HS2 has been a controversial topic for some time now. Between the disruption it would cause to countless neighbourhoods and the protests that have emerged and the debate about the cost effectiveness of the project, it’s been in the news a fair amount. The transport network in the UK needs improving, not only for businesses located here, but also to encourage more investment into the country. HS2 is one of the solutions offered.
The latest estimate for the cost of HS2 is over £40 billion. However, many suggest that the benefits HS2 will bring do not cover the full costs. Furthermore, as noted above, other concerns include the disruption that it will bring to countless households who will be living along the proposed routes. Cost benefit analysis have been carried out to determine the viability of the project, but they are invariably difficult to do. As they involve determining all of the private and social costs and benefits and putting a monetary estimate onto them, there will inevitably be factors that are over-looked, under-estimated or over-estimated. The suggestions here are that the costs have been under-estimated and the benefits over-estimated.
In September, KPMG produced a report that estimated the overall benefit to the UK economy would be a boost to growth of 0.8%, which would benefit many businesses and communities. The British Chambers of Commerce said:
Business communities in dozens of cities and towns, from many parts of the UK, remain strongly supportive of HS2.
The railway network is also approaching full capacity and this is one of the reasons why HS2 has been proposed. A government source said:
We need to do something because our railways are nearly full, but the alternative to HS2 is a patch and mend job that would cause 14 years of gridlock, hellish journeys and rail replacement buses … The three main routes to the north would be crippled and the economy would be damaged.
However, this report has faced criticism, in particular because it ignored a variety of supply-side constraints and because they argue it would be more effective to simply update the existing network. 
However, a new government-commissioned report has suggested that this alternative to HS2 would involve 14 years of weekend route closures and much longer journey times. However, those in favour of updating existing routes have said that this new report commissioned by the government is ‘a complete fabrication’. Hilary Wharf of the HS2 Action Alliance commented:
This government-funded report is a complete fabrication. The main alternative to HS2 involves longer trains and reduced first-class capacity to provide more standard class seats…No work is required at Euston to deliver the necessary capacity increase. Work is only required at three locations on the WCML [West Coast Main Line], and this is comparable to the work being carried out on the route at present.
The debate regarding HS2 will continue for the time being and it is just another area that is fuelling the political playing field. Whatever is done, the rail network certainly requires investment, whether it is through HS2 or upgrades to the existing routes. The following reports and articles consider the latest developments and controversy regarding HS2.
Reports
HS2 Cost and Risk model Report: A report to Government by HS2 ltd HS2 Ltd March 2012
High Speed 2 (HS2) Limited: HS2 Regional Economic Impacts KPMG September 2013
Draft Environmental Statement: Phase One: Engine for Growth HS2 May 2013
Updated Economic Case for HS2 HS2 August 2012
Articles
HS2 alternative ‘would mean years of rail disruption’ BBC News (28/10/13)
Alternative to HS2 would see Britain suffer 14 years of rail misery, says Coalition Independent, Nigel Morris (28/10/13)
HS2 alternatives could require 14 years of weekend rail closures The Guardian, Rajeev Syal (28/10/13)
Passengers ‘face 14 years of chaos if HS2 is derailed’: ‘Unattractive’ package of closures would be needed to expand capacity if Labour withdraws support Mail Online, Jason Groves (28/10/13)
HS2: Labour to examine cheaper rival plan The Telegraph, Tim Ross and Andrew Gilligan (27/10/13)
Britain’s railways have become mere outposts of other nations’ empires The Guardian, John Harris (28/10/13)
’Years of delays’ if government backs down on HS2 rail project Financial Times, Kiran Stacey and Brian Gloom (28/10/13)
Questions
- What is a cost-benefit analysis? Explain the steps that are involved in any cost-benefit analysis.
- Conduct a cost-benefit analysis for HS2. Ensure that you differentiate between costs and benefits and between private and social concepts.
- How can we measure the costs and benefits of HS2?
- Explain how HS2 is expected to boost economic growth. Use the AD/AS model to illustrate this.
- To what extent is there likely to be a multiplier effect from HS2? Is it likely to benefit the whole economy or just those areas where the route lies?
- Conduct a cost-benefit analysis for the alternative suggestion. Which do you think is likely to be more feasible? Explain your answer.
- How will improvements to the rail network or the investment of HS2 benefit businesses in the UK economy?