When it comes to Buying Votes few things work as well as High-Speed Rail

Posted by PITHOCRATES - November 3rd, 2013

Week in Review

Governments everywhere have a love affair with high-speed rail.  Because it’s big.  It’s costly.  And best of all it takes a lot of union workers to build it.  And even more to maintain and operate it.  That’s a lot of grateful people who will remember them at the next election.  And when you get down to it that’s what politics is all about.  Buying votes with taxpayers’ money.   And few things cost more than high-speed rail.  Which is why governments love them.  Even if they are not good economic models (see Upgrading existing rail network would be better value than HS2, government analysis finds by Tim Ross posted 11/3/2013 on The Telegraph).

Ministers published their latest economic “business case” for the controversial £50 billion high speed project last week, as the Prime Minister sought to deflect pressure onto Ed Miliband over Labour’s wavering support for the plan…

Ministers paraded the latest official estimate of the economic value of the plan, which claimed that HS2 would deliver £2.30 in benefits for every £1 spent on the scheme.

The figure was based on an assessment of the impact of quicker travel times, more trains running between London and the north, and extra investment in jobs and businesses along the new route, among other factors.

However, detailed analysis buried within a separate 150-page study into the alternatives to HS2, also published by the Department for Transport last week, showed that upgrading services on existing rail routes would provide far better value for money.

According to this study, one package of improvement works to existing lines between London, Birmingham and northern cities would deliver economic benefits equal to £3.30 for every £1 invested, 43 per cent more than HS2.

This is why high-speed rail is not a good economic model.  It may deliver everything they say it will but whatever it does deliver is never enough.  Not with those mammoth price tags.  In this case £50 billion (about $80 billion).  To return £2.30 for every £1 invested that would come to £115 billion in new economic activity.  Britain’s GDP in 2012 was about £1.49 trillion.  So the expected return on that high-speed rail investment would be 7.7% of GDP.  Sounds nice.  But highly unlikely when you consider Britain’s GDP growth was than 1% in 2012.  Coming in at 0.1%.  Worse, all the costs will be in the first few years of breaking ground.  While the new economic activity will be spread out over decades.  Guaranteeing costs will exceed revenue for a very long time. 

Of all the high-speed rail lines in the world only two actually operate at a profit.  One in Japan.  And one in France.  Every other passenger train in the world loses money and requires taxpayer subsidies.  And because they do it is better to spend less than more.  Especially when more is £50 billion (about $80 billion).  And you can produce a greater return on investment by spending less.  But that is hard to do when you’re in the business of buying votes.  Which is why they keep trying to build high-speed rail.

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