The HS2 Calculation – Kill it, Kill It Now

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We’re presented with some numbers trying to persuade us that HS2 should go ahead. The actual lesson from these numbers being presented to us being that we should kill HS2, kill it stone dead right now:

Scrapping the HS2 rail project will cost at least £12 billion in write-offs and compensation and plunge major construction companies into financial peril, ministers are being warned.

Sources close to the beleaguered scheme told the Observer that extra costs of £3bn-£4bn would be incurred even if it were scrapped immediately. £9bn has been spent already.

The £9 billion is sunk costs. Whatever we do we’ll never get that money back. Therefore the £9 billion should have no influence on what we do next. For what we do next has no influence upon the spending or not of the £9 billion.

Actually, if we’re entirely honest about this, this isn’t quite true. For some portion of that £9 billion is land acquisition costs. Which means the project owns some land – which, if we don’t complete the project means we can sell the land and get some money back. This though is not an argument for continuing the project, rather the other way around.

So, we avoid the sunk costs fallacy. What are we being presented with as our numbers then? We can spend £100 billion on building a choo choo set. Or we can spend £3 billion on not building a choo choo set.

Sure, having fast choo choos has some value. Not a lot, the autonomous car is going to make train lines somewhat redundant as a method of passenger travel soon enough. And while rail is just great for freight not so much on a small and crowed island like the UK. Works great across America, not so much here. Oh, and freight doesn’t need to travel fast either.

Technology has also upended the calculations about the value of fast travel for passengers. We value their time as if they can’t work while on the train, that’s just how it is done. Laptops and mobiles – and yes, our time valuations come from before those were widespread – mean this is no longer true. The time value is very much less than what is in the calculations in use.

But this then becomes the question. Is the fast choo choo set worth £97 billion? The answer is no. Therefore kill it, kill it now.

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Jim
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Jim

Its not going to be £97bn though is it? It’ll be at least 50% more than that, probably double.

We really should make the politicians (and those making the estimates) have some skin in the game. Lets say if the scheme goes ahead and if it costs a penny more than £97bn before the first train runs end to end they all get hung. Deal?

Clem Fandango
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Clem Fandango

I think you mean hanged.

Jim
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Jim

Pendant. Which is what they’d be too 🙂

Bloke on M4
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Bloke on M4

The sensible thing with these projects would be to contract a supplier with an incentive, like a fee per ticket sold on the new trains. They fail to deliver, they overrun, doesn’t cost us extra.

Bloke on M4
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Bloke on M4

“Sure, having fast choo choos has some value. Not a lot, the autonomous car is going to make train lines somewhat redundant as a method of passenger travel soon enough. And while rail is just great for freight not so much on a small and crowed island like the UK. Works great across America, not so much here. Oh, and freight doesn’t need to travel fast either.” The autonomous car is a bit of a pipe dream. But what’s already damaging the case for HS2 is the decline in commuting because of remote work. Rail use is up, but that… Read more »

Quentin Vole
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Quentin Vole

+1
My only quibble would be that an autonomous car that can drive through crowded, badly lit city streets or windy country lanes is probably a bit of a pipe dream. But the technology is already pretty much there to drive in convoy on motorways without driver intervention – adaptive cruise control and lane following are available on plenty of high- (and not so high-) end models already.

Bloke on M4
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Bloke on M4

That’s a good point.

But I don’t want to drive. I’d rather have that 30-60 minutes back and have a more leisurely breakfast, finish work at 5:30 and be in the pub for 5:40.

Quentin Vole
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Quentin Vole

#metoo
But some jobs require physical presence, my plumber can’t work over webex (though he’s not likely to be an HS2 customer, either).

Bloke on M4
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Bloke on M4

Exactly. Commuting is mostly about city office workers. There aren’t factories in Holborn and the plumbers that go there need tools so generally drive. Shop staff generally ride the bus.

I’m sure there’s exceptions, but that isn’t going to keep demand up if the rest are doing 2 days at home each week.

djc
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djc

But if I take the train I will be doing that drive through” crowded, badly lit city streets or windy country lanes ” to get to the station.
Once you count door-to-door a few minutes saved on the train (where at least it is possible to do a bit of work) doesn’t amount to much.