Friday, 12 March 2010

High Speed 2

In September last year, I commented on what I felt we would know after the various studies for HS2.

My starting point was that: "The direct user benefits (i.e. the benefits to people making journeys) are potentially quite large. Unfortunately, so are the costs. Both costs and benefits are highly uncertain." The government has now placed numbers on this suggesting that the project will generate £2 for every £1 spent. That might sound like a good return, but the Eddington report found "transport schemes can deliver overall benefits averaging £4 per £1 of government expenditure". So there are certainly many alternative projects which would generate better returns.

Next, I suggested that: "the wider benefits - e.g. 'regenerating the north' - are even more uncertain. I suspect the only thing we can say with any certainty is that they are likely to be overstated." Claims that Birmingham's economic output will increase by 6% suggest this process has already started.

Finally, I pointed out two certainties. First, the environmental impacts are not large and could well be negative (HS2 predict a change in average annual emissions in a range from -0.41 to +0.44 million tonnes, equivalent to just +/-0.3 per cent of current annual transport emissions) The second certainty is that any new route will not be commercially viable and will need large government subsidies (HS2 predict the cost is £30bn). The government suggest they will expect fair contributions - and point to developers and local government. Of course, most of the benefits are to passengers experiencing faster journeys so fair contributions means higher fare contributions (no pun intended). We shall see, but I can't imagine higher rail fares being that popular with voters ...

Thursday, 4 March 2010

The rural economy

The Rural Advocate has published his 2010 report. It focuses on how to keep young people in the countryside and includes a number of recommendations including around affordable housing, employment and skills, transport and communications.

I have written on rural housing and Digital Britain before and there is nothing new in the report that has changed my thinking on that.

My more fundamental question around this year's report is why should it be a policy objective to keep young people living in the countryside? It is hard to create jobs in rural places because they are less productive (if they were as productive as jobs in urban areas, then why would firms ever pay downtown rents?). Overcoming this productivity disadvantage requires more than just (very expensive) investment in broadband and more mobile coverage. More (heavily subsidized) public transport can only do so much to allow people to commute to jobs - rural areas close to bigger cities are usually expensive, while smaller towns struggle to generate large numbers of jobs for surrounding rural areas.

In short, we can spend a large amount of money to equalizing coverage of broadband, mobile networks and public transport but (likely) failing to generate significant numbers of rural job opportunities. Alternatively, we can recognize that, at least since the industrial revolution, rural to urban migration has played a crucial role in improving many young people's life chances. Perhaps we should be focusing on what we can do to help encourage and support it.