High Speed 2 (Economic Affairs Committee Report)

Lord Forsyth of Drumlean Excerpts

Thursday 23rd January 2020 Lords Chamber

Moved by

[Lord Forsyth of Drumlean]

To move that this House takes note of the Report from the Economic Affairs Committee Rethinking High Speed 2 (6th Report, Session 2017-19, HL Paper 359).

[Lord Forsyth of Drumlean (Con)]

My Lords, I congratulate my noble friend Lord Goldsmith on a superb maiden speech. We very much look forward to his contributions to the House in the future.

I apologise, as I am suffering from a cold; my noble friend Lord Ridley told us yesterday that Darwinian principles meant that his cold would find another host, and I fear that he has been proved correct in that respect.

Five years ago, the Economic Affairs Committee, under the excellent chairmanship of the noble Lord, Lord Hollick, raised serious questions about the cost of HS2, the methods used to appraise the project and other priorities for rail investment in its 2015 report The Economics of High Speed 2. In January 2019, the committee followed up this inquiry and published a new report in May last year. Sadly, we found that the Government were still no nearer to providing satisfactory answers. We therefore concluded that HS2 required a major rethink. Before I explain our conclusions, I thank the committee staff who produced the report: Sam Newhouse, Ben McNamee and Lucy Molloy.

I begin with the question of how urgently we need HS2 in relation to other rail investment priorities. In 2015, the committee suggested that rail infrastructure in the north of England should be the priority. We asked the Government to consider whether investment in northern rail infrastructure should be prioritised over HS2. Beyond a business case for Northern Powerhouse Rail, no such assessment of the relative merits of doing so was ever carried out. Five years on, commuter services in the north of England remain badly overcrowded, unreliable and reliant on ageing Pacer trains built on the cheap using frames from Leyland National buses.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I am sorry to intervene on the noble Lord—I will not do it again—but I cannot understand why his committee does not seem to have looked at the West Midlands and the issues there.

[Lord Forsyth of Drumlean]

If the noble Lord allows me to make my speech, he will perhaps get an answer to that.

The Government’s response to our report stresses that the Northern and TransPennine Express franchises will deliver over 500 brand new vehicles and retire all the existing Pacer trains. Yet, in spite of the Government’s confidence, Pacer trains remain in widespread use today. Allow me to stress that Pacers were initially given a lifespan of 20 years when they were introduced as a stop-gap in the 1980s. Forty years later, many are still with us.

Overcrowding continues to be far more severe on commuter services than long-distance services. We heard evidence that fast long-distance services are among the least crowded trains that serve the cities on the HS2 line. For example, just 4% of passengers stand on the Virgin Trains West Coast to Manchester, whereas there has been a doubling of demand for local services into central Manchester in the last 15 years but only a 50% increase in passenger capacity. HS2 will do very little to help these long-neglected commuters travelling into cities in the north. In fact, the main beneficiaries of overcrowding relief from HS2, when it is finished, will be London commuters who use the west coast main line. Chris Stokes, an independent rail consultant, described HS2 as

“a very expensive way of dealing with the Milton Keynes-Euston commuter peak.”

Simply put, the HS2 project is a poor reflection of the UK’s rail investment needs—I hope that addresses the noble Lord’s question.

[Lord Hunt of Kings Heath]

Do not tempt me.

[Lord Forsyth of Drumlean]

There is, fortunately, a programme in place to help these commuters: Northern Powerhouse Rail would create faster and more frequent lines between Liverpool and Manchester, Manchester and Leeds, Sheffield and Manchester, Leeds and Sheffield, and Leeds and Newcastle. It would reduce journey times between northern cities substantially. To give just two examples, the journey time from Liverpool to Manchester would reduce from a maximum of 57 minutes to just 26 minutes; likewise, Newcastle to Leeds would be reduced from 95 to 58 minutes. Such improvements to journey times would increase access to a wider jobs market between northern cities that are currently very poorly connected.

Representatives from northern regions who gave evidence to our inquiry generally agreed that both HS2 and the Northern Powerhouse Rail programme were absolutely crucial to the north. Since the publication of our report, there has been fierce debate—to put it mildly—on whether both programmes are needed. First, the Government, under the previous Prime Minister, stated in their response to our report that HS2 needs to be in place first. In August, the new Government commissioned a review into the viability of HS2, chaired by Doug Oakervee. New details from a leaked version of his report—apparently delivered before Christmas but still unpublished by the Department for Transport—were revealed this week and appeared to indicate only qualified support for the project.

The recently published dissenting report from the noble Lord, Lord Berkeley, argued that HS2 is the “wrong and expensive solution” and that priority should be afforded to Northern Powerhouse Rail and Midlands Connect instead. Stakeholders from the Midlands and the north of England, however, have made clear in their response, once again, that both programmes are needed. We urge the Government to provide clarity on this matter. The noble Lord, Lord Berkeley, made it clear: if the Government have £150 billion, they can do both; if they have only £50 billion, they need to choose.

In the view of the Economic Affairs Committee, HS2 phase 2b and Northern Powerhouse Rail should be combined into a single programme to allow investment to be prioritised where it is needed most, and funding for the northern powerhouse needs to be ring-fenced and brought forward where possible, otherwise the north of England will continue to be short-changed by the Government’s plans. The Government stated in their response that they would “carefully consider this recommendation”. We hope they do so.

Our report also considered the planned costs of HS2 and examined the method by which the Department for Transport determines whether the project provides value for money. The leaked version of the Oakervee report found that more work is needed to assess the scheme’s impacts on regional growth and that it is “hard” to say what economic benefits will result from building it. Suffice it to say that providing clarity on the costs of HS2 has never been one of the Government’s strengths. The first estimates for the costs of HS2 were published in February 2011 by the department under the then Secretary of State for Transport, Philip Hammond. The estimated cost for the full network was given as £37.5 billion. Then the department, under the following Secretaries of State, Justine Greening and Patrick McLoughlin, put forward two updated economic cases in January 2012 and October 2013. The estimated cost rose first to £40.8 billion and then to £50.1 billion.

Moving forward, the department’s 2015 spending review set the funding envelope for HS2 at £55.7 billion, in 2015 prices. Adjusting for construction price inflation since 2015, this funding envelope increases to £59 billion today. The estimated costs, however, were shown to have increased to £65.2 billion. Yet fear not; in 2017 the department, now under Secretary of State Chris Grayling, published a financial case with all assumed efficiency savings calculated into the model, estimating that the full cost of HS2 would be £52.6 billion. The committee was told that spending to date on the project was £4.3 billion.

Since the publication of our report, there have been even more conflicting estimates of the costing range for the project. In August 2019 HS2 chairman Allan Cook published an official stock-take of the current status of the programme, in which the total funding range for all costs and risk was estimated at between £72.1 billion and £78.4 billion. Yet following this the Secretary of State for Transport, Grant Shapps, clarified these costs to Parliament in a Written Statement on 3 September 2019:

“Adjusting by construction cost inflation, the range set out in Allan Cook’s report is equivalent to £81 to £88 billion in 2019 prices”.—[Official Report, Commons, 3/9/19; col. 7WS.]


Now, according to the leaked Oakervee report, the cost of the project could rise to as much as £106 billion. Adding to the confusion, the noble Lord, Lord Berkeley, suggests in his dissenting report that the total cost will in fact be £115.8 billion.

This confusion absolutely tallies with what the committee heard from Sir Terry Morgan, the former chairman of HS2 Ltd, who told us that “nobody knows yet” what the actual cost of HS2 will be. Most pointedly, the noble Lord, Lord Berkeley, concluded that

“Parliament has been seriously misled”


about the costs of HS2. The committee also had serious reservations about the cost-benefit analysis used in determining whether HS2 provides value for money. The results of the latest cost-benefit analysis for HS2, published in July 2017, show net benefits of £92.2 billion and net costs to the Government of £39.8 billion. Following the familiar theme of confusion that has arisen throughout the project so far, the leaked Oakervee review suggests that the cost-benefit ratio has fallen from £2.30 to £1.50 for every pound spent. The committee did not find the methodology used credible for either the project’s costs or its benefits. The model does not account for the transformative effects on employment and population that new infra- structure can provide, because it assumes that land use in the surrounding area is fixed. The Government’s response to our critique was disappointing. They accepted the limitations relating to the treatment of land-use changes but offered no indication that they would carry out new analysis.

Our second reservation concerns the methodology and evidence used to calculate the value of travel time. These measurements have improved since their first iteration—when they forgot that people can, and quite regularly do, work on trains—but they are still questionable. They used surveys asking business rail travellers hypothetical questions about how much they would be willing to pay for quicker journeys. The committee did not believe that a few hundred interviews carried out on station platforms were a robust evidence base on which to base a calculation of the benefits that a potentially £80 billion new railway will bring.

Finally, our report shows that the estimated benefits of HS2 are highly dependent on forecast numbers of business travellers using long-distance rail. Our central concern on this point is that the evidence used to forecast the number of business travellers using HS2 is based on data that is 15 to 20 years old. Not only do the numbers not correspond to the most recent data from the national travel survey and the national passenger survey, but relying on out-of-date data is neither a robust nor rigorous basis for evidence-based policy-making. We therefore recommended that new analysis of the project is needed. This must take into account the transformative effects of new infrastructure on the benefits of the project. It should revise the assumptions behind the values of travel time, and the demand forecasts should be revised ahead of this new analysis. We recommended that this analysis be published in full alongside the business case by the end of last year. The Government have accepted that the data is out of date and stated that updating it is part of the department’s latest research priorities. We strongly urge its publication as soon as possible.

In 2015 we recommended that the Government should review the cost saving from lowering the maximum speed of the railway and terminating the line at Old Oak Common rather than Euston. Yet again, the Government failed to consider our very reasonable recommendations. Our follow-up examined the two ideas again in detail. HS2 is being built to accommodate trains that run at a maximum of 400 kilometres per hour, with trains initially expected to run at a maximum of 360 kilometres per hour. Trains that can travel at that speed do not exist. When we asked why the railway was being designed to that specification we were told it was in order to make it future-proof. We heard evidence that strongly questioned the design speed, including one piece of evidence that described the maximum speed as “an engineer’s pipe dream” and “close to ludicrous”.

Allow me to stress, on this point, that in phase 1 trains can operate at 360 kilometres per hour on a mere 68-mile stretch between Amersham and Birmingham. Reducing the maximum operating speed to 300 kilometres per hour would add an extra 10 minutes to a journey between London and Manchester, but the cost savings for the whole project could represent up to £1.25 billion once longer-term operational and energy costs are accounted for. Based on this evidence, we see no reason for HS2 to be built to operate at 400 kilometres per hour.

Once again, we are disappointed that the Government have ignored our recommendation to assess the cost saving that could be made by terminating the HS2 line at Old Oak Common rather than Euston. The Government and HS2 Ltd cite a 2011 report from Atkins as the evidence base for rejecting our proposal. Notwithstanding the fact that it was written at the start of the last decade, that report assessed only the reduction in benefits and made no estimate of the possible cost saving. The Government must consider both. We argue that what matters for the termination point is not the single point in central London, but the connections that enable passengers to quickly arrive at their destination. The evidence we saw shows that onward journey times to final destinations using the Elizabeth line from Old Oak Common appear to be comparable to, or better than, continuing from Old Oak Common on HS2 to Euston. Euston is not “central London”.

We have therefore recommended that the redevelopment of Euston station be removed from the scope of phase 1 of HS2 and that Old Oak Common should operate as the London terminus for phases 1 and 2a. Doing so will allow time to determine whether Old Oak Common could operate as the London terminus for the entire HS2 network, and the potential costs or savings that that would involve relative to a terminus at Euston. Our report is an appeal to the Government to conduct a major rethink of the full HS2 project. A new appraisal of the project is urgently required. The Government must act to ensure that the benefits of HS2 are not geographically uneven and do not entrench the uneven economic divide between north and south that already exists.

I was very struck, in our discussions in the committee, by the words of the former Chancellor and Transport Secretary the noble Lord, Lord Darling. He said, “These projects are all the same: they run over budget and in the end the bit at the end gets cancelled.” The bit at the end is the east-west rail structure which is so desperately needed now in the north of England. I beg to move.

--- Later in debate ---

[Lord Greaves (LD)]

My Lords, it is a privilege to follow the noble Lord, Lord Berkeley, on this. I pay tribute to him because he has at least stirred up a lot of very interesting debate about where investment in the railways—a huge amount of it—is now required.

Various noble Lords, starting with the noble Lord, Lord Forsyth of Drumlean, said that the priority is for the north of England. There are two questions there. Can you build the northern half of HS2 and not bother with the southern half, as I think the noble Lord, Lord Berkeley, suggested? All you would end up with is high-speed services from perhaps Crewe to Birmingham, or Leeds to Mansfield, with passengers then wanting to get on to the existing main lines to London, which are already full. It is nonsense.

However, I can assure the noble Lord, Lord Forsyth, that when I set off on Monday to drive to the station, I saw a train coming over the viaduct in Colne, which is at the end of the worst branch line in the north of England—that must be true because I keep saying it—and it was a Pacer. On the other hand, the Pacers are about to go. There are loads of new trains and carriages in the north of England. The problem is that the infrastructure that these new trains will run on is often inadequate and, in some cases, rubbish. Therefore, the timetables cannot make proper use of them.

[Lord Forsyth of Drumlean]

I am sure the noble Lord does not mean to misrepresent the report. Our report does not suggest that HS2 should be cancelled. It suggests that the cost overruns could be addressed by lowering the speed and leaving the link to Euston, and that the priority should be to ensure that the infrastructure improvements are made in the north.

[Lord Greaves]

I do not disagree with that at all. I am grateful to the noble Lord but there is a general undercurrent implying that if we could get rid of HS2, even at this late stage, people would be happy.

I have a confession to make: I like Euston station, and there are two reasons for that. First, it is where I go when I go back north, and therefore a nice place to go; secondly, it is efficient. The problem when Euston was built was that civic engineers and architects in this country had lost the great Victorian ability to combine efficiency and beauty, which I think we are learning again.

The people challenging the existing programme for HS2, who want it to be slowed down or stopped, or whatever, really have to answer the almost unanimous civic and economic leadership in the north of England, who all say that they want to get on with it. That means the mayors, council leaders, councils generally, businesspeople and everybody else. To say that it is only because they are businessmen and MPs who want to get to London quicker is just derisory. There is a general belief in the north of England that it is a good thing and needs to be got on with now. This is not least because if it were to be cancelled, or deferred for another three or four years for more inquiries et cetera, the idea that a lot of activity would suddenly start up in the north of England as a result, and have lots of money allocated to it, is just cloud-cuckoo-land. It is a complete pipedream. The problem is that people see defects in the system for developing infrastructure in this country, of which HS2 is a good example, then transfer that to the scheme itself. The problem is the system, not the actual scheme.

People have talked about northern powerhouse rail but I am not clear what that is or whether there is consensus on what it means. For Transport for the North, which has produced a strategic transport plan that includes the railways, northern powerhouse rail is the line between Liverpool and Hull, particularly the part between Manchester and Leeds. The Prime Minister seems to think that it is from Manchester to Leeds; that also seems to be what the Conservative manifesto said. I consider it ludicrous that priority now should be given to spending a large sum of money—I am not quite sure what this includes or where it comes from but if the figure of £39 billion is bandied about now, it will be £60 billion or £70 billion before long, as we know—when it seems to be simply a high-speed railway line between Manchester and Leeds, which stops at Bradford. Whether all the trains will stop at Bradford, I do not know. I am in favour of them stopping there, as a Bradfordian, but it does not seem a priority to me. All the towns in between—Halifax, Huddersfield, Oldham and Rochdale on the other side, and so on—will get no benefit at all. If you live in Huddersfield and want to go on this railway, you will have to get the train to Bradford, then turn around to go back over the Pennines.

This is a vanity scheme that does not mean much. If it is meant to be part of a wider network of high-speed lines in the north of England and their connecting lines, including to Liverpool, Hull and Sheffield, then it requires HS2 to be built. This is because it is intended that the northern powerhouse rail network in the north of England, apart from the section between Manchester and Leeds, will include a substantial part of the stuff built for HS2, as the noble Lord across the Chamber said. Therefore, if it is a sensible strategy to significantly increase the amount of pretty high-speed trains between the main cities in the north of England, or at least the main cities in Lancashire and Yorkshire, simply building 40 miles of fast track between Manchester and Leeds does not seem sensible. I do not think that is a priority at all. The single main rail project in the next five years of improvements will be improving the existing trans-Pennine line between Leeds, Huddersfield, Oldham and Manchester, the Standedge route over the Pennines through the Standedge tunnel. That has been downgraded. It needs electrifying throughout and to be made four-track throughout as it goes over the Pennines, opening up the old tunnels. That is the priority, because it is something that can be done in five or six years.

Building a new railway line between Leeds and Manchester to high-speed standards, requiring a parliamentary Bill and all the rest, will mean that our successors in your Lordships’ House will be discussing it in 10 years’ time and it still will not have started. I agree with the noble Lord, Lord Berkeley, that less ambitious schemes—although many are ambitious—covering the whole of the north of England should be the goal. The north of England is not like London—which has a centre, with everybody commuting in—but a constellation of cities and big, medium-sized and small towns, many of which have railway lines between them, and some of which need railway lines reinstating. We should look at the whole of the north of England, because that is what is needed.

--- Later in debate ---

[Lord Forsyth of Drumlean]

My Lords, we have had a very good debate. On the subject of Victorian pioneers, my noble friend might recall that when Prince Albert set up a commission for the Great Exhibition, he insisted that no one should be charged more than a penny, that it should make a profit and that it should be completed on time—and indeed it was. And not only did it make a profit but the surplus was used to build the Victoria and Albert Museum and the Science Museum, and there was money left over that is still providing bursaries to art students. So it is a bit unfair to present the Victorians as being unable to carry out great projects and bring them in within time and within budget.

We have had an extremely good debate, which mirrored what went on in the committee. The key issues are: is it really necessary at this stage to make the link to Euston, and what are we going to do if the costs overrun? Several noble Lords talked about costs: the noble Lords, Lord Hollick, Lord Rodgers, Lord Fairfax, Lord Turnbull and Lord Truscott, as well as my noble friend Lord Howard, who told us about salaries—which tended to suggest that there was a gravy train as well as a fast train—and the noble Lord, Lord Mair, who told us about the opportunities to use technology on costs. All those noble Lords emphasised the importance of costs. The committee, when we looked at this continuing escalation of costs, was concerned—as the noble Lord, Lord Collins, and the noble Baroness, Lady Kramer, said—that it is not “either/or”. Our concern, as has happened so many times, was that, if the costs get out of control, the Treasury will cut the project. Almost every speech has been in support of infrastructure in the north. My noble friend Lord Astor, and the noble Lords, Lord Berkeley and Lord Shipley, all emphasised how important it is that this work in the north should be carried out.

Many speeches pointed to the environment. My noble friend Lord Randall, the noble Baroness, Lady Young, and the noble Lord, Lord Faulkner, all emphasised its importance. This is where cost and the environment come together. If we reduce the speed of this thing, as the noble Baroness, Lady Young, pointed out, there is then wobble room to enable important environmental assets to be saved, because it is not necessary to travel in a straight line.

[Baroness Young of Old Scone]

I thank the noble Lord for giving way. I would hate for him to call it “wobble room” on a train. I think I said “wiggle room”. One must get these technical terms right.

[Lord Forsyth of Drumlean]

One person’s wiggle is another’s wobble. I am not sure that either is a technical term but we got the gist of what the noble Baroness meant. She and my noble friends Lady Neville-Rolfe and Lord Howell made this point about the importance of avoiding straight lines, which comes with a reduction in speed.

What was really interesting about the response from my noble friend the Minister is that she gave an absolute assurance that we will get a decision from the Government in February. So, within five weeks we will be told what is happening; whatever is happening, that will end the uncertainty and we can get on with whatever they have decided—and her speech left ample opportunity for them to decide almost anything at all.

The noble Lord, Lord Adonis, in a very powerful speech, argued strongly that we should not seek to challenge decisions taken in 2016—I wish he had taken that view on other decisions taken in 2016—which was a view shared by the noble Lords, Lord Shipley and Lord Kerslake. The noble Baroness, Lady Kramer, made the important point, echoed by my noble friend Lord Framlingham, that one of the problems with this project has been the breakdown in trust and the lack of transparency. Whatever the Government decide next month, I hope we will have a much more open dialogue about the progress of this project. It seems to me that the opportunities are to tackle the question of speed, to defer the link to Euston and, most importantly —something the Minister’s reply did not deal with, but as recommended by the committee—to ring-fence the expenditure in the north; it should be absolutely clear that it is part of this project that is not open to being sacrificed.

Having listened to the debate, I believe that there is a consensus in this House not to cancel the project but to get a grip on the costs and the environmental damage that has been done, and to deliver with certainty the infrastructure that is needed east, west, in the north of England and, indeed, in the Midlands. Of course, I regard the north as the deep south, as I come from Scotland. I have avoided the temptation to talk about the links to Glasgow or Edinburgh, where the ability to wiggle or wobble around the mountains of the Lake District and elsewhere is distinctly limited. I am most grateful to everyone who participated in the debate. I am sorry that I have not had time to mention everyone. I am most grateful to colleagues for staying so late on a Thursday evening.

Motion agreed.