High-Speed Rail

Andrea Leadsom Excerpts

Thursday 31st March 2011 Westminster Hall

[Kelvin Hopkins]

I have made my main points. I have made them before in this Chamber, and I shall continue to make them, because they are rational. A lot of people in the industry also support my view, which is not based on nimbyism but on what Britain really needs. Britain does not need HS2; it needs more investment in conventional rail and, indeed, in rail freight.

[Andrea Leadsom (South Northamptonshire) (Con)]

On a point of order, Mr Walker. For several months, the hon. Member for Coventry North West (Mr Robinson), my hon. Friend the Member for North Warwickshire (Dan Byles) and I have attempted to secure this debate via the Backbench Business Committee. We have been preparing for this incredibly important debate for a long time, and I was assured only yesterday by the Table Office that my hon. Friend the Member for Wellingborough (Mr Bone) would make a few brief comments, and then I would be the first speaker.

[Mr Charles Walker (in the Chair)]

It is always helpful if the Table Office conveys to the Chair the discussions it has had with Members’ researchers. If there has been confusion, I will get to the bottom of it.

[Andrea Leadsom (South Northamptonshire) (Con)]

It is a pleasure to serve under your chairmanship today, Mr Walker. I am delighted to see so many right hon. and hon. Members in this Chamber. I would particularly like to mention my hon. Friends the Members for Lichfield (Michael Fabricant), for Kenilworth and Southam (Jeremy Wright) and my right hon. Friend the Member for Uxbridge and South Ruislip (Mr Randall), who are present today.

I am sick to the back teeth about the way in which the debate on high-speed rail is being trivialised into the nimbys versus business recovery, the poverty-stricken north versus the privileged south, and the commuter versus the community. The debate about high-speed rail should be about how best to deliver the transport infrastructure that Britain desperately needs to ensure a rebalancing of our economy, with prospects for private sector recovery coming from all parts of the UK and not just the dominant south-east.

High-speed rail will be an eye-wateringly expensive project, costing at least as much as the renewal of Trident. It is crucial that a project that would cost each family in Britain £1,000 is properly scrutinised to deliver not just the benefits of extra capacity, but the value for money that taxpayers are entitled to expect. I will make the case that high-speed rail does not deliver value for money. That is not a nimby perspective. I have spent 23 years in banking and finance, including in project finance. I do not believe that the economic case stacks up and I am certainly not alone in that view.

My hon. Friend the Member for Chichester (Mr Tyrie), Chairman of the Treasury Committee, gave a speech immediately following the Budget. He said:

“In our efforts to return to sustained growth, we need to make the best use of every pound invested in our public services. Another example of the need to make sure we have coherence in growth policy has been put to me by colleagues on both sides of the House. They have asked whether spending £17 billion on a high-speed rail link is better use of the money than investing in modern rolling stock and improving the existing tracks.”—[Official Report, 23 March 2011; Vol. 525, c. 973.]

That is precisely the question that Parliament needs to debate and resolve. Others who question high-speed rail, and whom, I feel sure, could not be accused of nimbyism, include the TaxPayers’ Alliance, the Adam Smith Institute, the Institute of Economic Affairs, Friends of the Earth, the Sustainable Development Commission, rail experts and the Countryside Alliance. So let us have a proper debate today and acknowledge that all who speak here are in favour of the central goal of achieving better transport infrastructure, in support of rebalancing our economy and a private sector-led recovery.

[Graham Evans (Weaver Vale) (Con)]

All three major parties had HS2 in their manifestos, including the party for which my hon. Friend stood. Why is she choosing this moment to put these points forward, rather than before the general election?

[Andrea Leadsom]

I thank my hon. Friend for those remarks. Ever since Lord Adonis introduced the proposal, I have opposed it, as I am sure my right hon. Friend the Minister will recall.

[Angie Bray (Ealing Central and Acton) (Con)]

The proposal was, of course, in our manifesto. That is a particularly important point for my constituency because we were deadly opposed to the third runway at Heathrow. One of the most important alternatives our party suggested was putting people on trains rather than planes. I appreciate that the proposal will not make a difference to travel from Birmingham, because there are no planes from there to Heathrow but, when we push up north, it could make a significant difference to the use of domestic flights to Heathrow. For that reason alone, it is very easy for me to support the proposal.

[Andrea Leadsom]

I agree absolutely with my hon. Friend. We desperately need to improve dramatically the capacity in our train infrastructure. I hope that she will bear with me, because I intend to show that we can achieve that without needing to spend the amount of money that we are talking about for high-speed rail.

[Dan Byles (North Warwickshire) (Con)]

On that point, lest people think that that argument means that this is somehow a green solution, is it not the case that any slots freed up at Heathrow from domestic airlines will be taken up by long-haul airlines, thus increasing not decreasing emissions?

[Andrea Leadsom]

Yes, indeed. There have been plenty of anecdotal reports from low-cost airlines suggesting that they would welcome the opportunity to put on more cheap long-haul flights.

I plan to challenge four aspects of the case for HS2: the business case, the environmental case, the claims about job creation and the potential for regeneration. I am a firm believer that one cannot attack something without providing an alternative. I will therefore also discuss a viable alternative to HS2. I have based my challenges on phase 1 of HS2, in spite of the fact, unfortunately, that the consultation incorporates the entire Y-shaped project. There is too little detail on the assumptions underlying phase 2 to be able to assess the figures properly. I also need to point out that the original business case, written by Atkins for the Department for Transport in March 2010, was updated last month. The new business case is considerably less attractive than the old one.

I will deal first with the business case for HS2. HS2 Ltd claims a net benefit ratio, which includes the wider economic impacts, of 2. That means that for every pound spent, there will be £2 of benefit. That is about the minimum return that could be expected from a rail project—the bar for roads projects is significantly higher. Even that modest claim, however, makes enormous assumptions. Specifically, one of the core and somewhat ludicrous assumptions is that all the time spent on a train journey is wasted, and therefore that every minute of a train journey that is saved can be given a value in pounds—the number of minutes saved, multiplied by the earnings of an individual. That would not matter so much except that the journey time savings account for more than 50% of the £20 billion of total economic benefit claimed for the project. I urge the Department for Transport to look again closely at that point.

[David Mowat]

On the first point, the ratio of 2 is for the London to Birmingham link. As my hon. Friend will know, the ratio is 2.6 for the link to Manchester and to Leeds. Including the wider economic benefits, it is 2.6. I have the business case for Crossrail, which my hon. Friend may have had the chance to have a look at. The business case in that is 1.87. The final point that my hon. Friend might wish to consider is the idle time point, which is very important.

[Mr Charles Walker (in the Chair)]

Order. We have had too many questions.

[Andrea Leadsom]

I am struggling to follow some of my hon. Friend’s numbers, because I think that he might be looking at the numbers from the original business case, not from the current one. I do not want to address his points specifically because those numbers do not quite register with me. I apologise for that.

Passenger forecasts are another major assumption in the business case, relying on a 216% rise in demand for train travel. That figure remains wildly optimistic, in spite of being downgraded from the original business case, in which growth of 267% was forecast. The Department for Transport’s own national travel survey shows that overall transport demand is no longer growing with GDP. Eurostar’s passenger numbers in 2009 had reached only 37% of the level that was forecast, as a result of building the HS1 link. The Public Accounts Committee took evidence from the Department for Transport on that point and was reassured by it that lessons had been learned and that any future major project would factor in more severe downside assumptions—that has clearly not been the case. The only comparable forecasts for long distance rail travel by 2036 are from Network Rail, which predicts a range of growth of 45% to 89%, versus that forecast by HS2 Ltd in its original business case of 133% growth by 2033. I urge the Department for Transport to look closely again at that assumption.

Of course, in cash terms HS2 will never pay for itself. Once built, only one third of the total claimed benefits will be captured through fares. The value of the net revenues once it has been built—with a presumption of fares of £14 billion, less operating costs of £6 billion over a 60-year project life—will cover only less than half of the capital costs. At a time when families up and down the country are feeling the pinch, we must make sure that infrastructure projects offer value for money. Many people would argue that not a penny will be spent until 2015 anyway, but between 2009 and 2015 the Department for Transport expects to spend around £1 billion just on preparing the way for high-speed rail.

Secondly, on the environmental impact, HS2 Ltd itself says that the project is, at best, carbon neutral. It predicts that 65% of passengers will either transfer from existing rail services, where faster trains inevitably increase carbon emissions, or are additional new journeys as a result of the faster trains, which will also increase emissions. The shorter journeys by air that will transfer to HS2, will ironically, as my hon. Friend the Member for North Warwickshire (Dan Byles) said, provide more capacity at our regional airports for cheaper long-haul flights. It is estimated that the modal shift from car to high-speed train will be approximately 7%. In fact, HS2 Ltd forecasts that the traffic volumes on the M1 will be reduced by only 2% as a result of HS2. So, it is not green. There will also be a significant environmental impact during construction, as well as permanently, to the English countryside, wildlife and historic sites.

Thirdly and fourthly, on the prospects for job creation and regeneration, the Department for Transport claims that HS2 will create 30,000 new jobs. Some 9,000 will be construction jobs and are likely to be temporary. The rest are skewed towards property development and retail near stations.

[Craig Whittaker (Calder Valley) (Con)]

It is not often that I am at odds with my hon. Friend and her point of view. However, only yesterday 90 business leaders from Yorkshire published an open letter in the Yorkshire Post, which sent a resounding message to the Government and said very clearly that high-speed rail is vital for Yorkshire’s success in the future. Who is right: the 90 business leaders in Yorkshire, or my hon. Friend?

[Andrea Leadsom]

I agree with my hon. Friend that it is very unusual for us to disagree. The reality is that we all share the same goal: to regenerate our economy and to provide good value for money to the taxpayer. What we are arguing about is how we achieve that. Surely my hon. Friend would agree that HS2 is not the only possible means by which to achieve that regeneration. We have to look at what gives us the best value for money.

Up to 70% of the new jobs created by HS2 will benefit London, where Old Oak Common is believed to be the best location for regeneration. I am sure that many hon. Members across the House do not feel that regeneration benefits to London represent good value for money. In fact, research on capital expenditure in the wider economy suggests that the cost of creating one job in the first phase is about four times the cost of capital expenditure in the wider economy. Again, I urge the Department for Transport to consider whether the project will create jobs. Would it be better to spend the money elsewhere and get four times the number of jobs in the wider economy?

[Mr Andy Slaughter (Hammersmith) (Lab)]

The hon. Lady is falling into the trap into which she said she did not want to fall—the north-south divide. In the ward in my constituency where the interchange will be based, just over half the working-age population are currently in employment. Investment in employment is needed in large parts of London, and in the south as well as the north, and she should perhaps have regard to that.

[Andrea Leadsom]

I thank the hon. Gentleman for his comments. Of course, he is absolutely right, but one of the key advantages that is talked about by those who advocate HS2 is the regeneration potential for the north of the country, and the scheme’s contribution to rebalancing our economy between the north and the south. I am sure he will agree that while there are benefits to regeneration in some desperate parts of the south as well, HS2 will not provide the regeneration in the north that is claimed for it.

[Stuart Andrew (Pudsey) (Con)]

Does my hon. Friend not recognise that HS2 coupled with the northern hub would actually provide many jobs in the north and help to end the north-south divide?

[Andrea Leadsom]

I thank my hon. Friend for his comments. I absolutely am a supporter of the northern hub—there is no doubt about that—but I refer him to my comments. HS2 is an extraordinarily expensive way of achieving jobs. In the wider economy, the cost of providing one job through capital expenditure is believed to be some 25% of the cost of providing one job through this project. I do not believe that it is a good way to create jobs, whether in the north or the south.

In summary, I believe that HS2 is a deeply flawed proposal that will not deliver the economic, environmental, employment or regeneration benefits that are claimed for it. However, I absolutely recognise the shortcomings of our existing transport infrastructure, and I commend the Government for the many measures they are taking to sort out long-standing bottlenecks.

The rebalancing of our economy and a private sector-led recovery will depend on significant investment in infrastructure, but there is an alternative to HS2 that can achieve the capacity the country needs at far better value for money: Rail Package 2. RP2 can provide 135% extra capacity, extendable to 176%, and a significant advantage is that it can be introduced incrementally as passenger demand increases. It requires certain things: lengthening all Pendolino trains to 11 cars from the current mix of nine and 11 cars; replacing some commuter trains with 125 mph stock so as not to delay faster trains; dealing with bottlenecks at seven specific points along the line; adding platforms at Euston and Manchester, and considering laying more track into Birmingham.

RP2 to the west midlands has a benefit-cost ratio of 1.9 versus 1.6 for HS2 London to west midlands, excluding the wider economic impacts. The benefit-cost ratio of the whole Y-shaped project is higher, at 2.2, but there is not enough information about the assumptions to evaluate that. In any case, I have provided plenty of information to challenge the assumptions.

[The Minister of State, Department for Transport (Mrs Theresa Villiers)]

Is my hon. Friend aware that the analysis of the business case for RP2 does not take into account the huge cost that would come from disruption to services as a result of the kind of upgrade she is talking about?

[Andrea Leadsom]

I thank my right hon. Friend for her intervention. I had not written that into my contribution because there is so much to say. As she well knows, HS2 requires the complete rebuilding of Euston station, and it would be extraordinarily difficult for services to be able to continue on the west coast main line during that period. In addition, as I am sure she knows, the proposals in RP2 are not the same as the first incremental improvements to the west coast main line in the first phase of regeneration, which required rebuilding virtually the whole of the track and the signals. The incremental proposals are entirely achievable while existing network services are utilised along the west coast main line.

[Mrs Villiers]

Does my hon. Friend accept that the more intensively a transport system is used, the higher the price paid in terms of lack of resilience? One of the major concerns about RP2 is that the line is intensively used at present, and the kind of even more intense use that she advocates would have a significant impact on it and cause major deterioration in reliability. There would be a significant negative impact on the quality of the passenger experience.

[Andrea Leadsom]

I thank the Minister again, but I have to disagree with her. There is no evidence that suggests that RP2 would involve a desperately intensive use of the west coast main line. Not only that, the capacity created by it would significantly exceed the likely demand, certainly in the short and medium term. Other rail experts argue that the forecasting model that is being used by the Department for Transport is suitable for forecasting demand up to 10 years only, not the 43 or 45 years for which the Department is forecasting. There is no clear evidence that my proposal would entail that intensity of west coast main line usage.

Another significant benefit of RP2 is that it can be delivered far quicker than HS2, thereby dealing with the problems of overcrowding now, rather than leaving the commuters of Manchester, Birmingham, Rugby and Milton Keynes to wait until 2026 for proper relief. The danger that is inherent in forecasting out to 45 years, as the Department has done, is removed by using RP2. It can be implemented incrementally—it is not all or nothing—and problems can be dealt with as they arise.

I fear that HS2 is a flawed project. There is no doubt that we have to improve our transport infrastructure, but I urge the Department to reconsider RP2, which is cheaper and more environmentally friendly. It would deal with the problems sooner and far more accurately than HS2.

I shall conclude with a final call to action. The original mandate of HS2 Ltd was to look at the feasibility of, and the business case for, a new high-speed rail line between London and the west midlands, and to consider the case for high-speed rail services linking London, northern England and Scotland. Because of that mandate, HS2 Ltd inevitably has a vested interested in seeing HS2 built. For the credibility of the project, the Department should undertake an independent comparison of the merits of HS2 versus RP2. Legitimate concerns have been ignored because of the insistence that opposition is just nimbysm. We must put that aside and have a rigorous debate on how to achieve our shared goals while getting the greatest bang for our buck. Thank you, Mr Walker.

--- Later in debate ---

[Dan Byles]

I am delighted to hear the Minister say that that is not true.

[Andrea Leadsom]

I would like to make the point that it is not possible for my right hon. Friend to make that claim. The transport network is actually in the private sector. Therefore, if the rail operators find that they are losing revenue because there is no longer the overcrowding that there was because of the 65% transferral of passengers to high-speed rail, they will inevitably either put up fares or reduce services. The most likely outcome is a reduction of services, because fares are capped.

[Dan Byles]

I am grateful to my hon. Friend for making that point. The very fact that the Minister referred to indicative figures—they are out there in the public domain, are causing concern, and are often quoted—shows that we have not yet had sufficient discussion or debate about the impact. From a sedentary position, hon. Members have rubbished some of the claims for Rail Package 2, and say that work has been done and shows that some of our claims for it are simply not true. Where is that work? Why is it not being published? Why is the Department for Transport not addressing the questions that opponents of HS2 are asking? Instead, it is addressing motives, and using words such as “nimby” and so on instead of addressing arguments. The Department should address those questions, but it is not doing so adequately.

Of more concern is the fact that there is evidence from studies of existing high-speed rail services in other countries that, far from pushing economic growth from the centre to the regions, they may have the opposite effect. They may suck economic activity from the regions toward the centre. There is a real danger of economic growth draining away from, for example, Birmingham and the surrounding region towards London. The Research Institute of Applied Economics at the university of Barcelona studied existing high-speed rail networks in Japan, France, Germany, Spain and Italy. Its findings should cause policy makers in the UK to sit up and take notice. It suggested that smaller cities linked to larger cities by high-speed rail lines sometimes suffer from a negative agglomeration effect. That may take several forms, but the report is very clear about the risks for smaller cities such as Birmingham when linked to a larger city such as London.

I shall quote briefly from the report. It states:

“It is consistently reported that HSR does not generate any new activities nor does it attract new firms and investment, but rather it helps to consolidate and promote ongoing processes as well as to facilitate intra-organizational journeys for those firms and institutions for whom mobility is essential.”

It continues:

“In fact, for regions and cities whose economic conditions compare unfavorably with those of their neighbors, a connection to the HST line may even result in economic activities being drained away and an overall negative impact”

--- Later in debate ---

[Mrs Villiers]

The project will create jobs throughout the country. The suggestion that all the cities that are calling for high-speed rail will see their economic growth sucked away by London just does not hold water. Look around Europe, where cities such as Lille and Lyons have been transformed. In Europe and Asia, cities are fighting hard to be on the high-speed rail networks that other countries have the courage and determination to deliver.

[Andrea Leadsom]

Does my right hon. Friend accept that unemployment in Lille rose after high-speed rail went there?

[Mrs Villiers]

What I know is that Lille’s prospects were transformed by high-speed rail, and its unemployment level fell to much closer to the French average. If people in Lille were asked whether high-speed rail was bad for them, or whether they would like it to be shut down, I suspect that they would say no.

As my hon. Friend the Member for Pudsey (Stuart Andrew) said, shrinking journeys between cities in the north will have a hugely beneficial impact, enabling them increasingly to merge into a single economic area. I emphasise that with its potential to regenerate regional economies, create thousands of jobs, and boost our national economy by about £44 billion, the project is about much more than shaving half an hour off the journey time to Birmingham.

That brings me to the next allegation—that the project is not affordable. In practice, most of the spending will not kick in for at least five years, so it is not competing directly with other priorities in the current period of austerity. Spending will then be phased in over the period of construction, which we all know is, sadly, a long one. The annual average cost will not be out of line with projects such as Crossrail, as my hon. Friend the Member for Weaver Vale pointed out. The figures in the consultation document also make no allowance for possible private sector contributions, which could be considerable, as hon. Members have pointed out, particularly in relation to the expected benefits of station redevelopment.

Perhaps most important is that delivering a major uplift in inter-urban transport capacity is not some nice-to-have luxury. It is absolutely essential if we are to prevent a capacity crisis on the west coast line and other key transport corridors in the years to come. No Government can afford to sit back, ignore the problem, and pretend that it does not exist.

Despite the valiant efforts of my hon. Friends the Members for South Northamptonshire, and for North Warwickshire, and the hon. Member for Coventry North West, the opponents of HS2 have not made a convincing case that there is a better way of dealing with the expected growth in demand for inter-city travel. My hon. Friend the Member for Warwick and Leamington (Chris White) suggested that information technology will provide the answer. I certainly hope that future advances in technology will make video-conferencing an alternative to more journeys, but I am afraid that after in-depth research, the Committee on Climate Change concluded that the net impact of such technology on travel is likely to be minimal, and I am afraid that improvements to the existing network just cannot provide the capacity that HS2 would. The Government are already committed to delivering a 30% uplift in capacity on the west coast line, with new carriages being introduced from April 2012, but that will simply not be enough to meet the demand for inter-city travel in the decades to come.

In response to the shadow Minister’s question about the capacity to deliver, HS2 would deliver 14 trains an hour, each of which would have about 1,100 seats. RP2 simply will not meet the future needs of this country’s transport system. The practical realities of further work on the existing line have a serious downside. As the right hon. Member for Coventry North East (Mr Ainsworth) said, passengers were subjected to a decade of disruption with the improvements to the west coast line, which have just been completed.

For the information of my hon. Friend the Member for South Northamptonshire, the work required at Euston for RP2 would be considerably more disruptive than those required there for HS2, because they would have to be carried out within Euston’s current footprint, making it much more difficult to keep current services going. Disruption would be much worse this time, because the west coast line is twice as busy as it was seven years ago.

The most viable journey time savings that could be achieved using the existing line would involve cutting out intermediate stops, which we all know would be deeply upsetting for the affected communities. Moreover, line upgrades cannot deliver any released capacity benefits, and squeezing even more into the current timetable to allow more intense use of the line would compromise resilience, and is virtually guaranteed to lead to a serious deterioration in reliability. In contrast, infrastructure-related delays on HS1 average just 6.8 seconds. The simple truth is that whatever is done to the existing line, it could never match the economic benefits of faster journey times, capacity uplift, and regeneration that HS2 would deliver.

The hon. Member for Dunfermline and West Fife (Thomas Docherty) called for leadership in delivering the project, and we intend to provide that. He asked whether appropriate rolling-stock designs were available. Our research and analysis is based on rolling stock that is already in use in the many countries that have embarked on high-speed rail. My hon. Friend the Member for Weaver Vale pointed out that the high-speed rail link is a manifesto promise, and it is one that we intend to keep. My hon. Friend the Member for Tamworth expressed concern about the current status of compensation, and I assure him that the exceptional hardship scheme is already in operation.

Lastly, I will address the allegation that high-speed rail is not green and offers no environmental benefits. Our analysis shows that the shift from road and aviation that would come with delivering the west midlands section of the line would broadly offset any increase in carbon emissions from the new line, despite the significant increase in passenger journeys that it would accommodate. We would get a major economic boost without increasing carbon emissions, which is just the sort of sustainable growth most people in the country say we should have. The modal shift resulting from the Y-shaped network to the north of England would be greater still, with as many as 6 million journeys by air and 9 million by road expected to migrate to rail. The carbon benefits of rail over aviation are set to grow as we make progress on decarbonising the electricity supply.

The consultation under way is one of the most wide-ranging ever undertaken. We will listen to and consider all responses with care, including those that will help us further mitigate potential local impact, which I know hon. Members are concerned about. I genuinely believe that with care, effort and high-quality engineering, we can address the worst local impacts and provide much-needed reassurance to the constituents of hon. Members who have taken part in the debate. Similar things were done for HS1.

Today, we still rely almost entirely on railways built by the Victorians, and I think it is time we started catching up with the high-speed rail revolution on which our European partners embarked more than a generation ago. I believe that we can—and should—aspire to the sort of high-quality long-distance travel network that other countries take for granted. Our high-speed rail plans provide a once-in-a-generation chance to address the transport capacity needs of our economy in the future, transform our economic geography, and generate a boost for jobs and growth worth billions of pounds. We know that it will not be an easy process, but we should not let this opportunity slip through our fingers. I have welcomed the opportunity to set some of our plans before the House this afternoon.

Question put and agreed to.