Dr Steve McCabe

Dr Steve McCabe

By Dr Steve McCabe – Birmingham City Business School

Birmingham City Business School is one of the longest established and most respected Business Schools in the UK, with a strong focus on practice-based learning alongside links to services and business. With over 3,200 students, it is also now one of the largest Business Schools and enjoys enormous respect in all areas of teaching and research. Students can specialise in a range of fields including finance, international business, marketing or general management.

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The media impresario and media-mogul Lew Grade funded the 1980 film Raise the Titanic! which was based on a novel of the same name. Despite the fact that he’d hired an all-star cast it was a commercial disaster and cost him a fortune. In frustration Grade was reputed to have said that it would have been cheaper to lower the Atlantic.

This amusing story reminds me of the on-going saga of High Speed 2 which seems to be getting more and more expensive. In particular, it makes me wonder if someone in Government will suggest that it will eventually become cheaper to move London than build this line!

The strange thing about HS2 is that it should be a cause of great excitement. After all, we are only doing what European nations achieved in their rail infrastructure years ago. Having travelled on the some of these routes and especially Eurotunnel I can attest to the incredible sensation of travel on a high speed train and watching the landscape whizz past.

But right from the great railway building mania of the 1880s it was always economic logic which prevails.

If a line made sufficient money it survived. However, many investors found that their expectations were unfounded and the line made losses causing closure. Many lines which did survive were doing so on pitiful returns and though they were taken over by the government in the nationalisation of the railways which followed the second-world-war, many disappeared when Dr. Beeching wielded his infamous axe in his 1963 report The Reshaping of the Railways.

What followed was decades of under-investment in our railway system which led to misery for travellers and very unfortunately, tragic accidents. Recent years have seen much needed investment into creating a railway system ‘fit- for-purpose’ in 21st century Britain and having high speed railways would seem to be immutable.

The trouble with HS2 is that it will be built with taxpayers’ money. No private investor would dream of funding a project which, according to The Institute of Economic Affairs, will cost £80 billion which is almost twice what the Department of Transport’s current estimated cost of 43 billion and which is an increase on the original proposed cost of £33 billion.

According to The Institute of Economic Affairs the cost of building the HS2 line is too high and as they believe “defies economic logic.” Indeed, they contend, if the £80 billion they believe is required to construct HS2 was instead spent on updating the existing transport infrastructure which would include major roads, motorways railways and airports, £320 billion worth of value could be yielded.

A major problem with HS2 is that arguments used to justify it have always seemed highly dubious. For example, it was suggested that there would be economic benefit from the reduced time business travellers spent out of the office and not doing ‘useful’ things. This has always appeared a bit slippery as my experience of travelling on trains recently is that everyone gets their laptop out and starts working.

I doubt that in fifty years time if HS2 is indeed built our progeny will worry too much about the final cost. At that the ‘sunk costs’ will be forgotten. However, currently £80 billion is a lot of money to spend when the economy is yet to fully recover.

The Institute of Economic Affairs are not the first to draw attention to what they believe to be questionable arguments for HS2.

So, if it is to go ahead we need better justification.

In the 1960s a huge amount of taxpayers’ money was spent on another form of high speed transport; the Concord aircraft.

Whilst the theory of supersonic air travel was fine in principle, in practice the ‘vanity’ of what was being achieved blinded its supporters to the economic reality of flying people faster than the speed of sound.

Concord was a form of luxury travel, like being a passenger on the Orient Express, and as a consequence only the very rich could afford to it. Flying subsonic was far more cost effective and, as we know, has expanded massively in the last twenty years.

Compare this to the dream of supersonic air travel. Because of consistent losses in flying the small numbers of very rich passenger coupled with the phenomenal costs of maintaining the aircraft and the catastrophic crash in Paris in 2000, Concord was eventually abandoned.

Unless there is an intention to subsidise HS2 and in order to recoup the cost of building the line, travel by HS2 might be seen to be akin to lying by Concorde; only for the extremely ‘well heeled’.

Making cities such as Birmingham and Manchester effective ‘suburbs’ of London might indeed bring much needed investment and jobs. However, this is far from certain and it is extremely unlikely that those carrying out jobs on average earnings (just under £27,000), will be using HS2 line to get to and from work.

So, before we commit to this project let’s see a much better analysis of what HS2 will really cost, the likely benefits and how it will provide advantage to wider society.

 

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Dr Steve McCabe

Dr Steve McCabe

Birmingham City Business School