More than £28 billion of taxpayers’ money will be needed to cover the hidden costs of the High Speed Two (HS2) project, according to an investigation championed by the TaxPayers' Alliance (TPA).
Rising costs and lower revenues associated with recent pledges made by the Department of Transport are to blame, claims the report.
Critics of HS2 argue that £10 billion will be added to the bill by Cross Rail 2 - the Chelsea to Hackney line - that will have to be built to ease pressure on London Underground lines from Euston, according to the TPA.
Offsetting environmental concerns, such as going underground to avoid visual disruption, will cost an estimated additional £3 billion, it says.
However, Professor David Begg, Director of the Campaign for HS2, called the TPA report a “work of imaginative fiction”. He said:
“Anybody can make up a set of figures for spending that may have to happen in the future. Unfortunately, the key thing this 'research note' lacks is any evidence or research.
“The TPA has nothing constructive to say about how Britain’s railway capacity crisis can be helped. Instead of just carping and criticising from the sidelines, they should realise that HS2 is the best option for taxpayers and passengers.”
Tory MP Kwasi Kwarteng, a member of the transport select committee, agreed with Begg. Speaking at an event organised by the Institute of Economic Affairs (IEA), he said:
“Any input into the model can come up with any answer you want. It is simply the case that it is all dependent on the assumptions you make. It does not take an Einstein or even a sophisticated mathematician to manipulate those assumptions to find the figures you want.”
The proposed high speed service is not designed to affect the regularity of existing trains. Theresa Villiers, Minister of State for Transport, pledged earlier this year that local trains will continue to run frequently.
However if there are no cuts to local services, then no savings are made, argues the TPA, adding £5.4 billion to the overall cost
Matthew Sinclair, Director of the TaxPayers' Alliance said:
"They’ve been promising the world but meeting their pledges would add billions to the already frightening price tag attached to the current plans. There is no way taxpayers can afford the hidden costs of HS2. It would be completely unfair to heap this further burden on them at a time when taxes are rising and other areas of spending are being cut."
Flaws in predicted revenue are also criticised by the report. The project relies on the assumption that many more people will be using rail by the time of HS2’s completion. Kwarteng acknowledged this, saying:
“I've seen the benefit-cost analysis and I agree that it is based on extraordinary assumptions: that is that rail demand will increase from now till 2043. If it stops in 2026, then it makes no sense; there will be no benefit. I’ve seen those figures... there are risks, everything in life has risks, but if you balance the risks I think this is an excellent project... railways have been subsidised by the government since the nineteenth century."
Over enthusiastic predictions have led to previous projects failing, say the TPA. Their research quotes a 2010 document from rating agency Fitch, which states:
“Historically, the agency has observed that the assessment of rail demand has displayed a significant optimism bias, particularly for Greenfield projects... Rail projects are often high profile. This exposes them to 'political entrepreneur syndrome', where the public authorities overestimate the benefits of the project to get it approved for the purpose of political gain.”
David Bayliss, an engineer from the RAC Foundation, agreed. Speaking at the IEA event, he said:
“As an engineer I am excited by the concept of high speed rail... but I am afraid this proposal is an example of naive enthusiasm over hard-headed realism.”
The government will announce their decision in December after further consultation. If the plans go ahead, building could start by 2017.
Kyn Aizlewood, an economic consultant and the co-author of 'High Speed 2: the next government project disaster?' said:
“There is consensus among people that we need continued investment in infrastructure, however I don’t believe HS2 is a good thing.”