The price of HS2: is it still worth £100 billion?

The price of HS2 is more than you think – but we’re not talking just about money. Blame the sunk costs fallacy.

According to the UK government, the cost of the high-speed rail link from somewhere in London – more on this issue later – has rocketed to over £100 billion. To be clear, that’s a thousand million pounds, times 100.

10 Sunk Costs Examples (The Fallacy Explained) (2023)

For this sort of money, you could open a lot of closed rail links, and electrify all of the UK’s rail network where it makes sense – in other words, every mile except little-trafficked branch lines. The carbon emission savings just from eliminating diesel traction would be immense. Also, electric trains are lighter, faster and quieter, and more attractive to travel in, resulting in greater passenger take-up and higher revenues. The rail industry calls it the ‘ the sparks effect’. Wear and tear on the track would be less too, resulting in lower maintenance costs. It’s a virtuous circle.

View of the Euston Approaches worksite.

Yet there’s a lot of momentum behind HS2. Euston station (above) has been torn open to create platforms and other infrastructure that will needed for the new trains. The countryside has had tunnels and embankments built, along with track beds. Viaducts are starting to be built. There’s a lot of jobs at stake here.

The benefits are said to be greater capacity on the west coast main line (WCML). It will all be worth it, we’re told.

HS2: a great idea?

As a rail enthusiast, HS2 seemed like a great idea to me when first mooted in 2009. At last the UK was to get its proper high speed rail system, something to equal the many found in the rest of Europe, France especially. It would relieve the WCML of slower traffic, such as local and freight trains, allowing more express and semi-fast trains to run.

However, high-speed rail will never be as useful in the UK because it’s a smaller, more densely populated country than, say, France or Spain: the centres of population are close together, making time savings fairly small. For example, just 20 minutes will in theory be shaved off the trip from London to Birmingham.

And here’s one of the problems: since HS2 first emerged as a concept, the world has changed. Traffic patterns are no longer what they were. Commuting traffic, which happens in peaks and demands greater train density, is not returning to pre-pandemic levels. Instead, leisure traffic is back to previous levels, and in some cases is even higher. People are using the trains in a less concentrated way, more spread out over the week and during the day. So fewer trains need to be run, making the capacity issue less urgent.

The UK government’s finances, creaking at the seams, are being stretched to cover the full costs now.

Work on the Euston end of the system has been paused. There’s talk of terminating the HS2 line at Old Oak Common, just outside Paddington, from where passengers will be expected to change onto the capital’s Crossrail. The top end of the line has been truncated: the Y shape has been lopped so that the HS2 trains will only go to Birmingham, not on to York and possibly Manchester. It won’t even link up with HS1, which goes through the Channel Tunnel.

And worst of all, the London-centric line is an insult to those living in the north. Denied the sorts of investment in trains and infrastructure that London and its environs have enjoyed for decades, they’re struggling on with old trains, cancellations and patchy timetables.

Not worth the candle

In other words, it’s becoming clear that this project now not worth pursuing for the supposed benefits it will confer. Not for £100 billion.

Yet the problem — the core problem – is the sunk costs fallacy. The unspoken argument is that we’ve spent so much already and are spending £120 million weekly with the total cost rising by £100 million every month as a result of inflation, according to rail expert Christian Wolmar, that it would be foolish to stop now. But a big chunk of money has yet to be spent. Trains, signalling and other rail infrastructure has yet to be purchased. These and operational costs seem unlikely to be recovered for decades.

Savings can be had. If we stop now, a lot of money has been spent. But if instead we spent a fraction – a tiny fraction – of what’s projected to be spent on HS2 rebuilding Euston into an attractive place to join the railway, rather than the dismal corridor it now is, and a portion of the rest on electrification and rail reopening projects, especially in the north, we’d all be better off.

The rail industry behind the scenes would be more than happy to see this happen, according to Wolmar. He says: “There are very few true believers in the project across the railway sector. The rail managers I meet either refuse to discuss HS2 or acknowledge privately that radical action is needed.”

Projects like this acquire their own life, floating above mere reality and rational thinking. We need to stop it now. What are the odds of this happening?

When ‘can do’ becomes can’t do

A lesson for modern management

Buffer stopAfter several decades of interaction with the IT industry in all its many forms, in addition to my role as magazine editor when I could see how the publishing industry works from the inside, I can safely say that one over-arching characteristic of modern management is a ‘can do’ attitude.

And this is all very well, and helpful to achieve project goals by instilling a sense of momentum and enthusiasm among those tasked with carrying them out. It’s built into modern managers that they must be positive: to be anything else, especially in front of your peers, is frowned upon; being negative is not a career-enhancing move.

But there are times when that attitude is positively and absolutely counter-productive. Most of the time, we on the outside don’t see this: internal corporate mistakes are usually covered up, no-one admits that an commercial organisation could possibly have done anything incorrectly – or as journalists like to say, fucked up – for fear of damaging reputations, share prices, product sales and so on.

There’s a prime example of how ‘can do’ became ‘can’t do’ that came to light because it affected tens if not hundreds of thousands of people. And the dirty laundry had to be washed in public because – hey – public money was involved. I’m talking about the railways, and how a timetabling process that should have worked didn’t, in part because of various forces majeures, but mainly because of the inability of a group of managers to accept that a project could fail if they carried on with it.

A new British railway timetable was introduced in May 2018, and it didn’t work. The consequence was that hundreds of trains had to be cancelled, more were hugely late and the days of many, many travellers were ruined. Only by removing hundreds of services from the timetable was a semblance of order restored. It was a mess, and it cast the railway industry in a poor light.

There was a variety of reasons for this. There weren’t enough drivers in the south and, in the north, track work that was planned to have finished hadn’t been because of unanticipated ground conditions, for example. But mostly it was because those in charge didn’t galloped ahead with a timetable they weren’t sure was going to work.

What went wrong?
Railway timetables are fiendishly complicated things. Not only do enough track paths have to be found for the services that train operating companies (TOCs) want to run, they have to fit in around a range of other factors such as engineering and maintenance possessions, driver rosters and availability, different train acceleration and braking characteristics, freight trains, gradients, and variables known and unknown such as weather, station dwell times and so on.

Normally the planning for a railway timetable in the UK starts about 65 weeks before implementation, known in the trade as T-65. A variety of iterations then ensues as TOCs bid for track space to run their services, and Network Rail (NR), the organisation tasked with drawing up the timetable, examines the bids and either accepts them, or rejects them if it believes they are unworkable. If the latter, the TOC has to think again and re-present its bids. By T-12, the timetable is supposed to be cast in stone, as that’s the date that advance tickets – which are tied to specific timetabled trains – go on sale to the public.

Most timetable changes, which happen in May and December each year, are fairly minor. But the May 2018 timetable was different.

One of the big differences was the fact that Govia Thameslink Railway (GTR) had a huge number of changes to the timetable to submit as a result of new Thameslink services that were planned to run through London Bridge, under central London, and onto the East Coast main line. Initially up to 20 new trains per hour (tph) were planned, though this was eventually reduced to 18 tph to allow for bedding in. But its initial bids for the hundreds of new train paths were rejected by NR, resulting in the iteration process going back and forth for weeks.

Long story short, GTR’s new services overwhelmed the process, which had never in recent memory had to cope with that volume of changes. It took a long time and only at T-3 was the timetable finally declared ready. But it wasn’t, and it was only the week before the new timetable was due to go live that GTR realised it had a problem: when the TOC overlaid its driver rosters onto the new timetable, they didn’t match, as the company didn’t have enough drivers with appropriate route knowledge to run the new services.

The post-mortem
There was an Industry Readiness Board set up specifically to manage implementation of the new GTR services, on which were represented all stakeholders, including NR and GTR. It had the final say on whether the new timetable should go ahead. But, as Modern Railways magazine reported in its September 2018 issue, when the chair of the committee Chris Gibb, an experienced railwayman, asked if the changes should go ahead, no-one put their hand up to say they should not.

An NR manager on the board, John Halsall, said that at the point where it could have been stopped, T-26 in November 2017, everyone believed the new timetable could be delivered. He said: “That ‘can do and get on with it’ approach, which was so helpful up to a point, was actually the problem when we got to the split second when we could have put our foot on the ball: ‘everybody said, no, we can do this, and we must push on’.”

NR’s systems operations manager Jo Kaye identified the problem: “Everyone was in a spirit of hugely positive forward momentum to make [the timetable] happen. Perhaps because of the culture, of being so keen to deliver, blinded us in some way to the risks.”

So basically, collective lemmingness happened: no-one dared challenge the prevailing ‘can do’ culture for fear of being declared a negative ninny. There’s a lesson there for us all.

Whatever happened to the railway?

Have you noticed how no-one talks about the railway any more? From BBC downwards, the place where you catch a train is now a train station, not a railway station. In other words, we talk about the vehicles, not the system. And the problem with that is that we’re getting a worse service and it’s costing us a lot more.

The reason why we’ve lost the concept of a railway system is clear: there is no system any more. Since the rushed, ideological privatisation of British Rail in the dying days of the last Tory administration, the railway has been run by train operators, such as Southern or First Great Western, and an infrastructure operator, Network Rail. Within each of these two broad groups — train and infrastructure operators — there are further schisms, such as train leasing companies, train refurbishment companies, track maintenance companies, signalling and telecommunications etc etc. The list goes on.

Railways are inherently complex organisations: they’re subject to disruption by all sorts of events, most of them not entirely or at all under the railway’s control. People fling themselves off platforms in front of trains, hardware wears out or fails before its time, external electricity supplies go down, weather results in key personnel — think train drivers and signalmen — being unable to get to work, and so on. You can imagine.

At the best of times, for a system such as a railway to work effectively it needs communication between the various elements. In the days of a single railway organisation, it wasn’t perfect but at least everyone was working for the same employer and could be orchestrated as such.

Today, that is no longer the case. Each organisation has a profit motive first which means there has to be a cash incentive to make something happen that’s out of the ordinary. Usually, that works to the disbenefit of the rest of us. For example, you want to make a train connection but your incoming train is 10 minutes late. In BR days, the connecting train might well have been held for the benefit of the arriving passengers. No longer. There’s a financial penalty for train operators if they are late so today you can happily watch your connecting train drive away as you arrive at the station.

Another classic example is a small incident that happened in July 2011 at the entrance to Edinburgh Waverley station. A train derailed but it was a slow-speed incident, the train stayed upright, and no-one was hurt. In BR days, a crew would have been out to to jack it up and get on its way, and make overnight repairs to the track. In this incident, before the train could be moved, there had to be a full investigation to find out what had failed in order to establish who would pay for the damage. This meant that, instead of there being a delay of perhaps an hour or three, it took a day and a half before Edinburgh was fully open for trains again.

Given that, you can imagine what happens when one railway company needs to contact another in an emergency. Something has gone wrong and it needs to be sorted out, as passengers are stranded in the middle of nowhere. Since the profit motive comes first, the various parties have to talk about who will pay, who is at fault and therefore potentially liable, and whether it’s worth fixing now or later. That’s before they get around to talking about how to solve the problem. Meanwhile, passengers sit in trains for hours.

This is not a hypothetical problem: it’s happened plenty of times. Yes, we’ve had some nice new trains following privatisation. We’ve also had beyond-inflation price increases every year to pay for them — and for the huge profit margins the trains companies demand before they will get involved, even though their profits are underwritten by the government — that’s you and me.

Privatisation of the railways has been a disaster overall. We’ve lost the concept of a railway system, and replaced it with a patchwork of train operators’ turfs, each of which doesn’t connect, and results in a blizzard of confusing ticket prices as they attempt to segment the market and screw more cash out of the customers (we’re no longer passengers). Woe betide you if you miss a train, even if it’s not your fault, as the mega-prices are backed up by penalties if you don’t get exactly the right ticket.

As my good friend John May sings: it’s time for a change.