The bogus capacity arguments for High Speed 2

The government recently pumped c. £10 billion of taxpayers’ money into the West Coast Main Line (WCML), delivering major improvements in journey times. It is therefore unsurprising that passenger numbers increased significantly in the period immediately following the upgrade.

However, it is far from certain that strong growth will continue in the longer term. For various reasons the UK economy is likely to perform relatively poorly. In addition, new technology may reduce the need for face-to-face meetings. Driverless cars could cut the costs of road travel. Strained public finances may increase the pressure to lower the level of rail subsidies and end the generous tax breaks given to wealthy long-distance commuters.

There is currently significant spare capacity on the WCML, but if this were no longer the case in the future, it would be far cheaper to make relatively minor adjustments to the existing route than build a brand new high-speed link.

The first step should be to phase out the subsidies and tax breaks that artificially inflate demand on the line. This should include handouts for heavily supported feeder services to the WCML, including local public transport. For example, state support currently covers approximately 40 per cent of heavy rail industry costs.

Price regulations and franchising arrangements should also be reformed so that train operators can make better use of existing capacity. More flexible pricing would flatten the peaks and reduce overcrowding, while combining franchises or greater vertical integration would reduce the duplication of underused services, thereby freeing up paths. Low-cost enhancements could then be deployed, such as lengthening trains and reducing the number of first-class carriages.

If there were a commercial case, relatively minor infrastructure investment, such as modernising signalling and re-engineering junctions, could deliver further capacity gains at a small fraction of the cost of HS2. The 51m group (pdf) has provided examples of how this could be achieved.

The potential for market mechanisms to resolve capacity problems can be illustrated with regard to rail freight (the above point about subsidies also applies). Under market conditions congestion would push up access charges on the route in question, thereby encouraging operators to more fully utilise train paths (for example with longer trains) or to divert traffic to alternative routes. For example, higher prices on the southern WCML might push intermodal freight onto the Ipswich-Nuneaton route. It might also affect the choice of port and inland terminal. At the margin, containers could shift from London Gateway to, say, Felixstowe, Immingham or Hull.

It should also be noted that rail freight traffic is fairly trivial in terms of the capacity of the road network. If a larger share of forecast intermodal growth shifted onto the roads, the effect would barely be discernible in most locations. Any impact could be mitigated by deregulation measures such as raising HGV speed limits on single carriageway roads and increasing maximum weights and lengths. There may also be a case for peak-time pricing at the worst bottlenecks, combined with an equivalent reduction in fuel duty, thus strengthening the incentives for hauliers to operate off-peak and making better use of existing road capacity.

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