The HS2 infrastructure project has seen its estimated cost rise dramatically, to the point where many are questioning whether it is worth going ahead with it. Dan Durrant writes that this highlights the problems with the cost benefit analysis (CBA) used by government to evaluate if projects are worthwhile. It narrows the conversation about how we do weigh up the costs and benefits of nationally important infrastructure. He argues for the use of an alternative approach, such as a more deliberative process that would allow us to take into account the non-monetary value people place on some things.
This week’s criticisms of HS2 by the Public Accounts Committee further highlight the difficulties for any government that wants to undertake long term strategic projects. I have argued that the governance of these megaprojects favours technocratic approaches that try, and in this case fail, to take the politics out of decision making. The paradox that this creates is that strategic decision making is by its nature political and to narrow the debate to abstract technical criteria actually makes the case harder to make.
The ever falling Cost Benefit Analysis (CBA) of HS2 shows some major flaws with this tool as a supposedly neutral way of informing decisions. There are two sets of problems with CBA. The first is the difficulty it poses for megaprojects like HS2 where the business case is based on the idea that the project will pay back more than it costs. The promoters end up hoist by their own petard when it turns out it might not. The second is a much wider problem. It is the way tools of government like this narrow the conversation about how we do weigh up the costs and benefits of nationally important infrastructure.
One has to have a little sympathy for the ministers and civil servants you see trying to defend a project that promises only £1.40 back for every £1 spent. They know it hovers on the edge of poor value for money. But they have become hemmed in by their own rhetoric. It is very hard to argue that a project represents an ‘engine for growth’ when it struggles to justify itself in financial terms.
The basis of the CBA has come in for very public ridicule over the issue of whether or not time spent on trains is unproductive. The assumption is that business traveller’s time is valuable in monetary terms, if you reduce that time with higher speed journeys then you increase value. The opponents and critics of HS2 point out that many people work on trains and so these assumptions are invalid. In fairness supporters of HS2 argue that there is an additional productivity boost if travellers switch from cars to trains and that there are wider economic and strategic benefits to HS2.
I agree we do need to consider the wider benefits of HS2 but if we do that then logically we need to consider the wider costs. We can go down the route of creating an increasingly complex set of calculations and more assumptions. There are alternatives. Measuring the Social Return on Investment may be appropriate in some circumstances but it still tries to monetise costs and benefits. In a case like HS2 some costs, the loss of rural environments or urban green space, are very hard to put a cash value on. This is still an abstract process and may discourage participation. It can work as long as everyone agrees on the measures used. If there is disagreement though proxy measures of value are very easy to pour scorn onto. CBA and any attempt to monetise costs and benefits are very bad at measuring things that are priceless.
Multi Criteria Analysis can try to solve this by adding different sets of social or economic criteria. This may be a better alternative but there are still questions of who sets the criteria, weighting and scores. A starting point for any evaluation of cost and benefit needs to be widespread agreement on what is valued.
Critics of HS2 would concur with early uses of CBA as a means of guarding the public finances against ‘pork barrel politics’ and political vanity projects. However this creates problems when CBA becomes the dominant tool for decision makers. The supporters of HS2 will argue that some of our best loved monuments and most used infrastructure would never have survived this form of narrow analysis. It can make it hard to do things for strategic reasons or because it is the right thing to do for future generations.
In a discussion of the strategic issues it is very easy to forget the human costs for people in urban and rural areas. Abstract measures of value can only contribute to this problem. As Michael Sandel points out putting a price on something can diminish its value. I would argue that a more deliberative process allows us to take into account the non-monetary value people place on some things.
The technocrats who quite like tools like CBA will probably be horrified by suggestions like this. CBA may sound neutral but what is and what is not counted is a political issue. Ironically a more deliberative process may actually help the strategists. If there is a compelling and widely accepted case that the benefits outweigh the costs then it is easier to justify some people losing out. That is as long as principles of fair treatment, compensation and appropriate mitigation can be agreed by everyone involved.
This does put the onus on those who believe there is a strong strategic case for HS2 to convince more than a handful of political decision makers and senior civil servants. That would mean much more the just consulting. It would mean that some decisions would be shared with those affected. It would require a level of transparency about assumptions and decisions. Technical issues would need to be publicly debated rather than subject to media point scoring. However the benefits to this would be that unreasonable or self interested positions on either side of the debate would be much harder to sustain in an open and democratic evaluation of costs and benefits.
Note: This article gives the views of the author, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting.
Dan Durrant is a PhD Researcher at the OMEGA Centre for Megaprojects in Transport and Development, part of UCL’s Bartlett School of Planning. His research is into the role of civil society in megaproject decision making and he is focusing on HS2.
The first prime issue is the purpose of a project and the contexts. In the case of HS2 there are flaws in the concept and there are issues of legacy and geological/topological large costs. This area as to be addressed and the SEA case is about the setting and objectives.
The next is the failure to consider the net from total investments. For example long term projects have large percentages rotating from pay to returned income tax and from expenditure to returned VAT. This is not considered by the analysts.
The third is political fall out comes also from the proposal and the communities and in the case of HS2 now from the wider reactions. You cannot remove the politics when their is such impacts.
Dr Chris Eaglen