High Speed Forecasts Were Wrong

International passenger numbers on the HS1 Channel Tunnel high-speed rail line are falling far short of original forecasts, a report from a Government spending watchdog said today.

The project costs of the £6.16 billion London to Folkestone line have exceeded the value of journey-time saving benefits, the National Audit Office (NAO) report said.

Passenger numbers between 2007 and 2011 were, on average, two-thirds of the level forecast when the Department for Transport (DfT) guaranteed the project debt in 1998 to enable the line to be built, the NAO said.

NAO head Amyas Morse said: "The HS1 project has brought a number of significant benefits including quicker journey for passengers.

"However, the project went forward on the basis of hugely optimistic assumptions about international passenger numbers. These were not realised and the department is only now developing its plan to evaluate whether the project was value for money.''

The first section of the line, which is used by 186mph Eurostar trains between London and Paris and Brussels, was completed in 2003, with the full line open in 2007.

Originally run by London & Continental Railways (LCR), the line was sold to a consortium in November 2010 for just under "2.05 billion.

The NAO report today - the third it has made on HS1 - said the project had delivered a high-performing line, which was subsequently sold in a well-managed way which removed the taxpayer's open-ended support for the project.

But it added that international passenger numbers were falling far short of original forecasts and the project costs exceeded the value of journey-time saving benefits.

The NAO said the £6.16 billion construction cost was 18% higher than the target costs but that this performance "compares well with other railway projects''.

The report also said the line had performed well since it opened, with only 0.43% of services being delayed in 2010-11 by infrastructure incidents, such as track or signal failures.

But the below-forecast passenger numbers had left the taxpayer exposed to the risk of lower-than-expected passenger income, which had been expected to repay the project debt, the NAO said..

The report said the original business case for the line in 1998 was based on benefits to transport users from faster journey times and increased rail capacity and regeneration benefits.

The report said the total value of these benefits was not known. It added that the  DfT had started to identify the methods it will use to evaluate the project's costs and benefits.

The report added that the department had not reassessed these costs and benefits since 2001, despite assurances to the House of Commons Public Accounts Committee that it would do so.

Commenting on the NAO report, Margaret Hodge MP, chairman of the House of Commons Public Accounts Committee, said: "I am yet to be convinced that HS1 will prove to be value for money. Yet again we hear that value for money will depend on uncertain benefits which have not been quantified. We will want the department to do all it can to realise the benefits and turn this sorry story round.

"Compared to the staggering mismanagement of the West Coast mainline upgrade, the department did relatively well with the construction of HS1. But that is damning with very faint praise indeed. It's a sad state of affairs when it comes as no surprise that HS1 was based on dodgy assumptions and bad planning.''

A DfT spokesman said: "The department has significantly improved its passenger forecast modelling since the original work for HS1 some 20 years ago.

"HS1 was delivered on time and on budget and this report points to the significant benefits it has achieved, not just for passengers, but for the taxpayer, including when it was sold for more than #2 billion, far exceeding market expectations.''