Some of us are speculating whether an action for fraud could be mounted against those who have so shamelessly promoted HS2 by way of pretenses to the “transformational”, to the Wider Economic Benefits, and within the economic case generally, see the rest of this blog and Topic 17 within the Transport-Watch web site to appreciate the mammoth scale of the deceptions.

Paul Withrington

Dear Sir David

This letter raises seemingly small technicalities.  However, these are straws in the wind which point to a far greater issue.

In response to a FoI request your staff claimed that the organisation does not know the split between business, commuting and other trips.  However, that must be dissembling since, without that fundamental data, it would be impossible to carry out the economic analysis.

In lieu of an answer, data in Table 3-4 of the Assumptions report of October (PFM v4.3).  2013 enabled us to make a fairly robust estimate of business trips as a proportion of all trips. .The calculation yields 53.4%, a value which is far above the “one third” cited in paragraph 5.2.13 of the Demand and Appraisal report dated April 2012.

This very substantial and sudden increase arose immediately after the reduction in the value of business time from circa £47 per hour to £32 per hour and the reduction in forecast passengers from 380,000 per day to 310,000.  These changes should have reduced the benefits by 35%, so destroying the economic case.  However, largely as a result of this huge increase in the highly valued business trips the computed benefits increased by 24% – for Heavens sake

Separately from that, here is a particular example of how the railway and HS2 lobbies routinely behave.

• Bombardier told the Transport Committee’s inquiry into the Future of Rail, 2003-04, that to move 50,000 people per hour in one direction “we need a 35 metre wide road used by buses or a 9 metre wide track bed for a metro or commuter railway”.          In contrast ,the reality is that one lane of a motor road can carry 1,000 75-seat express coaches per hour at 100 kph thereby offering 75,000 seats in one lane the same width as required by a train.

This disgraceful anecdote is mirrored by the recent claim, made by the DfT, that HS2 will have the same capacity as a 12-lane motorway when, in reality, a single express coach lane would offer nearly four times as many seats as would HS2’s eighteen 1,100-seat trains per hour.

Frankly, the analysis and selling of this scheme is now (and always has been) dishonest: a desperately serious matter since tens, if not hundreds, of billions of pounds are at stake.

Stewart Joy, Chief Economist to British Railways in the late 1960’s wrote, in his book, ‘The Train that Ran Away’, that there are those who “… were prepared, cynically, to accept the rewards of high office in the British Transport Commission and the railways in return for the unpalatable task of tricking the Government on a mammoth scale.  Those men”, Joy wrote, “were either fools or knaves”; a sentiment which seems to apply with even greater force today than it did in the past.

Against that background, and the attached, I am canvassing people of status (particularly those who work in the railways) to act as whistle-blowers.

Perhaps you would consider that a preferable course to leaving a smear in the pages of history – the waste of tens, if not hundreds, of thousands of working men’s lives.

Yours sincerely

Paul F Withrington

Note, the letter sent to Sir David contained a tabulation and an attachment. To view those click here

Ronald Utt’s paper “America’s Coming High Speed Rail Financial Disaster” is a compelling read. For full enjoyment read the source here.  Otherwise savour these quotes:

• In addition to the billions of dollars in capital costs that the federal and state governments will incur the President has committed the nation to providing a perpetual stream of substantial subsidies.  As a result, the HSR program could come to rival the some entitlement programs in how much it will contribute to out-of-control annual federal deficits.
• With apologies to futurists, people in the construction industry and rail buffs, investing $13 billion (or even $8 billion) in passenger railroads is a little like building a bridge to the 19th century.
• In essence, the federal government is paying massive subsidies to achieve minor benefits for a  tiny fraction of the travelling public.
• However extravagant this commitment to jazzed-up 19th century technology may be, the ultimate costs of bringing HSR to the 13 corridors already approved by the FRA will be staggering.
• The supposed benefits do not even begin to justify the exorbitant costs.
• One purpose of the review was to address the contention that passenger rail in other countries, especially HSR, operates at a profit (i.e., without subsidies). For 1995–2006, the study found that the governments of Germany, France, the United Kingdom, Spain, Denmark, and Austria spent “a combined total of $42 billion annually on their national passenger railroads.”  The $42 billion that these six countries spent on just passenger rail in 2006 is roughly proportionate to the $54.8 (most of which was funded by user fees) that the government of the United States spent on all forms of transportation, including highways, rail, aviation, water transport, and mass transit.
• Despite Europe’s huge investment in passenger rail, its market share declined from 6.6 percent in 1995 to 6.1 percent in 2007.
• This last point is of some importance because one goal of the HSR scheme is to shift travel from largely unsubsidized commercial aviation to heavily subsidized trains. Yet the same scheme in Europe seems to have failed over the past dozen years, despite massive government subsidies.
• Today, several of the restructured, privatized Japanese passenger rail lines run at a profit, but only because they were acquired at a fraction of their capital costs and the government absorbed much of the system’s debt (circa $300bn).
• The point of reviewing the recent U.K. experience is not to criticize the rail reforms that the U.K. undertook, but to note that regardless of organization, ownership, and the intensity of the reform effort, building and operating a system of passenger rail service still requires massive public subsidies.
• Although the entire French passenger rail system receives an estimated annual government subsidy of approximately $10 billion (compared to the annual estimated subsidy of $22.8 billion for the somewhat larger German passenger rail system, which also includes an HSR component) the HSR service between Paris and Lyon—one of 11 TGV lines and 267 miles of the system—is believed by some to be one of only two HSR routes in the world that generate enough revenue to cover both capital and operating costs.
• Since opening, the [Taiwan] system has lost $2.1 billion, leading The China Post to describe the situation as a “hyper-modern technology [that] was meant to be a source of pride, but instead has turned into a rich source of embarrassment.
• Spain opened its first HSR line in 1992. Since 2003, it reportedly has spent more on rail than on roads.  Despite this commitment, the EU reports that rail in Spain accounts for only 5.1 percent of ridership, almost 2 percentage points below the EU-27 average of 6.9 percent for all surface transportation modes

Network Rail is to be fined £70 million for failing performance targets on punctuality. The fine will, of course, be paid by taxpayers since Network Rail receives subsidy – fares do not even cover operating costs – bust since 1955 and before.

Furthermore Network Rail has a debt of £30 billion.  That debt is notionally secured against the (imaginary) value of the Regulatory Asset Base, the RAB, on the fraudulent basis that investment in rail leads to an asset that can be traded.  Instead, without Government support, the railways, if retained as railways, are worthless in the market place.

It is not Network Rail and or the banks which should be fined.  Instead it is the Chief Execs, past and present, and their henchmen – all of them guilt of misleading the Government on a mammoth scale.

The claims made by those lobbying for HS2 are the top end of that; a scheme which will, if built, waste resources equivalent to the lifetime wages of 80,000 working men.

Our letter to The Times – inevitably not published ……….

The five lead letters under the heading “No HS2 please, we are British”, in The Times of March 20^th were notable for the complete absence of data. So, let us be clear. The cost will be circa £80 billion including the trains and the otherwise omitted links to the stations. That is equivalent to £3,000 for every household in the land. The actuarial loss faced by those standing in the opening year of 2036 after accruing the fares out to the remote year of 2096 will be similar (Note 1).

The claim is that the proposal will generate 100,000 jobs, although many, if not most, will be relocations. If we believe the 100,000 then the cost per job will amount to £800,000. How many working lives will that vast subsidy destroy in that part of the economy which makes a profit?

The scheme is said to be “transformational”. However, it is only new or generated trips that can contribute to that. These will amount to a trivial 1.5% of existing passenger-journeys by rail and to an even more trivial 0.05% of all passenger-journeys (note 2). These percentages sabotage the notion that this thing can be transformational in any sense except perhaps that it will extract £3,000 from every household in the land, 99% of which may never use a high speed train.

The claim made in the KPMG report, that the system will generate £15billion per year in wider economic benefits, implies that the new or generated business and commuter trips will yield 14 times the benefits derived from the average for the nation as a whole, with the further implication that every existing commuter or business trip using the West Coast Main Line is yielding circa 30 times the average – an absurdity which illustrates how ludicrous the £15billion is (notes 3 and 4).

Charitably KPMG did not carry out such a reality test. Had it done so it would never have published the £15bn, or at least not with a straight face.

Is it not time for those who so shamelessly promote this thing to be prosecuted for mis-selling on a gigantic scale?

Notes and calculations:

(1)         Table 15 of the October 2013 economic analysis provides a net loss to the Government of £31.5bn at the 2011 price and discount base. Rolling that up at the Treasury Discount rate of 3.5% to the opening year of 2036 yields £74bn representing the actuarial loss at 2011 prices faced by those standing in that year, assuming the forecast fares out to the remote year of 2096 actually arise.

(2)         HS2 Ltd also says that the project will generate 76,000 new passengers-journeys per day, (FoI request 13-873). The 76,000 corresponds to roughly 22.8 million per year.  It is only those new trips which can be “transformational” since all the rest (obviously) pre-exist.   There are currently 1.5 billion passenger-journeys per year by surface rail, and 43.5 billion passenger-journeys by all modes (walk and cycle excluded). Hence generated, or new, passenger-journeys may account for a trivial 1.5% of all surface-rail journeys and for an even more trivial 0.05%, or one in 2,000, of all passenger-journeys. Clearly that cannot be transformational

(3)         As above, generated, or new, trips total 76,000 per day.  If 40% are for business or commuting (Para 5.2.13 of the Ariil 2012 Demand and Appraisal report provides 33% for business. NTS data suggest adding 25% for commuting for longer distance trips) they will number 30,400 per day.  For such trips there are an effective 255 days per year.  Hence the annual new business plus commuter trips will be circa 7.75 million. Dividing KPMG’s £15bn by the 7.75 million provides an average value for these new business or commuter trips of circa £1,930, or circa £4,000 per round trip.  The National Travel Survey provides 177 such trips per head per year or £10.6 billion for the nation as a whole.  The GDP is circa £1.5bn.  Hence the value per trip is £141, 14 times less than the £2,600 for these marginally generated HS2 trips, illustrating how unbelievable the £15bn is. After all:

• The £4,000 per round trip is in excess of what would have been achieved had the individuals stayed in their offices.
• These new trips arise only because journey times will have been reduced somewhat.
• Pre-existing trips did not need such an encouragement.  Hence they will have higher WEBs, possibly double the average for the new trips, implying an average value attributable to a pre-existing business or commuter trips on the West Coast Main Line circa 30 times that for the nation as a whole.

Charitably KPMG did not carry out such a reality test.  Had it done so it would never published the £15bn, or at least not with a straight face.

(4)       These new trips arise only because journey times will have been reduced somewhat. Pre-existing trips did not need such an encouragement. Hence they will have higher WEBs than the generated trips. In standard economic analyses values associated with generated trips are half those attributed for those which already exists. The implication is that the value per trip attributable to a pre-existing business or commuter trips on the West Coast Main Line is double that for the generated ones, yielding a 30 times as much as those for the nation as a whole.

(5)       In October 2013 we asked HS2 Ltd, under freedom of information legislation, to provide the proportions of trips which were for business, commuting and leisure. That data must be available since, without it, the economic analysis could not be carried out.   HS2 Ltd claimed it does not hold the information. We have continued to press for the data but without success. The date is now 28^th March 2014. We regard this failure on behalf of HS2 Ltd as symptomatic of an organisation which will do all it can to prevent key data from reaching the public.

The 30% we have used is consistent with old reports.