High Speed 1: how taxpayers were taken for a ride

Eurostar 203High Speed 1 (HS1) would never have been built if the decision had been made on commercial criteria, or indeed on rational economic grounds. While the high-speed-rail lobby promotes the scheme as a success story, it was in fact a financial failure, marked by cost increases, repeated bailouts, disappointing passenger numbers and failed objectives.

The cost of the final HS1 scheme was far in excess of original estimates. In November 1985, British Rail’s preferred high-speed option was costed at about £1 billion in 2015 prices, while the final cost of the project has been estimated at approximately £11 billion in current prices.

Moreover, after the line opened below-forecast passenger numbers meant that the operator, Eurostar, had to be bailed out by the Department for Transport. Further government support for the struggling route was obtained via the access charges for (subsidised) Kent commuter services.

In addition to substantial operating subsidies, HS1 appears to have been artificially supported by the manipulation of the rail market. Some services from Kent stations to convenient London termini such as London Bridge, Cannon Street, Charing Cross and Victoria have been cut, while others have been slowed down, in an apparent attempt to drive passengers onto HS1. Commuters across the Southeastern franchise area also faced steep increases in fares to pay towards the high-speed services, whether they used them or not.

Many of the objectives of HS1 have also yet to be achieved. Plans to run international services from Stratford in London and through services to the Midlands and the North did not materialise due to low demand. At the time of writing, Eurostar trains do not stop at the £250 million Stratford International station. And notwithstanding exceptional traffic during the 2012 Olympics, it appears that the stop is only lightly used by commuters from Kent, often handling fewer than 1,000 passengers per day in each direction.

HS1 also provided a rationale for the construction of additional transport infrastructure at further expense to the taxpayer. A £250 million (2015 prices) extension to the Docklands Light Railway (DLR) was constructed largely to improve the accessibility of Stratford International. The line also provided a major justification for the redevelopment of Kings Cross St Pancras Underground station, at an additional cost of roughly £1 billion (2015 prices).

It should also be noted that much of the ‘regeneration’ along the route has been state-funded. The subsidised public sector and ‘crony capitalists’ dependent on government privileges dominate the post-Olympics redevelopment at Stratford. Major tenants will include the bloated bureaucracies of Transport for London and the Financial Conduct Authority.

Similarly, the government has sought to kick-start the stalled redevelopment of Ebbsfleet – a highly undesirable site, much of which is at risk of flooding – with the injection of at least £200 million of public funds.

The development of land near Kings Cross – also partly government funded – could well have been viable without the link, given the artificial scarcity of opportunities produced by strict planning controls in Central London. Indeed, the redevelopment of such areas may be delayed by the uncertainty and planning blight associated with major transport schemes.

Even if one makes highly optimistic (and questionable) assumptions about the wider economic gains from HS1, it is clear that the project represented very poor value for money compared with alternative investments in transport infrastructure. Indeed, when the deadweight losses from the tax bill and off-balance-sheet spending are included, it seems likely that the costs of the scheme have outweighed the benefits.

 

This analysis of High Speed 1 is partly based on research published in The High-Speed Gravy Train: Special Interests, Transport Policy and Government Spending.

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