High Speed Two (HS2) discussion

[RichmondCommu]

Secondly, the 'we can't afford this' argument is absolute bunkum. Firstly because with the pound being used as a haven currency by the world (along with the Dollar and the Swiss Franc), means our borrowing costs are incredibly low.

Given that our borrowing costs are so low this is precisely the time when we should be looking to clear as much debt as possible, not to add to it.

 

[Clip]

I believe its called democracy.

Indeed it is but I remember the Channel Tunnel getting rammed through parliament to get built rather then go on for years. Though worth noting terminal 5 spent about 5 years in consultation before it got built and pushed the costs up something stupid. Great democracy at work that. Talk and cost more money.

 

[WestCoast]

Democracy is wonderful, but there needs to be a balance between securing the future prosperity of the UK and respecting people's (sometimes very inward looking) views. The UK is a fairly large and densely populated country by European standards and the continental countries are the competition for incoming investment from the emerging economic powerhouses of the future. You've got to look at the wider picture here and where you envisage the country to be economically in 20-30 years time. I can understand the concerns about HS2, but I just worry that UK plc is falling behind what the competition can offer in terms of rail and airport infrastructure. You can increase education standards to record highs, but if there's a diminishing supply of skilled jobs for young people leaving education then they may emigrate or become a financial burden on the state

 

[HSTEd]

Given that our borrowing costs are so low this is precisely the time when we should be looking to clear as much debt as possible, not to add to it.

What?

Why should we reduce it now? What we should be doing is issuing as many long term bonds as possible at this interest rate.

Remember the inflation adjusted interest rate on 30 year gilts is now negative, think about that now.

 

[WatcherZero]

I find it ironic Osborne thinks the supporters arent shouting loud enough in favour, he gave a speech yesterday saying not enough people supported their cutting of top rate of tax to 45p and if they wanted more tax cuts in future they had to publically ask for them. Do you think that will take tax cuts off the Conservative agenda under the same logic by the same man?

 

[Rational Plan]

I would not put too much store in the article yet. The Spectator and the Telegraph have been anti HS2 since the start, treat any such story with a pinch of salt.

 

[Metrailway]

The lowest interest rates in over a hundred years is not when we can afford to build it?

Government debt is only at 1970 levels (as a fraction of GDP) currently, and the last time before that that it was below today's value was about 1915.

To be quite frank, the price of HS2 is a drop in the budget compared to the size of the economy, and the markets know this. £33bn may sound like a lot but even if it was paid for in one year that is only about 4 months of borrowing at the current deficit.

Although British Government debt is approximately 80% of GDP, in reality it is a lot higher due to various accounting tricks and PFI. For instance, Network Rail is state owned but is officially listed as a private sector company so it's debt does not go into the Government books. The Treasury last year published Whole of Government Accounts for the first time and according to an IEA blogger the Treasury figures showed that public sector debt is 173% of GDP. However, this still excludes Network Rail and various other organisations (but does include PFIs). This level of debt was last seen in the 1950s.

Now some people like Ken Livingstone will say that our debt is not a problem. We managed to set up the Welfare State with very high levels of debt.
However, he only tells half the story. We did set up the Welfare State but this is due to very cheap loans from the USA (which won't occur now) and very low private sector borrowing (unlike now). Also much of the debt then was held by British people unlike now. Japan has a very high debt at over 200% of GDP but the vast majority is held by Japanese people and companies as they are still very patriotic. There is not enough patriotism in this country to fund a higher debt, although this hasn't stopped the Government from trying.

 

[HSTEd]

Although British Government debt is approximately 80% of GDP, in reality it is a lot higher due to various accounting tricks and PFI. For instance, Network Rail is state owned but is officially listed as a private sector company so it's debt does not go into the Government books. The Treasury last year published Whole of Government Accounts for the first time and according to an IEA blogger the Treasury figures showed that public sector debt is 173% of GDP. However, this still excludes Network Rail and various other organisations (but does include PFIs). This level of debt was last seen in the 1950s.

Now some people like Ken Livingstone will say that our debt is not a problem. We managed to set up the Welfare State with very high levels of debt.
However, he only tells half the story. We did set up the Welfare State but this is due to very cheap loans from the USA (which won't occur now) and very low private sector borrowing (unlike now). Also much of the debt then was held by British people unlike now. Japan has a very high debt at over 200% of GDP but the vast majority is held by Japanese people and companies as they are still very patriotic. There is not enough patriotism in this country to fund a higher debt, although this hasn't stopped the Government from trying.

I assume, if you also include all these debts, that you include all the additional income streams available? For instance you include all the income Network Rail recieves from track access charges and rents and the like?
You can't simply assign all the debt of these organisations to the state and then ignore all the additional income that derives from thier operation.
(If the debt is supported by income derived from other sources than taxation it is not really general government debt)

Additionally PFI is not debt in the normal sense, and such has to be treated differently from "conventional" government debt.

Additionally the ongoing refinancing of the debts at lower interest rates increases our ability to borrow additional debts, borrowing as such does not cause our interest rates to increase under current conditions, they represent the risk of default, and therefore they would only increase if borrowing £30bn extra would increase our risk of default, and I don't think a few hundred million more pounds a year being expended on the interest would make any significant difference?

 

[PR1Berske]

If HS2 does not go ahead, this country deserves its place in the 19th century.
Very disappointing.

 

[RichmondCommu]

What?

Why should we reduce it now? What we should be doing is issuing as many long term bonds as possible at this interest rate.

Remember the inflation adjusted interest rate on 30 year gilts is now negative, think about that now.

On the contrary, we should try and clear as much debt as we can before interest rates start to rise. Adding to our already substantial debt will only store up problems for the future.

 

[Chris125]

Isn't that what the Great Central was meant to be?

Urban myth. Aside from the GCR not being to any 'continental' loading gauge (of which i believe there was no common standard at the time, Berne being later), there's the small matter of the entire route between London and the Kent Coast being wholly unsuitable too. It was built to a generous loading gauge, like the GWR, but that's all.

Regarding HS2, i think its pretty obvious the Spectator article should be viewed in the context of ongoing inter-party politics - and ignored.

Chris

 

[HSTEd]

On the contrary, we should try and clear as much debt as we can before interest rates start to rise. Adding to our already substantial debt will only store up problems for the future.

BUt the majority of debt we have is at higher interest rates than we can obtain now thanks to its long maturity.

The interest rate only affects debt issued now, it doesn't change the coupon on bonds issued a decade ago.

We should be borrowing when interest rates are low, and paying the debt down when the interest rates are high, since the only interest rate that matters is the one that we borrow at, not what it does after the bond is sold.

 

[Metrailway]

I assume, if you also include all these debts, that you include all the additional income streams available? For instance you include all the income Network Rail recieves from track access charges and rents and the like?
You can't simply assign all the debt of these organisations to the state and then ignore all the additional income that derives from thier operation.
(If the debt is supported by income derived from other sources than taxation it is not really general government debt)

Of course - but Network Rail's profit is small when compared to it's large debt.

http://www.guardian.co.uk/business/2012/jun/07/network-rail-profits-debt-rise?newsfeed=true

 

[HSTEd]

Of course - but Network Rail's profit is small when compared to it's large debt.

http://www.guardian.co.uk/business/2012/jun/07/network-rail-profits-debt-rise?newsfeed=true

£27bn in debt with a £754m in profit....
£27bn in debt using 10 year bonds purchased today comes to (at the yield from the FT website - 1.73%) roughly £467m pounds.

So even assuming interest service is not covered by the costs and thus has not already been accounted for, Network Rail can easily cover its debts and pay them down in current conditions, it could even service its debts if the interest rates on ten year debt were to rise as high as 2.9% after inflation (if we assume its profits will rise with inflation).
Indeed under current conditions it could be supporting roughly ~£16bn in government debt if repaying it was not currently required.

 

[Schnellzug]

Just wondering, in view of the notion that High Sped lines are, to paraphrase mrs. Thatcher, roads to prosperity, what about the example of Spain, which has been building an incredibly extravagant network of high Speed lines like there's no tomorrow, and never mind where the money comes from? Indeed, even France are now having to admit that a lot of the High Speed Lines have never come anywhere near the amount of traffic they hoped for, and even even with the incredibly generous attitude they have to Public spending, they're having to look much more realistically at them in Future.

 

[HSTEd]

Just wondering, in view of the notion that High Sped lines are, to paraphrase mrs. Thatcher, roads to prosperity, what about the example of Spain, which has been building an incredibly extravagant network of high Speed lines like there's no tomorrow, and never mind where the money comes from? Indeed, even France are now having to admit that a lot of the High Speed Lines have never come anywhere near the amount of traffic they hoped for, and even even with the incredibly generous attitude they have to Public spending, they're having to look much more realistically at them in Future.

France has a drastically lower population density (144 people per sq. km versus 255) than the UK. Spain is even lower (91/sq. km).

We have far more opportunities for connections between cities than France and Spain, and there are numerous good choices available. HSR can also potentially capture far more of the market due to the distance ranges in the UK being far more amenable to it than they are in France/Spain.

 

[Schnellzug]

France has a drastically lower population density (144 people per sq. km versus 255) than the UK. Spain is even lower (91/sq. km).

We have far more opportunities for connections between cities than France and Spain, and there are numerous good choices available. HSR can also potentially capture far more of the market due to the distance ranges in the UK being far more amenable to it than they are in France/Spain.

Isn't that also an argument against HSLs? They've been able to construct them so extravagantly because the population is much more spread out, so distances are longer and there's much more room to construct elaborate civil engineering works, and High Speed lines are much more competitive over long distances. The more dense population* in the UK would make relatively short distances between stations more sensible; i.e. more like what we have now.

* geographically, not.... well, I don't know :-/

 

[sulli_os]

I know that the money isn't in a pot somewhere so won't necessarily become available, but there are other projects that it could be used for that would still alleviate some of the capacity issues on the WCML. One would be to properly upgrade the MML:

* WCML spec, including in-cab signalling, Class 390 stock etc. Include in this upgrade the line between Manchester and Derby and you could have Manchester - London trains on this route, something like:

Manchester - Derby - Leicester - London St Pancras [plus intermediate stops]
(Sheffield trains running via Nottingham, maybe)

You could even have trains calling at a new/modified Manchester Airport terminal if you were being particularly forward thinking. Plus you'd get quite a bit of diesel rolling stock (HST or 222) from the MML becoming available for cascade elsewhere

---

As a side note, I'd personally like to see and end to many of the "fast" trains that don't stop anywhere, and in their place see a greater number of semi-fast services that tie together better. This would improve capacity, but I realise I may in the minority on this one.

 

[Zoe]

Manchester - Derby - Leicester - London St Pancras [plus intermediate stops]
(Sheffield trains running via Nottingham, maybe)

Midland Mainline wanted to run an improved service to Leeds service and the 9 car 222s were ordered for this but the SRA then decided to now allow this service to run. I'm not sure Manchester would be any different as like Leeds it is well covered by other TOCs.

 

[sulli_os]

Midland Mainline wanted to run an improved service to Leeds service and the 9 car 222s were ordered for this but the SRA then decided to now allow this service to run. I'm not sure Manchester would be any different as like Leeds it is well covered by other TOCs.

Too young to remember it but sounds about right. So much for "privatisation will bring innovation to the railways" eh?

Edit: I was thinking it could be part of a remapping of franchises, so Manchester wouldn't be served by the West Coast franchise at all. That said, I think it's a good thing to have some passenger-facing competition. Passengers might get a better deal.

 

[caliwag]

I am bemused by the lack of similar articles from other authoritative sources, which suggests that the title of this article is less definitive than it first seems.

It is true, however, that HS2 is nowhere near to being "confirmed." I for one am in two minds over the project.

On the one hand, if HS2 goes ahead, the extra capacity and slightly faster services would of course be much appreciated, although I have concerns over WCML services being slowed to a crawl and the HS2 fares being sky high.

On the other hand, I fail to be convinced by the pro-HS2 claims that the WCML south of Rugby is "full." How can a line be "full" if 5-car Voyagers and 4-car Desiros are running up and down the line, day in, day out? How can a line be "full" when a certain class of train that can run in 12-car formation is currently running in 9 and 11-car formation? And how can a line be "full" when many Off-Peak and shoulder-peak intercity services are nowhere near full capacity? If...

• All Pendolino's were lengthened to 12-car, with one First Class coach converted to Standard Class
• All Voyagers were doubled-up to create 10-car formations
• Desiros ran as a minimum of 8-car formation
• A greater emphasis was placed on Off-Peak travel
• And peak restrictions were adjusted to encourage shoulder-peak travel

...capacity would be increased dramatically, and with a much, much lower cost than HS2.

Excellent post...one of the most sensible bits of analysis I've read on the whole issue. May I suggest that you fire a copy of this to Ms Greening, post haste!

 

[williamn]

All of the above are short term fixes and don't address long term capacity issues. In addition I doubt Virgin will want to decrease revenue by converting a first class coach to standard, and its very hard to change people's travel patterns while working hours remain fairly rigid. In addition the costs of these short term fixes - extra carriages, platform lengthening etc, are disproportionate to their benefit.

 

[radamfi]

But what about pricing people off the WCML as an alternative to building HS2?

 

[HSTEd]

So how will you be driving people to use the seats in these Desiros that take far longer to reach the destinations that you can reach on the Virgin trains?

Why not convert all the coaches on the Pendolinos to first class and make second class passengers use the Desiros?

Forcing people to take trains that take rather longer to reach the destination in question will not lead to increased ridership.

 

[Zoe]

But what about pricing people off the WCML as an alternative to building HS2?

You could then end up with people switching to road and air which is not a great idea at all considering the climate change and peak oil concerns.

 

[gordonthemoron]

and also, M1 is effectively a car park
--- old post above --- --- new post below ---

As a side note, I'd personally like to see and end to many of the "fast" trains that don't stop anywhere, and in their place see a greater number of semi-fast services that tie together better. This would improve capacity, but I realise I may in the minority on this one.

I'd also like to see fewer through trains (esp to London) and more proper connecting services, e.g. from Inverness, Aberdeen, Sunderland, Hull, Harrogate, Lincoln & Bradford Interchange to reduce/eliminate running diesels under the wires

 

[Waverley125]

The reason having a higher population density works for the UK is precisely because you can increase stops on the line, giving more people access and increasing ridership.

For instance, the line from Madrid to Barcelona in Spain is 386 miles long, and has 3 intermediate stations-at Zaragoza, Lleira and Tarragona. Serving populations of 700k, 250k and 400k. This means it competes with air travel, and has very long distances without stopping.

By contrast, HS2

London-Birmingham: 120 miles, relieving most congested long-distance railway line in the country, serving the Birmingham metropolitan area, population 3.6 million.

Birmingham-Manchester: 90 miles, serves population of 2.6 million

Birmingham-East Midlands: 50 miles, serves population of 900k

Birmingham-Sheffield 35 miles, serves population of 1.8 million

Sheffield-Leeds: 35 miles, serves population of 2.3 million

see the difference?

 

[caliwag]

You could then end up with people switching to road and air which is not a great idea at all considering the climate change and peak oil concerns.

In isolation UK needs to play its part. It's always been said that we need to set an example etc etc, but I read that China is to build 70 new airports and expand the 100+ it already has in the immediate few years. This on top of the hundreds of coal-fired power stations it has already announced, so what ever out little nation does is irrelevent globally.

I still think that social networking, ways of communicating, home working, home deliveries with the consequent demise of the traditional high street, tele-seminars etc will all be seen to be the way forward by more and more enlightened organisations. Sorry boys and girls it'll be the end of all those jollies and the 'I have to go to london for a meeting'.

 

[HSTEd]

In isolation UK needs to play its part. It's always been said that we need to set an example etc etc, but I read that China is to build 70 new airports and expand the 100+ it already has in the immediate few years. This on top of the hundreds of coal-fired power stations it has already announced, so what ever out little nation does is irrelevent globally.

Alright, if you don't agree with the environmental argument, how about the reduction in use of liquid fuels argument? Reducing the oil imports that require us to actually care what happens in the middle east and so on.

 

[Wath Yard]

Just a few days ago the All-Party Parliamentary Group for High-Speed Rail published a report concluding that HS2 is the only solution to long term capacity problems beyond 2020. Yes, adding the odd coach here and there will help, but only to a point. There comes a point you simply cannot push an essentially Victorian network anymore, especially if you want to run more trains in the peak and a mixed traffic railway.

The full report is here

http://www.appghsr.co.uk/upload/APPG for High-Speed Rail Inquiry Report.pdf

The thing about that is it is produced by a group calling itself All-Party Parliamentary Group for High-Speed Rail who:

The APPG for High-Speed Rail is a cross-party group of MPs who believe that Britain needs a modern high-speed rail network.

A bit like the AA saying we need more motorways or BA and Virgin Atlantic saying Heathrow needs expanding. Hardly impartial or convincing.