Infrastructure - a critique of HS2

"If India can send a mission to Mars for £47 million, why does a rail line to Birmingham and beyond have a potential cost of £80bn+"

Free market think tank IEA has published a critique of HS2, suggesting the bill will top £80bn. On top of this, there is talk of cutting costs by axing some key stations, reducing its viability. The Treasury has a senior civil servant reviewing the whole project, and serious concerns are leaking out.

The paper (linked below) looks at HS1 as an example; the cost over-run there was (2013 prices) an initial projection of £1bn, but ending up at £11bn. Substantial. In addition the government still has to subsidise the operating companies to get some use out of it, and train fares across the South East are higher as a whole.

The paper talks about "high benefit" projects, and sees HS2 as a low benefit project. Why is it being pursued then? Special interests - a really nice evaluation point is that widely dispersed groups - e.g. the taxpayers funding it - don't have much incentive to rally against it, whereas those groups that benefit directly are very skilful at getting there way.

Clearly infrastructure is critical; if you get an "infrastructure" question, there is some really specific high-level material in here; a quick skim of the first 15 pages or so (with notes) should give you at least four or five points you could bring in about how the wrong project can damage infrastructure in the long run, and (tying it into our QE/infrastructure essay) how separating projects from government control would make unviable projects less likely. To paraphrase Milton Friedman, "if it's your own money, you use it with care; if it's the taxpayers', who cares?"


IEA HS2 - a special report