diamond geezer

 Tuesday, January 29, 2013

Yesterday the Government announced its preferred route for the northern end of HS2, a Y-shaped extension of the High Speed rail line to Manchester and Leeds. It'll be some time before the new line is operational, with all the fine detail yet to be planned and agreed. But how much will it cost to use this new railway?
The government says its proposals "assume a fares structure in line with that of the existing railway" and that HS2 could generate sufficient demand and revenues without needing to charge premium fares.
So, maybe it'll not cost much more than now. But let's see what that might mean, with reference to the only existing High Speed line in Britain. That's HS1 out of St Pancras to Kent, where fares to use the faster line cost more than they do on slower lines. Let's calculate how much more...

2013 fares to Kent
Return fare
from London to
Peak timeOff-peakFare
increase
SlowHS1SlowHS1
Ashford£29.60£35.50£26.30£31.5020%
Canterbury£30.50£36.40£27.70£32.9019%
Dover£36.30£42.20£32.30£37.5016%

Just to clarify, on HS1 you can't pre-book a specific train and get a better deal, you pay either the peak or the off-peak fare. But it's clear from the table that the supplement for taking the High Speed line from St Pancras is about £5. The percentage increase is 20% to Ashford, where the whole journey is High Speed, and a bit less than that for stations beyond, partly along slower lines. So for High Speed only journeys, the appropriate High Speed premium would appear to be 20% - maybe not as high as you were expecting.

Now let's apply that further north. I've researched the current price of a return ticket to Birmingham, Manchester and Leeds, using the fastest services, at two different times. Firstly the morning rush hour, for the highest possible fares, then on a Saturday, which is representatively off-peak. On each occasion I've then worked out the fare if you book cheapest trains three months in advance, and what happens if you turn up and buy a ticket on the day. Here's what happens...

2013 fares to the Midlands & the North
Return fare
from London to
Peak timeOff-peak
AdvanceOn the dayAdvanceOn the day
Birmingham£67£158£15£49
Manchester£134.50£308£25£77.30
Leeds£37.20£249£29.20£98

Rail travel's great if you can travel off-peak and tie down your life in advance. Even in peak times it's fairly cheap to get to Leeds, although I should point out these fares are for the most recently-released tickets, and anything under two months hence is rather dearer. Alas we can't always plan that far ahead, and the £308 that Virgin charge to Manchester and back is daylight robbery.

How would things change if we added a 20% High Speed premium? How much more expensive might it be to travel along the fast track (announced yesterday) than the relatively slow track we have today?

Equivalent HS2 fares including 20% High Speed premium
Return fare
from London to
Peak timeOff-peakTime
saving
AdvanceOn the dayAdvanceOn the day
Birmingham£80£190£18£5935m
Manchester£161£370£30£9355m
Leeds£45£299£35£1181hr

That doesn't look too bad, assuming that today's pricing structures are one day applied to the new line. But I have my doubts that a High Speed network would offer the same levels of cut price advance tickets we see today. Instead I'd expect that those who want to pay less would be shunted onto the existing railways, where there'd be spare capacity, leaving HS2 for those who value time over money.

The table above shows the potential fares in today's money. But what if we take account of one more thing - inflation? The new line isn't scheduled to open until 2032-33, twenty years hence, and fares will have risen a lot by then. They're currently pegged at "inflation plus 3%" per annum, although the government's reduced that to "inflation plus 1%" this year, equivalent to 4.2%.

Let's assume that fares will rise 5% per year for the next 20 years, a potentially conservative estimate. 5% per year may not sound much, but it soon adds up, and two decades on is equivalent to a single rise of 165%. Here are those HS2 fares again, assuming a 20% High Speed premium plus 5% fare rises between now and 2033. Isn't maths scary sometimes?

2033 HS2 fares inc 20% High Speed premium + inflation
Return fare
from London to
Peak timeOff-peak
AdvanceOn the dayAdvanceOn the day
Birmingham£213£503£48£156
Manchester£428£980£80£246
Leeds£118£793£93£312

These are only ballpark figures, and undoubtedly wrong, although I've tried to base them as far as possible on current reality. But there you have it, in 2033 a return ticket from London to Manchester via HS2 could set you back nearly £1000. That's £33bn of government money well spent, and no mistake.


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