John Whitehouse

Retired County Councillor for Kenilworth Abbey Division Learn more

My latest posting on Lib Dem Voice: The opportunity cost of HS2

by John Whitehouse on 2 December, 2013

Today’s publication by the Liberal think tank Centre Forum, “Build the infrastructure: bin the wish list”, ought to make every Liberal Democrat stop and think again about the wisdom of spending £50 billion on HS2.

The report concludes that “projects must be prioritised with full consideration of opportunity costs”, saying:

The debate on major infrastructure projects needs to take account of opportunity costs as well as individual project benefit-cost ratios.

Opportunity cost measures the difference in benefit-cost between chosen investments and others that are given up as a consequence. Thus, deciding to invest in one set of projects which consume the entire budget means that other projects cannot go ahead because there is no money for them.

The High Speed 2 (HS2) rail project illustrates the point. Current estimates are that it will cost about £50 billion which would fund beneficial projects across a range of sectors. One commentator noted that for the cost of HS2 you could fix the nation’s potholes, upgrade the existing West Coast Main Line, fix other rail bottlenecks, turn busy A-roads into dual carriageways, build a third runway at Heathrow, invest £2 billion in cycle networks and provide superfast broadband across the country.

Alternatives to HS2 can be built for a fraction of the HS2 projected costs. The Atkins report on alternatives to HS2 has concluded that investment of £2.6 billion could increase long distance capacity on the West Main Line by an additional five trains an hour, with journey time reductions to Birmingham and Manchester.

No doubt the debate over HS2 will rumble on for some time to come. What is clear is that a deliverable and affordable programme means one in which some pet projects will need to be canned so that others can be prioritised.

Difficult choices have to be made. But that is why we elect governments.

A welcome dose of hard-nosed economic reality, perhaps, but will it be enough to burst the bubble of wishful thinking that has surrounded the whole HS2 project from the beginning?

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