Manchester and Birmingham, reinstate line through Peak district and go south via Ambergate and Derby.

Going towards Scotland, the Settle Carlisle could be widened out to UIC and electrified. The cost could be contriolled by shutting it for a year and handing it over to contractors (much cost is payments to operators who cannot run services)

Both would be hideously slow, in the case of going via Lichfield still doesn't get you into Brum itself easily. What happens to all the passengers on the S&C if you close it for a year? and what do you do to the routes either side of the S&C?

 

[camflyer]

The thing is reducing prices cash result in more income. Let's take an extreme example, if you have a train ticket for a 100 mile journey that costs £200 you may get 10 people but it, however if the ticket was only £5 you'd probably have 2,000 people. In doing so your income would be £10,000 rather than £2,000.

Obviously there's a point at which it would cost more, as you would need to provide more capacity. However there's probably a mid point where by providing cheaper tickets attracts more income without requiring extra spending. This is likely involve trying to have almost as many bums on seats as possible.

That will surely depend upon government policy of the day and whether they want it to be profitable in its own right or are prepared to subsidise it in order to encourage economic development along the route.

 

[Bald Rick]

Now there's a surprise. The Government is happy to gift capital funding for HS2, but reopening schemes such as Uckfield-Lewes, which would cover their operating costs (reference 2008 reopening study) are expected to pay for their capital as well.

Sorry that’s not right.

This is the difference between a business case that justifies the capital expenditure before committing, and what happens as and when the capital has been spent and the operation starts providing a net income.

All* projects that want Government funding have to demonstrate that they provide value for money over the standard appraisal period with the standard appraisal criteria. HS2 does this. Uckfield - Lewes (and most other rural reopening proposals) don’t.

Unless any scheme that is delivered is privately financed, then it doesn’t need to pay back the loans directly, as the loans are held by Central Government as part of the U.K. Public Sector Net Debt. However the operation of the line would be expected to make as high as return as possible, to provide a contribution to Government income. It’s exactly the same rules for any new railway.

* there are a few that don’t, and that’s needs a special direction from the Secretary of State of Scottish Government, but that’s politics.

 

[Bald Rick]

The thing is reducing prices cash result in more income. Let's take an extreme example, if you have a train ticket for a 100 mile journey that costs £200 you may get 10 people but it, however if the ticket was only £5 you'd probably have 2,000 people. In doing so your income would be £10,000 rather than £2,000.

Obviously there's a point at which it would cost more, as you would need to provide more capacity. However there's probably a mid point where by providing cheaper tickets attracts more income without requiring extra spending. This is likely involve trying to have almost as many bums on seats as possible.

This is basic ecomonics and is the Price Elasticity of Demand. The example you provide would be very price elastic, ie very sensitive to price changes.

Typically, rail travel is price inelastic - ie as fares rise by x%, demand falls by less than x%. This was demonstrated perfectly in the late 80s when there were significant real terms fare rises, yet demand continued to grow significantly, because of a booming economy.

This is why fares are regulated.

 

[yorksrob]

Sorry that’s not right.

This is the difference between a business case that justifies the capital expenditure before committing, and what happens as and when the capital has been spent and the operation starts providing a net income.

All* projects that want Government funding have to demonstrate that they provide value for money over the standard appraisal period with the standard appraisal criteria. HS2 does this. Uckfield - Lewes (and most other rural reopening proposals) don’t.

Unless any scheme that is delivered is privately financed, then it doesn’t need to pay back the loans directly, as the loans are held by Central Government as part of the U.K. Public Sector Net Debt. However the operation of the line would be expected to make as high as return as possible, to provide a contribution to Government income. It’s exactly the same rules for any new railway.

* there are a few that don’t, and that’s needs a special direction from the Secretary of State of Scottish Government, but that’s politics.

Are you saying that the Government didn't have to amend the methodology for evaluating the benefit:cost ratio of HS2 so that it was different from that used for reopenings ?

Are you saying that Uckfield-Lewes was tested to the same methodology as HS2 in terms of cost:benefit ?

 

[HSTEd]

This is basic ecomonics and is the Price Elasticity of Demand. The example you provide would be very price elastic, ie very sensitive to price changes.

Typically, rail travel is price inelastic - ie as fares rise by x%, demand falls by less than x%. This was demonstrated perfectly in the late 80s when there were significant real terms fare rises, yet demand continued to grow significantly, because of a booming economy.

This is why fares are regulated.

I am not sure that High Speed rail will be price inelastic.
The travel time changes are epochal and I can't help but feel that enormous amounts of traffic could be generated by low ticket prices.

 

[6Gman]

Exactly!
The Y-shaped northern bits are only there in the stated plans to make northerners think that it is a UK project that benefits them and so they should be happy to contribute. It will NEVER go north of Birmingham.

Don't forget, it's all about capacity, NOT SPEED!

Between Manchester and Birmingham, reinstate line through Peak district and go south via Ambergate and Derby.

And how long would that take, compared to going via Stafford?

And it doesn't resolve the issue of capacity into Piccadilly or New Street.

 

[The Ham]

I am not sure that High Speed rail will be price inelastic.
The travel time changes are epochal and I can't help but feel that enormous amounts of traffic could be generated by low ticket prices.

Quite, in my example of £5 for 100 mile trip you would get lots of people who would travel just because they could.

As I said that's an extreme example, however if you can get to a point where travel to London was 12p per mile (£40 return from Manchester) then no one would drive it if they were going on their own as the fuel would be about the same cost.

At the moment a 390 with 300 people all paying £200 brings in £60,000. Change that to 900 people and they only need to pay £67 to bring in the same amount.

Even if you wanted to being in an extra 50% it would only need to be £100 each for those 900 people.

Although £100 is a lot more than £40 is still 50% cheaper than £200 which is what people are already willing to pay. And a lot more people would be willing to pay £100 than £200.

Could it be three times as much? Maybe. However if you still offered turn up and go tickets as per today that you'd still get some still pay that amount. That could allow you to offer some more crazy cheap tickets so that your average stayed the same.

 

[matacaster]

And how long would that take, compared to going via Stafford?

And it doesn't resolve the issue of capacity into Piccadilly or New Street.

1. Of course it would take longer than going via Stafford, perhaps 20 minutes more - but some people might be quite pleased that they didn't reach Birmingham so soon. With HS2 between London and Birmingham reducing time for that leg of journey, extra time to Manchester would likely offer journey time like now - is that such a big issue?
2. I reckon you could get a couple of extra platforms at Piccadilly near platform 1 where the old Royal Mail? sidings were. As for Birmingham, why go to New Street? - a short link to Curzon street would surely provide a simple and dare I say, convenient and cheap option.

 

[The Planner]

2. I reckon you could get a couple of extra platforms at Piccadilly near platform 1 where the old Royal Mail? sidings were. As for Birmingham, why go to New Street? - a short link to Curzon street would surely provide a simple and dare I say, convenient and cheap option.

You mean where the HS2 station will be at Piccadilly? There will be no links to HS2 from the conventional network apart from Handsacre and Crewe south of Manchester.

 

[Warwick]

HS2 removes essentially all the capacity constraints, and floods the market with cheap to provide seats.
We should see the price of such tickets fall substantially

Like you I'm a lover of irony.

 

[Bald Rick]

Are you saying that the Government didn't have to amend the methodology for evaluating the benefit:cost ratio of HS2 so that it was different from that used for reopenings ?

Are you saying that Uckfield-Lewes was tested to the same methodology as HS2 in terms of cost:benefit ?

I’m saying that at a given point in time, all transport projects are tested the same way. The methodology may change from time to time, as will the values of factors assessed, and that ca only be correct as processes improve.

 

[Bald Rick]

I am not sure that High Speed rail will be price inelastic.
The travel time changes are epochal and I can't help but feel that enormous amounts of traffic could be generated by low ticket prices.

I’m not sure either, but it sure as hell won’t have a price elasticity of 3!

 

[Bald Rick]

Quite, in my example of £5 for 100 mile trip you would get lots of people who would travel just because they could.

As I said that's an extreme example, however if you can get to a point where travel to London was 12p per mile (£40 return from Manchester) then no one would drive it if they were going on their own as the fuel would be about the same cost.

Plenty of people would still drive regardless of price, depending on their precise start and end points, what they needed to do when they get there, where they are going next, and what they need to take with them.

As I’ve mentined before, I get free travel, yet when I’m going to my parents - who live within 3 minutes of a station with a reasonable service - and more often than not I will drive as overall it is more convenient.

 

[The Ham]

Plenty of people would still drive regardless of price, depending on their precise start and end points, what they needed to do when they get there, where they are going next, and what they need to take with them.

As I’ve mentined before, I get free travel, yet when I’m going to my parents - who live within 3 minutes of a station with a reasonable service - and more often than not I will drive as overall it is more convenient.

There's going to be a lot of people who will be using HS2 to travel long distances, given that it will be traveling at high speed with few stops the journey time saving compared with driving is likely to be fairly significant.

London to Birmingham tends to be a little quicker by train than driving allowing for some traffic and starting from (say) the Houses of Parliament. Add in a 30 minutes journey time saving and even if the train is every 30 minutes and you just miss one your journey is likely to be comparable time wise.

However from Birmingham is likely to be more frequent than 2 an hour but your not likely to be starting from the centre so overall most journeys will be comparable even with a long change time.

Also less and less people are opting to own a car (or at least multiple cars) meaning that they are used to the lack of immediate nature of car travel, so giving them a cheaper way of traveling would probably result in then traveling more.

The increase in low cost airlines hasn't resulted in a small increase in the number of people flying rather it lead to a massive boom. HS2 could result in a similar change in travel patterns to EasyJet.

 

[yorksrob]

I’m saying that at a given point in time, all transport projects are tested the same way. The methodology may change from time to time, as will the values of factors assessed, and that ca only be correct as processes improve.

I see that a new study has recently been announced for Skipton - Colne, so the proof of the pudding will be in the eating as to what is taken into account.

 

[snowball]

I see that a new study has recently been announced for Skipton - Colne, so the proof of the pudding will be in the eating as to what is taken into account.

More recent than the one that was announced at the beginning of February?

 

[yorksrob]

More recent than the one that was announced at the beginning of February?

No, but I still count that one as recent, given that it hasn't been done yet.

 

[Bald Rick]

I see that a new study has recently been announced for Skipton - Colne, so the proof of the pudding will be in the eating as to what is taken into account.

*sighs*

I’m going to say this one last time.

At any given point in time there is only one methodology for assessing transport projects that require Government funding.

It’s called WebTAG, and is recognised internationally as one of the best appraisal methodologies anywhere in the world. You can read all about it here:

https://www.gov.uk/guidance/transport-analysis-guidance-webtag

There is a substantial amount of guidance linked from that web page.

 

[PeterC]

Because we are reminded constantly that HS2 is about capacity, not speed. So, if that's the case it's just wasting money to engineer it for 250mph operation.

Lower speed means reduced headways means more trains. Save a fortune too.

Not that I'm sold on either capacity or speed though.

WE know that the issue is capacity but its sold to the public on speed.
I am in the cynical school and don't believe that phase 2 will be built.

 

[quantinghome]

I am in the cynical school and don't believe that phase 2 will be built.

A number of posters say similar things; can I ask why you believe this? Do you think Phase 2 is a fundamentally flawed concept? Is the government spending hundreds of millions of pounds on planning and design for Phase 2 as some cynical PR exercise to fool Northerners? Are there fundamental reasons why it can't be done that the government has yet to realise?