Can’t Assess HSR Benefits Without Looking At Oil
Britain’s proposed HS2 high speed rail line has been controversial since the Labour government proposed it back in the ’00s. The Conservative Party was skeptical in opposition but has embraced it now that they are in power. The project is moving ahead but, as tends to happen with major projects, cost estimates are rising and those who don’t understand the importance of fast, electric passenger rail are trying to kill it.
The Economist magazine is one of those critics, and this week laid out its reasons for skepticism. There’s just one problem. One of the most important factors to include in any assessment of HSR’s costs and benefits is the price of oil – and it’s nowhere to be found in the Economist’s article.
THE case for HS2, the proposed high-speed railway, has never looked more dubious. On June 26th Patrick McLoughlin, the secretary of state for transport, revised the estimated cost of the project up from £32.7 billion ($50 billion) to £42.6 billion—or £50 billion if the price of rolling stock is included. In May the National Audit Office could not say whether HS2 represented value for money. Calculations about the productivity lost as businessmen sit on trains turned out to have been based on data from 1999-2001, before the advent of iPads and train Wi-Fi. Lord Mandelson, a former business secretary who once supported the scheme, wrote in the Financial Times on July 3rd that it “has the potential to end up a mistake”. NIMBYs continue to campaign against it.
A big part of the problem is that the UK is mired in the grip of insane austerity policies, pushed by media outlets such as the Economist even though it has produced nothing but a near triple-dip recession and widespread suffering. Government needs to be spending a lot more money to create jobs, and building sustainable infrastructure like HS2 is a great way to do it. Yet in a country where austerity dominates elite thinking, major projects like HS2 are seen as suspect.
The issue about productivity is interesting yet given flawed treatment. Apparently a Department for Transport study claimed that productivity was being lost to delays on trains, but that study was done in the pre-smartphone and pre-tablet era. Yet that doesn’t invalidate the broader point that slow transportation infrastructure has productivity costs. A slower train is still slow, and brings a time penalty. Sure, one could get some work done on a slower train if you have wifi or a cellular enabled device. But you can get a lot MORE work done in your day if your travel time is shorter.
As we have argued consistently at this blog since 2008, the cost of doing nothing is not zero. HS2 will save money by providing an alternative to expanding airports and motorways. It will also add capacity to the overall British rail network, and provide a much needed improvement to rail connections between northern England and London.
Most importantly, HS2 will reduce Britain’s reliance on oil and can help reduce carbon emissions. Although it seems like elite opinion has gotten used to high oil prices, those prices are only going to rise further. When that happens, Britain’s already fragile, weak, and stagnant economy will be pulled back down into recession yet again. The current government has made a series of bad economic policy judgements. Building HS2 would be one of the few smart decisions they would have made in their time in power.
Any assessment of the cost and benefits of high speed rail has to take a holistic view – one that includes the cost of oil – if it’s to be credible.