A senior MP has questioned the credibility of a forecasting change that significantly boosted the economic case for HS2, noting that without the change the high speed rail project would ‘scarcely be worth the candle’.
Andrew Tyrie, chairman of the Treasury Select Committee, has written to transport secretary Chris Grayling to challenge the Department for Transport’s (DfT) updated economic case for HS2, published in November 2016.
What HS2 would look like at London Euston
He noted that the benefit-cost ratio (BCR) for the full HS2 network had increased from 1.8 in November 2015, to 2.1 in the new document.
This meant that for the first time the project was considered to be able to deliver ‘high’ value for money, in line with DfT guidance.
Mr Tyrie said: ‘The Department claims that it has been underestimating the growth in passenger demand in support of the economic case for HS2.
‘The transport secretary needs to explain why the latest projection for growth in demand will be any more reliable than its predecessor. Over the last seven years we’ve had six of these – each different.
‘Without this latest data, the business case suggests that the project will deliver low value for money, according to the Department’s own guidance. In other words, HS2 would scarcely be worth the candle.’
Mr Tyrie pointed out the forecasting change that made the largest impact came from updated demand data that increased it by 1.6. He noted that if the demand update were to be removed, the benefit-cost ratio ‘would fall dramatically’.
He claimed that ‘the credibility of this sharp rise in forecast demand is crucial to the whole HS2 project’, and asked Mr Grayling to not only explain the change but provide some assurance the forecasting would not simply be changed again in the future.
Mr Tyrie also pointed out that the latest rail demand forecasts underpinning the DfT’s analysis of Phase 2b of the scheme are based around the Office for Budget Responsibility’s (OBR) outlook for the economy but that the OBR subsequently downgraded its forecasts for GDP growth.
A DfT spokesperson said: 'We keep our modelling under constant review and our analysis has repeatedly shown HS2 will be high value for money and deliver more than £2 of benefits for every £1 invested.'
Mr Tyrie recently also took the Government to task recently for the modelling it used on the economic case for Heathrow expansion.