Economics of High Speed Rail Links

A recent report criticised a proposed new High Speed rail link between London and Birmingham (HS2) on the grounds that:

• Cost of building scheme (£17bn) is hard to justify given benefits would be limited to relatively small number of passengers.
• Benefits of reducing CO2 emissions are limited.
• There is a stronger argument for using government spending to improve existing rail infrastructure, e.g. longer trains and making better use of existing lines.

Supporters argue that demand for rail travel is continuing to grow. By 2020, projected rail use will have outstripped capacity. Investment is needed to provide more services and meet future demand. By providing extra capacity, it will relieve congestion on roads and improve the infrastructure of the UK economy. Also, by offering better quality, faster rail services, it will encourage more people to choose train. Like building new roads increased demand for car travel, building faster lines will create demand for train use.

Report calls for Rail scheme to be scrapped at Independent.

There may be a good case that investment funds may be better used on existing capacity. However, in this debate it is useful to take into account external benefits which are often ignored in public debate about the desirability of various transport schemes.

Death Rate by Mode of Transport

By comparing death rates by billion passenger KM, train travel is much safer than car use. A fatality rate of 1.9 per billion KM, compared to 0.3 billion KM for train.

Source: ONS - Social Trends 40

• Fatality rates of transport should be given a significant economic cost. If one form of transport is fives times safer than another, then this is a significant external benefit, which justifies government subsidy.
• The other issue is time. A new high speed train link helps save time for both rail users and car users who benefit from lower levels of congestion.
• The growth in train travel in the UK, is despite the fact that services are often overcrowded with a perception of being late and expensive. If train services are quicker, it will attract more people to choose train travel rather than drive.
• Related to the issue of time, is the fact that train travel offers opportunity to work. In the age of iPads and laptops, train travel can become an opportunity to work rather than get stressed driving through the streets of Birmingham.

This doesn't mean all high speed rail networks should automatically go ahead. But, when deciding, greater mention should be made of other externalities. Train travel does justify government subsidies, but often in the UK we have made decisions on the rail network based on simple profit and loss. This has left the UK, with a transport infrastructure which increases cost on business.

Related

• Growth of rail travel in UK
  
• Cost Benefit Analysis