Opportunity Cost is the Achilles Heel of High Speed 2

An economically rational transport investment policy would allocate scarce resources to those projects with the highest returns.

Yet even if one accepts the official estimates – and in reality there are major doubts as to whether the benefits will actually outweigh the costs – it is clear that High Speed 2 offers poor value for money compared with alternative transport schemes (data on rates of return on transport schemes here).

The issue of Opportunity Cost is therefore the Achilles Heel of HS2. Clearly the vast resources required would be far better deployed elsewhere.

If the aim is to cut journey times, then other schemes would deliver more valuable savings for less expenditure.

If the objective is to address overcrowding then there are far more cost-effective ways of increasing capacity and making more efficient use of existing links.

And if regeneration of the North is the priority, then greater gains would come from investing in local schemes that would deliver substantial agglomeration benefits.

In summary, High Speed 2 fails the test of economic logic. It is being driven by a mixture of politics and special-interest pressure rather than rational economic analysis.

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