Restarting HS2a

[slowroad]

Yes, completely agree. Rescheduling in 2023 is already have thought to have added up to 3.1bn to the project and I wonder if it its continuing to add more than that.

Trouble is, spending on HS2 means not spending on other things that have a better return.

 

[FMerrymon]

Trouble is, spending on HS2 means not spending on other things that have a better return.

One may look at it like that, but if you're already committed, then the return you expected will be less, you'll receive the return later and be a more costs till then, so makes more sense just to get it done.

 

[The Ham]

One may look at it like that, but if you're already committed, then the return you expected will be less, you'll receive the return later and be a more costs till then, so makes more sense just to get it done.

Indeed, let's say by delaying opening by 5 years it costs an extra £2bn in construction inflation above the standard rate of inflation and you pay out on £1bn of interest on money already spent, then you need to find the equivalent of £0.6bn a year over that 5 year window just to cover those costs (let alone the actual construction costs).

If you were working on the assumption that you would only spend £5bn a year on building HS2 then you'd need to extend your build program by a further 7 months.

That's before you consider any of the benefits of opening sooner, such as the economic improvements from the trains running.

Government spending is not like a household/personal budget, where nearly all debt is seen as bad. Especially as the research paper which showed the link between poor growth and high debt ratios had been found to have weighted poorly:

Reinhart, Rogoff... and Herndon: The student who caught out the profs

The mistakes revealed this week in a celebrated paper by two eminent economists, were spotted by a student - Thomas Herndon of the University of Massachusetts Amherst.

www.bbc.com

Thomas and his supervisors also didn't like the way that Reinhart and Rogoff averaged their data. They say one bad year for a small country like New Zealand, was blown out of proportion because it was given the same weight as, for example, the UK's nearly 20 years with high public debt.

"New Zealand's single year, 1951, at -8% growth is held up with the same weight as Britain's nearly 20 years in the high public debt category at 2.5% growth," Michael Ash says.
"I think that's a mistaken way to examine these data."

There's no black and white here, because there are also downsides to the obvious alternatives. But still, it's controversial and it, too, made a big difference.

All these results were published by Thomas Herndon and his professors on 15 April, as a draft working paper. They find that high levels of debt are still correlated with lower growth - but the most spectacular results from the Reinhart and Rogoff paper disappear. High debt is correlated with somewhat lower growth, but the relationship is much gentler and there are lots of exceptions to the rule.

In other words whilst high debt creates some extra economic headwinds there's still likely to be growth (for example if the UK was still at 2.5% growth we'd be doing better than we had of late).

 

[slowroad]

Indeed, let's say by delaying opening by 5 years it costs an extra £2bn in construction inflation above the standard rate of inflation and you pay out on £1bn of interest on money already spent, then you need to find the equivalent of £0.6bn a year over that 5 year window just to cover those costs (let alone the actual construction costs).

If you were working on the assumption that you would only spend £5bn a year on building HS2 then you'd need to extend your build program by a further 7 months.

That's before you consider any of the benefits of opening sooner, such as the economic improvements from the trains running.

Government spending is not like a household/personal budget, where nearly all debt is seen as bad. Especially as the research paper which showed the link between poor growth and high debt ratios had been found to have weighted poorly:

Reinhart, Rogoff... and Herndon: The student who caught out the profs

The mistakes revealed this week in a celebrated paper by two eminent economists, were spotted by a student - Thomas Herndon of the University of Massachusetts Amherst.

www.bbc.com

In other words whilst high debt creates some extra economic headwinds there's still likely to be growth (for example if the UK was still at 2.5% growth we'd be doing better than we had of late).

It’s only in so far as construction inflation increases above general inflation that real costs increase (taxes rise with inflation too). And even if you choose to borrow more, there is always a choice about what you spend it on. The economics of HS2 are so bad that the return/benefits of spending on other things are likely to easily offset any real cost increases from delay.

 

[The Ham]

It’s only in so far as construction inflation increases above general inflation that real costs increase (taxes rise with inflation too). And even if you choose to borrow more, there is always a choice about what you spend it on. The economics of HS2 are so bad that the return/benefits of spending on other things are likely to easily offset any real cost increases from delay.

Do you have any data which shows that construction inflation has increased slower than general inflation?

What I've seen is that it's still going up rather much faster.

For example, at work we have a book for working out costs, now it's not the latest version and so it's based on data from 4 years ago, we recently got a quote for a project and compared the prices in that book and on average it was about 35% more than we would have priced it as.

That compares with general inflation which would have seen prices rise 22% in that timeframe.

To take your logic to an extreme example you'd still pause construction of HS2 when there's just £100 left to spend to finish it because spending that £100 would be better spent on something else because it would return £4 more.

Clearly the costs of servicing the loans on the money spent is a factor, so the better value schemes would have to also cover those costs.

Using the above extreme example, if the return was £4 more than the cost of the HS2 loan costs then it's worth pausing HS2.

However we're either talking stellar returns (so why not do both anyway) or something which isn't going to see a return for decades (due to the scale of the project) and so the "cost" of delay isn't going to be that great.

Also, the poor business case for HS2 was based on 2.5% per year rail growth, whilst the 2023/24 data shows we're behind where it should be (COVID causing that), it also shows that the rate of growth was significantly ahead of 2.5% so it's likely the gap will continue to close.

It's also worth noting that if rail growth only reaches pre COVID levels in 2030 then we'd be back on track for that 2.5% growth model.

However, if rail growth either reaches pre COVID levels prior to 2030 and then maintains at least 2.5% growth or sees growth higher than 2.5% for long enough, it's not unlikely that rail use could be higher than the model suggested and therefore the business case could turn out to have under estimated the benefits.

For example in 2019 the model suggested for every 100 passengers n 2009 there should be 131 passengers using the railways for the business case to be on track. In 2019 the numbers of people travelling between London and West Midlands/North West/Scotland wasn't 128, in fact it was quite some way adrift from that. As the actual numbers were 170 passengers.

In 2024 we would have needed there to have been 148, whilst the actual number was 128 for between London West Midlands/North West (I've excluded Scotland, as that was 210, but if included that it would be 152, but that is due to the success of the ECML services, so could be argued it's not reticent to HS2).

However given growth was at least 8% (on Scotland, the other two regions saw at least 14% growth) if we see 8% growth for the next 3 years (whilst the model would have moved the target to 156) passenger numbers would have reached 161 and whilst still behind the 170 of 2019 it'll still be ahead of the business case model.

Do you want to guess at what the rate of growth was expected to rise by for the first 10 years of operation of HS2 due to all the extra capacity HS2 was going to create (bear in mind that in the year before opening with just whatever improvements may have happened to the existing network the rate of growth was expected to be 2.5%)?

 

[slowroad]

Do you have any data which shows that construction inflation has increased slower than general inflation?

What I've seen is that it's still going up rather much faster.

For example, at work we have a book for working out costs, now it's not the latest version and so it's based on data from 4 years ago, we recently got a quote for a project and compared the prices in that book and on average it was about 35% more than we would have priced it as.

That compares with general inflation which would have seen prices rise 22% in that timeframe.

To take your logic to an extreme example you'd still pause construction of HS2 when there's just £100 left to spend to finish it because spending that £100 would be better spent on something else because it would return £4 more.

Clearly the costs of servicing the loans on the money spent is a factor, so the better value schemes would have to also cover those costs.

Using the above extreme example, if the return was £4 more than the cost of the HS2 loan costs then it's worth pausing HS2.

However we're either talking stellar returns (so why not do both anyway) or something which isn't going to see a return for decades (due to the scale of the project) and so the "cost" of delay isn't going to be that great.

Also, the poor business case for HS2 was based on 2.5% per year rail growth, whilst the 2023/24 data shows we're behind where it should be (COVID causing that), it also shows that the rate of growth was significantly ahead of 2.5% so it's likely the gap will continue to close.

It's also worth noting that if rail growth only reaches pre COVID levels in 2030 then we'd be back on track for that 2.5% growth model.

However, if rail growth either reaches pre COVID levels prior to 2030 and then maintains at least 2.5% growth or sees growth higher than 2.5% for long enough, it's not unlikely that rail use could be higher than the model suggested and therefore the business case could turn out to have under estimated the benefits.

For example in 2019 the model suggested for every 100 passengers n 2009 there should be 131 passengers using the railways for the business case to be on track. In 2019 the numbers of people travelling between London and West Midlands/North West/Scotland wasn't 128, in fact it was quite some way adrift from that. As the actual numbers were 170 passengers.

In 2024 we would have needed there to have been 148, whilst the actual number was 128 for between London West Midlands/North West (I've excluded Scotland, as that was 210, but if included that it would be 152, but that is due to the success of the ECML services, so could be argued it's not reticent to HS2).

However given growth was at least 8% (on Scotland, the other two regions saw at least 14% growth) if we see 8% growth for the next 3 years (whilst the model would have moved the target to 156) passenger numbers would have reached 161 and whilst still behind the 170 of 2019 it'll still be ahead of the business case model.

Do you want to guess at what the rate of growth was expected to rise by for the first 10 years of operation of HS2 due to all the extra capacity HS2 was going to create (bear in mind that in the year before opening with just whatever improvements may have happened to the existing network the rate of growth was expected to be 2.5%)?

Just a detail but I did not mean to say that construction inflation was lower than general inflation- rather that it is a problem only in so far as it is higher, not by the full extent of the difference. On passenger numbers , the key question is whether that level of growth could be sustained with fares at a level that would generate the required return. Given what has happened to business travel, there are grounds for scepticism. (I know many people will be sceptical, but also, over the longer term, there is a least a chance that electric air travel will further eat into the business market.)

 

[SCDR_WMR]

Just a detail but I did not mean to say that construction inflation was lower than general inflation- rather that it is a problem only in so far as it is higher, not by the full extent of the difference. On passenger numbers , the key question is whether that level of growth could be sustained with fares at a level that would generate the required return. Given what has happened to business travel, there are grounds for scepticism. (I know many people will be sceptical, but also, over the longer term, there is a least a chance that electric air travel will further eat into the business market.)

That's only the case if this is a money making business. It isn't. It's a nationally important piece of public transport infrastructure. Notice that the previous post mentioned passenger numbers not turnover as that is the most important metric for this.

That's not to say finances are not important, of course they are otherwise travel could be free, but I don't believe HS2 or any rail line has ever been built as a profit making entity.

 

[JamesT]

That's only the case if this is a money making business. It isn't. It's a nationally important piece of public transport infrastructure. Notice that the previous post mentioned passenger numbers not turnover as that is the most important metric for this.

That's not to say finances are not important, of course they are otherwise travel could be free, but I don't believe HS2 or any rail line has ever been built as a profit making entity.

Until 1948, all railway lines in the UK were built to make a profit.

 

[takno]

Until 1948, all railway lines in the UK were built to make a profit.

That was always the plan. Not all that many of them actually managed it

 

[Krokodil]

That was always the plan. Not all that many of them actually managed it

Though generally life was pretty good until 1914

 

[Sorcerer]

That's only the case if this is a money making business. It isn't. It's a nationally important piece of public transport infrastructure. Notice that the previous post mentioned passenger numbers not turnover as that is the most important metric for this.

That's not to say finances are not important, of course they are otherwise travel could be free, but I don't believe HS2 or any rail line has ever been built as a profit making entity.

Quite so, and I find it bizarre that railways seem to have an expectation to make a profit to justify their upfront costs, something that almost never seems to be expected of roads. Indeed high-speed inter-city rail tends to actually be the more profitable side of passenger services, and if done in full it could very much encourage enough of a modal shift to recoup some of the initial costs from fare revenue. Even so, the non-monetary contributions would still be enough to justify the investment even if it doesn't operate at a profit for years.

Until 1948, all railway lines in the UK were built to make a profit.

It's considerably easier for railways to make a profit when it's the only viable form of transport available. But as we saw in the 1960s trains were no match for the increasingly affordable air travel and speed and convenience of cars and motorways, so profiteering is now considerably harder when passengers have choices, especially if one of those choices is an overcrowded expensive train compared to the privacy and flexibility of a car. Transport infrastructure in today's age should be considered more of a public service rather than private enterprise. It can make a profit, but it shouldn't be the end goal.

 

[HSTEd]

Quite so, and I find it bizarre that railways seem to have an expectation to make a profit to justify their upfront costs, something that almost never seems to be expected of roads. Indeed high-speed inter-city rail tends to actually be the more profitable side of passenger services, and if done in full it could very much encourage enough of a modal shift to recoup some of the initial costs from fare revenue. Even so, the non-monetary contributions would still be enough to justify the investment even if it doesn't operate at a profit for years.

The problem here is we don't care if specific services make money, we care about the change in overall subsidies to the industry.
Much of HS2's revenue will be abstracted from the classic railway, which will be unable to strongly reduce its operating costs, because the scheme requires the bulk of the classic railway operate almost as before.

HS2 is, unlike modern Shinkansen schemes in Japan, not designed to enable significant closures or rationalisation of the legacy railway system.

So the net reduction in subsidies will be far less than would be naively expected.

 

[slowroad]

That's only the case if this is a money making business. It isn't. It's a nationally important piece of public transport infrastructure. Notice that the previous post mentioned passenger numbers not turnover as that is the most important metric for this.

That's not to say finances are not important, of course they are otherwise travel could be free, but I don't believe HS2 or any rail line has ever been built as a profit making entity.

It is not about “profits” - there is no good case for using large amounts of very constrained public funds to support the leisure travel of people, many of whom have above average incomes.

 

[takno]

It is not about “profits” - there is no good case for using large amounts of very constrained public funds to support the leisure travel of people, many of whom have above average incomes.

HS2 provides a more effective distribution of wealth around the regions, frees up space on railways for freight and commuters, supports business by reducing time lost in travel, allows people to provide free care to relatives the other end of the country rather than being a burden on public funds, and reduces congestion.

I don't agree that there's anything particularly wrong with using public funds to support leisure travel, nor do I worry too much if perhaps as many as half those people are on above median incomes. Even if you are going to argue that that's wrong though, complaining about an important piece of infrastructure on the basis that somebody somewhere might get a leisure trip out of it seems very extreme.

 

[joieman]

HS2 provides a more effective distribution of wealth around the regions, frees up space on railways for freight and commuters, supports business by reducing time lost in travel, allows people to provide free care to relatives the other end of the country rather than being a burden on public funds, and reduces congestion.

I don't agree that there's anything particularly wrong with using public funds to support leisure travel, nor do I worry too much if perhaps as many as half those people are on above median incomes. Even if you are going to argue that that's wrong though, complaining about an important piece of infrastructure on the basis that somebody somewhere might get a leisure trip out of it seems very extreme.

After all, increased leisure travel was one factor that enabled the expansion of the legacy railway network.

 

[slowroad]

HS2 provides a more effective distribution of wealth around the regions, frees up space on railways for freight and commuters, supports business by reducing time lost in travel, allows people to provide free care to relatives the other end of the country rather than being a burden on public funds, and reduces congestion.

I don't agree that there's anything particularly wrong with using public funds to support leisure travel, nor do I worry too much if perhaps as many as half those people are on above median incomes. Even if you are going to argue that that's wrong though, complaining about an important piece of infrastructure on the basis that somebody somewhere might get a leisure trip out of it seems very extreme.

But when those benefits are added up, they are much lower relative to costs than could be obtained by spending the money on other things.

 

[SynthD]

The classic railway will be able to do more with their subsidies, by serving the intermediate, the semi fast and stopper services.

It is not about “profits” - there is no good case for using large amounts of very constrained public funds to support the leisure travel of people, many of whom have above average incomes.

I've been unclear on this point. As HS2 has created its own debt, (which is seen as safe because there is a clear repayment scheme based on future tickets, and it's government backed) has it held back the government from borrowing that mount themselves?

 

[JamesT]

I've been unclear on this point. As HS2 has created its own debt, (which is seen as safe because there is a clear repayment scheme based on future tickets, and it's government backed) has it held back the government from borrowing that mount themselves?

According to Lord Hendy, HS2 doesn’t have its own debt. https://www.theyworkforyou.com/wrans/?id=2025-04-12.HL6631.h&s=hs2

HS2 Ltd does not have debt as the Company is fully funded by HM Treasury/DfT.

So it would be part of the overall government debt, the level of which is a high priority for the Chancellor.

 

[Brubulus]

According to Lord Hendy, HS2 doesn’t have its own debt. https://www.theyworkforyou.com/wrans/?id=2025-04-12.HL6631.h&s=hs2

So it would be part of the overall government debt, the level of which is a high priority for the Chancellor.

HS2 spending isn't subject to fiscal rules around day to day spending, but it does impact total borrowing and debt. Clearly the solution to prevent further cost inflation is to pursue a reasonable accelerated timetable, as in accelerated until the point at which doing it faster leads to cost increases larger than inflation.

 

[Nottingham59]

The classic railway will be able to do more with their subsidies, by serving the intermediate, the semi fast and stopper services.

I've been unclear on this point. As HS2 has created its own debt, (which is seen as safe because there is a clear repayment scheme based on future tickets, and it's government backed) has it held back the government from borrowing that mount themselves?

I don't think HS2 has issued bonds or any other sort of debt to pay construction costs. I'm sure those have come from the exchequer.

And in any case, the income from future ticket sales will never be enough to pay back construction costs. The "Cost" in the Benefit-Cost Ratio is actually what's left over after the value of future ticket sales has been deducted from construction costs.

 

[HSTEd]

The classic railway will be able to do more with their subsidies, by serving the intermediate, the semi fast and stopper services.

Will they, once the WCML loses its primary sources of farebox income?

There will likely be major incrases in net subsidy to the legacy WCML operators, unless there are major cuts to infrastructure or operations.

I've been unclear on this point. As HS2 has created its own debt, (which is seen as safe because there is a clear repayment scheme based on future tickets, and it's government backed) has it held back the government from borrowing that mount themselves?

AFAIK there are no HS2 bonds, the Treasury is allergic to such hypothecation. It all goes into the big public debt pool.

 

[Sorcerer]

Will they, once the WCML loses its primary sources of farebox income?

There will likely be major incrases in net subsidy to the legacy WCML operators, unless there are major cuts to infrastructure or operations.

There will still be some InterCity services on the WCML post-HS2, and I think the Chester and North Wales trains will be one of them. They'll just likely be slower but also cheaper for passengers who prefer to spend less and for whom time is not an obstacle. But it's also very likely that HS2 and the legacy route operators will both be under Great British Railways, so profits made from HS2 and InterCity services can act as feeders for the regional and local services instead of now where Avanti and LNWR profits go to separate shareholders.

 

[HSTEd]

There will still be some InterCity services on the WCML post-HS2, and I think the Chester and North Wales trains will be one of them. They'll just likely be slower but also cheaper for passengers who prefer to spend less and for whom time is not an obstacle.

Well yes, and those trains will not raise much in terms of ticket revenue. They will be niche services with cheap tickets.
This does not solve the primary problem.

But it's also very likely that HS2 and the legacy route operators will both be under Great British Railways, so profits made from HS2 and InterCity services can act as feeders for the regional and local services instead of now where Avanti and LNWR profits go to separate shareholders.

The problem is the net revenue of the HS2 operations may not cover the increase in subsidies required for the classic operations.
The total cost of operating the railway system will increase because HS2 will cost money to operate, but it is not clear that the increase in revenue from selling the extra tickets HS2 enables (or extra freight trains) will cover this increase.

In my own view, a scheme could have been designed that would have provided transformative journey improvements, as HS2 purports to do, but also allowed major economies in classic railway operations. This would have been a very different scheme to the one proposed.

 

[Snow1964]

Yes, completely agree. Rescheduling in 2023 is already have thought to have added up to 3.1bn to the project and I wonder if it its continuing to add more than that.

There is two parts, the start-stop rescheduling completely undermines the initial sequencing and adds costs. That is the cost base is not spread based on build times, but get parts already contracted, and others starting later.

The effect is not only do costs rise, get a completion delay, and lots of dead money invested with an extended deferred return. In blunt terms will now be completed tunnels, earthworks, and Curzon Street station, all sitting idle from 2027 or 2028, with no return (income from running trains) until many years later

 

[Sorcerer]

Well yes, and those trains will not raise much in terms of ticket revenue. They will be niche services with cheap tickets.
This does not solve the primary problem.

I don't think they'll raise much simply by virtue of there not being that many. The real net benefit is when you have more space for local services that don't need as large gaps in the timetable. If we have an increase in 10tph for paths then that could see an increase of up to 120 extra coaches depending on the formation (twelve carriage trains). Admittedly it most likely won't always be this long, but it's a lot of extra seating that can be filled to meet current demand.

The problem is the net revenue of the HS2 operations may not cover the increase in subsidies required for the classic operations.
The total cost of operating the railway system will increase because HS2 will cost money to operate, but it is not clear that the increase in revenue from selling the extra tickets HS2 enables (or extra freight trains) will cover this increase.

I did forget to consider that extra railways would mean extra cost, especially when it's highly-advanced and high-speed. However, I do think the demand will meet the supply within a few years to the point where the line eventually pays for itself. Granted it could be better if the route was done in full, but there is at least still some value to Phase 1 even if the entire route's potential is dwindled by all the cutbacks.

 

[eldomtom2]

HS2 is, unlike modern Shinkansen schemes in Japan, not designed to enable significant closures or rationalisation of the legacy railway system.

Modern Shinkansen schemes are not really designed to "enable significant closures or rationalisation" - it's just that the law allows the JR companies to very easily divest themselves of "parallel conventional lines" once the Shinkansen is opened, and it's usually in their financial interest to so since the lines are usually unprofitable with express services removed and they can expect local governments to pick up the tab for any genuinely necessary connections. For example, the Hokkaido Shinkansen is hardly designed to serve the city of Hakodate (population 239,813) with its station ~10 miles away from the city in open countryside, but JR Hokkaido still plans to divest itself of the conventional line linking the Shinkansen station with the city proper, with the prospect of the line closing entirely and being replaced by buses being seriously considered by local governments.

 

[The Ham]

It is not about “profits” - there is no good case for using large amounts of very constrained public funds to support the leisure travel of people, many of whom have above average incomes.

How many have above average incomes and which average?

To illiterate my point, statically this statement is 100% accurate:

The average salary of those in the UK is higher than the average wage in the UK

Therefore, when there's headlines saying "average pay of those using the railways is higher than the national average" it may not be 100% accurate to use that to then say the average leisure user is paid above average.

Also the word many is vague enough to allow people to reinforce their views but may not actually be that big a deal.

Let's say I believed a prediction that I would be punched by someone called Arthur, I could treat a headline saying "many babies called Arthur being born" and fear that I would be meeting an Arthur every five minutes.

As many just means a large number, with no clear definition of where "large" starts, so it's entirely possible to say that 1,000 is a large number, it's certainly larger than quite a few numbers, not the largest, but that's not what we're defining.

Therefore, as the number of babies being called Arthur is only about 5,500 babies a year out of about 700,000 live births a year, I'm still not going to actually meet that many.

Well yes, and those trains will not raise much in terms of ticket revenue. They will be niche services with cheap tickets.
This does not solve the primary problem.

The problem is the net revenue of the HS2 operations may not cover the increase in subsidies required for the classic operations.
The total cost of operating the railway system will increase because HS2 will cost money to operate, but it is not clear that the increase in revenue from selling the extra tickets HS2 enables (or extra freight trains) will cover this increase.

In my own view, a scheme could have been designed that would have provided transformative journey improvements, as HS2 purports to do, but also allowed major economies in classic railway operations. This would have been a very different scheme to the one proposed.

The thing with HS2 is that the cost per seat falls significantly, so it's actually rather easy for HS2 services to cover a significant amount of subsidy of the classic network.

Rolling stock costs for a 16 coach HS2 service (assuming the same cost per coach) would be the same as the current mix of 390 train lengths and would be cheaper if the 390's were lengthened to 12 coaches. As I've explained before this is due to the round trip being much shorter than currently.

That means that if the train leasing costs are the same for a service with up to 607 seat capacity, as it is for a service with 1,100 seats then those costs will be lower.

Likewise staffing costs, as not only are there more seats per driver, but the number of services a driver can do will also increase as the journey time will be shorter.

Therefore if we were to assume the cost to run per seat if any given services on the WCML was 100 with 30 being leasing costs and 30 being staffing costs.

Based on the above the leasing costs would fall to 17 and the staffing costs would fall to 10, even if we assume that the cost of everything else was 50% more, then the cost per seat rate would still fall from 40 to 33. Giving us a total of 60 per seat (66,000 per service vs 60,700)

Now let's say that the average income per seat on the WCML was 90 (so making a loss), that's an income of 54,630 per service (and a loss of 6,070 per service)

If passenger numbers stayed the same then the income per seat would fall to 50 per seat as there's far more seats on the new services. This also means that the losses would be much larger at 24,570.

However, it's possible to reduce the ticket prices to attract more people. Let's say we reduce ticket prices from 180 to 153 that 15% reduction will attract a lot of people, and probably far more than 15% more people.

To get to the same loss per service you'd need to increase passenger numbers by 42%. However, rather than the trains being 50% full the new trains (allowing for that 42% increase in passengers) are now only 40% full.

That means that not only would people be saying their paying less, but they are less likely to be overcrowded - making it not only cheaper but a more pleasant environment which would drive the sorts of rates of growth needed to get the increases needed.

 

[FMerrymon]

Much of HS2's revenue will be abstracted from the classic railway, which will be unable to strongly reduce its operating costs, because the scheme requires the bulk of the classic railway operate almost as before.

HS2 is, unlike modern Shinkansen schemes in Japan, not designed to enable significant closures or rationalisation of the legacy railway system

It is designed to significantly increase other operations on the legacy railway, which can grow passengers, freight and therefore revenue for those non express London services.

And in any case, the income from future ticket sales will never be enough to pay back construction costs. The "Cost" in the Benefit-Cost Ratio is actually what's left over after the value of future ticket sales has been deducted from construction costs.

Infrastructure does not need to cover cost from charging for direct use, you build stuff to enable growth, encourage redevelopment, housebuilding, business and industry. Hs2 was never expected to cover all the cost of construction with fares, however, its expected to be operationally profitable and that calculation was without the extra revenue and wider economic benefits of additional services from released capacity

The cost calculation in the bcr is the cost of construction and operation for 60 years, against the benefits to the economy and return from fares.

Will they, once the WCML loses its primary sources of farebox income?

There will likely be major incrases in net subsidy to the legacy WCML operators, unless there are major cuts to infrastructure or operations

Without pendelinos, there'd be some reduction in cost of maintenance. You get more revenue back from increased freight usage and the new services on wcml.

instead of now where Avanti and LNWR profits go to separate shareholders

The private operators currently are paid a management fee by the dft, its not the same as during franchising. Even then, the operators got a small return and paid the dft large amounts up front that helped fund other lines.

Well yes, and those trains will not raise much in terms of ticket revenue. They will be niche services with cheap tickets.
This does not solve the primary problem

But you said before that stopping hs2 in Luton would increase passenger use and that urban areas along the wcml were being ignored. Clearly not niche.

A high frequency, turn up and go, long distance semi fast service could be very appealing for those travelling on a budget as well as providing a better service for those intermediate stations. That was part of the plan, just now such an increase can't reach Crewe.

That benefit was never well publicised. In my opinion, there should a branding such as West coast metro or something that would help sell the areas that would benefit in a similar manner to how crossrail became a selling point for areas it served.

As well as all this, you could also sell spare paths to private open access operators who could offer different experiences for passengers or operate crowd buster services for special events.

 

[Sorcerer]

The private operators currently are paid a management fee by the dft, its not the same as during franchising. Even then, the operators got a small return and paid the dft large amounts up front that helped fund other lines.

Oh, that's right, my mistake. Hasn't been proper franchising since the pandemic era. That said having GBR running both HS2 and classic services will still enable the high-speed inter-city rail services to act as feeders for the regional and local trains, as is usually the case with rail travel.

As well as all this, you could also sell spare paths to private open access operators who could offer different experiences for passengers or operate crowd buster services for special events.

Indeed, and you could potentially even offer paths on HS2 to open access operators. NTV have expressed interest in potentially expanding their operations outside their Italo services in Italy, the UK being cited as a potential market. I'm not holding my breath but I could easily imagine new 'Britannico' services running alongside state-owned GBR. Interestingly had Avanti kept the services they'd even be competing with Trenitalia again.

 

[Yew]

But when those benefits are added up, they are much lower relative to costs than could be obtained by spending the money on other things.

Could you give us some examples, instead of the nebulous "other things"?