The need for high-speed rail

The clamour for new high-speed rail lines from politicians and train enthusiasts is ever-increasing, but whether they really offer value for money remains to be seen

Author: Jules Gray
July 3, 2013

Big shiny trains that soar across the landscape at break-neck speeds seem to be as popular with rail fanatics as they are with politicians these days. Across the world, many policymakers are enthusiastically talking up the ability of high-speed rail as a means to boost long-term jobs, address regional inequalities, and provide a more sustainable global transport network less reliant on fuel-guzzling planes and cars.

But such enthusiasm has been met with equal levels of scepticism from those that think building extensive tracks of new railways are a blight on the landscape as much as they are on a nation’s balance sheet. Although the environmental impact of new high-speed rail routes have been widely discussed – particularly in the leafier parts of the English countryside that a proposed new line will pass through – it is the economic benefits offered by these lines that need to come under more scrutiny.

While high-speed lines may be ideal in expansive countries with a lack of transport infrastructure, they seem less practical in more developed regions well served by different forms of transport. They are also hugely expensive projects that take especially long to build, presenting the problem of a costly ‘white elephant’ that may no longer be up to speed with current technologies.

Background development
Initially developed in Japan as a solution to the serious congestion in the Tokyo to Osaka corridor in the 1950s, high-speed rail began life with top speeds of just 145kmph. By 1964, the Japanese had developed the 0 Series Shinkansen train – commonly known in English as ‘Bullet Trains’ – which reached top speeds of 210kmph.

Europe quickly followed suit, with both German and French engineers showcasing trains that ran at 200kmph in 1965. The busy route between Paris and Toulouse was chosen to support a 200kmph line the following year by state-run firm SNCF. The French later developed their TGV (Turbotrain Grande Vitesse) service that ran at speeds of more than 250kmph, beginning commercial use in 1981.

After the success of the TGV in France, Germany opened its own high-speed service in 1991 that ran between Hannover and Würzburg. Spain joined the party with a line that connected Barcelona and Seville in time for the 1992 Olympic Games.

In the last two decades, other countries have been eager to install their own high-speed rail lines. The US – although widely served by the airline industry – saw the Acela Express service open in 2000, linking Boston, New York, Philadelphia, Baltimore and Washington DC. It was heralded as a success, running at a profit, although it is considerably slower than high-speed routes around the world, with just a small section running at 240kmph.

Asia has also seen a growth in high-speed lines, with South Korea building the Korea Train Express service in 2004 across the busy industrial corridor between Seoul and Busan, while China has opened a number of lines, the first of which – the Qinhuangdao to Shenyang Passenger Railway – opened in 2003, and the country now has the largest high-speed network in the world.

Japan’s bullet train Hayabusa is unveiled in Tokyo after a departure ceremony in 2011. The thin nose will allow the train to travel at 300kph
Japan’s bullet train Hayabusa is unveiled in Tokyo after a departure ceremony in 2011. The thin nose will allow the train to travel at 300kph

Grand plans
More high-speed routes have been announced recently around the world, and many are hailing them as exactly the sort of infrastructure projects that can help drive economic growth and create jobs in a period when many are out of work.

The EU has been hugely in favour of developing an extensive network of high-speed rail lines that will serve some of the less developed regions

The EU has been hugely in favour of developing an extensive network of high-speed rail lines that will serve some of the less developed regions, with strong connections to Europe’s larger economic hubs. The US has also seen calls for a new network of high-speed lines, with President Barack Obama enthusiastically talking up the technology in his campaign in 2008.

However, currently the largest project being actively undertaken in the country is the California High-Speed Rail network, which finally got approval in February. Another line between Washington DC and Boston was also proposed in 2012 by the president of Amtrak, although the estimated $151bn cost and 25 year build time has drawn considerable criticism.

Proponents of such lines say they will help address capacity issues arising from increasing populations, as well as taking a lot of the burden from both road and air travel. It is the economic impact on less developed regions that are heralded as the biggest advantage of high-speed rail.

Gerald Ollivier, the World Bank’s Senior Transport Specialist, has been working on China’s high-speed rail network and spoke in January of the advantages it will have for such a expansive country: “Look at the case of Zhengzhou on the 2,298km Beijing to Guanghzhou line opened on December 26th [2012]. “In the past, in a three-hour conventional train journey on this line, about three million people from Anyang, Xinxiang and Handan could reach Zhengzhou; today, with the opening of the new high-speed line, this number will surge to 28 million people from eight cities. These cities will start to work more closely together as a return trip within a day will be within reach.

“The impact in terms of economic exchanges, accessibility, and productivity gains are expected to be significant, and extend beyond traditional transport savings. The scale and scope of the Chinese high-speed rail programme offer a unique opportunity to measure such impacts.”

The tortoise and the hare
However, a recent study into the economic impact of high-speed rail outlines why it may not offer the benefits to regions that many presume. The discussion paper by Ginés de Rus of the University of Las Palmas, in collaboration with the OECD and the International Transport Forum, looked at the impact investment in high-speed rail could have on economies. The paper, ‘The Economic Effects of High Speed Rail Investment’, was originally written in 2008, but updated last summer.

De Rus says that while improved transport links from high-speed rail might allow large companies better access to previously underserved regions, they may also hinder these regions’ industrial growth.

“A better connection between two regions with different development levels not only gives firms in a less developed region better access to the inputs and markets of more developed regions. It also makes it easier for firms in richer regions to supply poorer regions at a distance, and can thus harm the industrialisation prospects of less developed areas.”

This seems to have been shown in Spain, where the benefits of a link from Madrid to Seville built in the early 1990s have not extended to the surrounding Andalusia region. The link was predicted to cause many companies to relocate from Madrid to Andalusia, but many remained in the capital, serving the regions at arms length.

With regards to Europe’s ever-growing network of high-speed lines, de Rus adds: “The Trans-European Transport Network will give much of the EU better access to the main activity centres. However the gap in relative accessibility between core and peripheral areas is likely to increase as a result of the new infrastructure, which reinforces the position of core regions as transport hubs. “The emphasis on high-speed rail links is also likely to favour the main nodes of the network, and is unlikely to promote the development of new activity centres in minor nodes or in locations in between nodes.”

Justifying the cost
It is clear that the benefits from high-speed rail can vary wildly, depending on the regions they serve. While installing a network of high-speed railways across huge territories makes sense in the case of countries like China and the US, in smaller nations like the UK the arguments don’t quite stack up.

While high-speed lines may be ideal in expansive countries with a lack of transport infrastructure, they seem less practical in more developed regions

The romanticism that surrounds rail travel among many in British society stretches back decades, but is often a misguided yearning for a bygone age of grand projects. The current government has adopted proposals from its predecessors and intends to build a new line that would run initially from London to Birmingham, before eventually splitting into two new lines up to Manchester in the west and Leeds in the east.It is seen by some as the best way of eliminating the north-south divide in the UK, even though its projected cost is around £33bn and it wouldn’t be open until at least 2032. It has come in for criticism from people concerned at the government’s ability to pay for it, as well as the long-term benefits it will have on society.

The cost-benefit ratio has been shown to be comparatively low for such an expensive projects, falling well short of the government’s target of between 1.6 and 2.0, with some estimates putting it at just 0.5. A recent report by the National Audit Office raised concerns about the cost of the project and the projected economic benefits. This followed other sceptical statements in recent years, including those of Nigel Hawkins, a senior fellow at the think tank Adam Smith Institute.

Writing in 2011 of the high cost of HS2 in comparison to what it would deliver to the economy, Hawkins said: “Yes, HS2 may create a substantial number of construction jobs and yes, it may narrow, to a limited extent, the very wide north/south divide – but it is a very expensive way of doing so.” However, the UK’s plans for a high-speed network seem less necessary when you consider it already has an extensive rail network built during Victorian times that could be reopened to create more capacity.

After the steady decline in British Rail’s finances, the government in 1962 announced its Transport Act, in response of the Beeching Report, which dramatically cut much of the rail network. A third of all passenger services, as well as over 2,000 stations, were closed.

Although it is unlikely that all of these routes would ever be restored, the added capacity that could be created by using some of HS2’s proposed £33bn budget to reopen some old lines would surely drastically alleviate the country’s congested transport network.

State support
When a government looks to build a high-speed rail network, the scheme must offer a net social benefit greater than the next best alternative. As high-speed rail tends not to attract private investment, the burden on the government is usually quite extreme. Air and road travel, on the other hand, is more than likely to see heavy private investment, as the returns tend to be more immediate.

De Rus concludes that the risks associated with high-speed rail investment, including the relatively high long-term cost that is almost entirely undertaken by the state, means that only in very specific circumstances should it be considered.

He said: “The lack of private participation in high-speed rail projects increases the risk of losing money. High-speed rail investment may be adequate for some corridors, with capacity problems in their railway networks or with road and airport congestion, but its convenience is closely related to… the volume of demand. Moreover, even in the case of particularly favourable conditions, the net present value of high-speed rail investment has to be compared to other ‘do something’ alternatives, such as road or airport pricing and/or investment, upgrading of conventional trains.

“When the investment cost associated to new high-speed rail lines does not pass any market test, and the visibility is reduced by industry propaganda, short-term political interests and subsidised rail fares, conventional cost-benefit analysis can help to distinguish good projects from simple ‘white elephants’.”

Faster but not always better
Ultimately, investing in high-speed rail takes much time and a lot of money, but it can prove beneficial if conducted in the right environments. However, there is a danger that newer technologies in transportation will race ahead in the years that it takes to build a high-speed route.

Air travel is slowly becoming more efficient, while there is an expectation that within 20 years we may all be getting around in self-driven cars. The need for speed is also questionable, as existing train services begin to offer internet connectivity, allowing people to begin work while in their seats, and therefore negating the need to get into the office quicker.

There is also a question of who will use the high-speed lines. While they will offer faster and more comfortable journeys, the high cost of building them means that the burden of paying for it will likely be put on the passenger. High ticket prices may result in a line exclusively used by the wealthy, with the rest of society foregoing a the reduced time for a much reduced cost.

Source: International Union of Railways/Amtrak
Source: International Union of Railways/Amtrak