High Speed Rail – The Completion And Sale Of Hs1 by parliamentaryyear


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									                   High Speed Rail – The Completion And Sale Of Hs1

The Parliamentary Information Office of the Parliamentary Yearbook is currently
monitoring developments in the UK high speed rail network for major features on
transport and the environment in the next edition

The Commons Public Accounts select Committee today published its 4th Report of Session
2012-13, the completion and sale of High Speed 1.

High Speed 1 (HS1), officially known as the Channel Tunnel Rail Link (CTRL) and originally
as the Union Railway or Continental Main Line (CML), is a 108-kilometre (67 mile) high-
speed railway from London through Kent to the British end of the Channel Tunnel.

The line was built to carry international passenger traffic from the United Kingdom to
Continental Europe; additionally it carries domestic passenger traffic to and from towns and
cities in Kent, and has the potential to carry Berne gauge freight traffic. The line, crossing
over the River Medway and underneath the Thames to London St Pancras, opened in full on
14 November 2007. It allows speeds of 230 to 300 kilometres per hour (143 to 186 mph) and
cost £5.8 billion to build. There are intermediate stations at Stratford International, Ebbsfleet
International and Ashford International.

International passenger services are currently provided by Eurostar, with journey times of
London St Pancras to Paris Gare du Nord in 2 hours 15 minutes, and St Pancras to
Brussels-South in 1 hour 51 minutes, using a fleet of 27 Class 373/1 multi-system trains
capable of 300 kilometres per hour (186 mph). Other, competing, passenger operators are
expected to use the line in future.

Domestic high-speed commuter services serving the intermediate stations and beyond
began on 13 December 2009. The fleet of 29 Class 395 passenger trains are permitted to
reach speeds of 225 kilometres per hour (140 mph).

Publishing the report on the sale and completion of the line, the Rt Hon Margaret Hodge MP,
Chair of the Committee of Public Accounts, today said:

"Whilst HS1 provides an efficient service, contributing in an important way to British transport
infrastructure, there were costly mistakes in the history of the project. These must not be
repeated with HS2.

“HS1 was supposed to pay for itself but instead the taxpayer has had to pay out £4.8 billion
so far to cover the debt on the project.

“The root of the problem is the inaccurate and wildly optimistic forecasts for passenger
numbers both when the line was being planned and when the Department restructured its
deal with the contractor, London & Continental Railways Limited. International passenger
numbers have only been a third of LCR's original forecast and two thirds of the Department's
forecast. The Department failed to take into account the growth of low cost airlines or the
competitive response of the ferry companies.

“This isn’t the first time that over-optimistic planning and insufficiently robust testing of
planning assumptions has got the Department into trouble. My Committee's report on the
East Coast Mainline raised similar concerns.

“HS1 will continue to cost the taxpayer money–£10.2 billion over the next 60 years, so
before going ahead with HS2 we need a robust cost benefit analysis.

“Some of the Department's assumptions about the benefits of faster travel are simply
untenable. For example, the time business travellers save by using high speed rail is valued
at £54 per hour yet the time commuters save getting to and from work is only valued at £7
per hour. It is difficult to see how this can be justified. The Department also assumes that all
time spent on a train is unproductive. And unrealistic assumptions about ticket prices act to
exaggerate passenger demand forecasts.

“The Department also told us that it had not considered the benefits and costs of alternatives
to HS2 such as investment in broadband videoconferencing or investment in alternative,
more local train routes.

“It is nonsense that the Department does not have a full understanding of the wider
economic impact and regeneration benefits of transport infrastructure, including HS1, to
inform future investment decisions.

“All these things are crucial for proving the case for investment in long distance travel and
demonstrating value for money.

“The Department must revisit its assumptions on HS2 and develop a full understanding of
the benefits and costs of high speed travel compared to the alternatives."

Margaret Hodge was speaking as the Committee published its fourth Report of this Session
which, on the basis of evidence from an expert witness and the Department for Transport,
examined the High Speed 1 project and the lessons that need to be learnt from it.

The high speed railway linking London to the Channel Tunnel, known as High Speed 1, has
now been fully open for almost five years. Since opening, the line has had a good
performance record and the Department for Transport (the Department) can be proud of
some aspects of the project. A revised timetable and budget were established in 1998 and
the line was constructed within this revised timeframe and revised budget. In 2010 the
Department managed the sale of HS1 Limited, which has a concession to operate the line
for 30 years, in an exemplary manner. The sale, along with the Department’s restructuring of
Eurostar UK, which ran the British arm of the international train service, transferred most of
the remaining operational risk relating to the line to the private sector, with the project debt
being met by the taxpayer.

There have also been some costly mistakes in the history of this project. The Department
originally expected London & Continental Railways Limited (LCR), (which was awarded the
contract to build the line in 1996), to service the project debt from future revenues from
Eurostar UK (the train operator). However by the end of 1997 Eurostar UK revenues were
substantially below LCR’s forecasts. Consequently, in 1998, the Department agreed to
restructure the deal and guarantee most of LCR’s debt. The Department’s debt guarantees
were called upon in June 2009 and the taxpayer is now servicing and repaying the project
debt of £4.8 billion.

Passenger demand for international services on the line has been much lower than forecast
and that is the root cause of the failure of the original deal and of the call on the
Department’s debt guarantees. International passenger numbers have only been one-third of
LCR’s original 1995 forecast and two-thirds of the level the Department forecast in 1998.
The Department's planning assumptions for the line were wrong; it failed to properly
consider the impact on passenger numbers of the growth of low cost airlines and the
competitive response of ferry companies. Over-optimistic forecasting and insufficiently
robust testing of planning assumptions is a recurring problem, as our previous report on the
East Coast Mainline has demonstrated. The Department must learn the lessons from the
past and ensure that cost benefit analysis is solid as it develops its plans for HS2.

The Department still does not have plans in place to evaluate fully the impact of High Speed
1. Total taxpayer support for the line, over a 60 year period to 2070, has an estimated
present value of £10.2 billion. Benefits for passengers from shorter journey times over this
period have an estimated present value of £7 billion. The basis of this cost/benefit analysis is
open to challenge. There is a risk that the value of passenger benefits is overstated, for
example because the Department’s methodology assumes that all time on a train is
unproductive, and a further risk that the wider economic benefits are not taken into account
because no appropriate analysis is made.

While difficult, it is disappointing that the Department has not attempted to understand the
economic impact and local regeneration benefits achieved so far from High Speed 1. Also it
has not assessed the impact on regeneration of decisions on where to locate stations. The
Department will need to evaluate HS1’s regeneration benefits and wider economic impacts
worth many billions of pounds if the project is to demonstrate value for money. To learn from
past decisions and so make well-informed investment decisions in the future the
Department, as well as other government departments investing in infrastructure, must
improve its understanding and measurement of the economic and regeneration benefits of
new infrastructure.

The Parliamentary Information Office of the Parliamentary Year book will continue to report
on the progress of HS2 and Government’s response to the Committee’s comments about
HS1 as we go through the months ahead.

Web: www.parliamentaryyearbookinformationoffice.co.uk

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