Predicted economic benefits of HS2 are falling - but ministers insist it will revitalise Britain’s rail network

Ministers insisted that the High-Speed 2 link will revitalise Britain’s rail network despite the Government’s latest strategic case for the scheme downgrading the economic benefits it will generate by up to £10 billion.

The expected benefit-cost ratio (BCR) for the £50 billion project has fallen from £2.50 for every pound of public money spent, as claimed by the Department for Transport last year, to £2.30 in wider economic benefits, according to new analysis published by the company charged with delivering HS2.

The reduction of the BCR was seized upon by opponents of the scheme, which include councils and residents' groups in Tory heartlands through which the London to Birmingham first phase of the line will pass once completed in 2026.

The benefits have been downgraded in part because the cost of the project has jumped from £33 billion to over £50 billion, including the rolling stock.

The figure, contained in the Strategic Case for HS2 report, was also reduced after the Government corrected its assumption that business travellers would not be able to work on the 225 mph trains.

Describing the downgraded benefits as “a good return on investment”, Patrick McLoughlin, the Transport Secretary, said HS2 would bring wider benefits for regional and commuter services, by adding vital extra capacity to the UK’s stretched rail network.

Without the new line, the West Coast, East Coast and Midland Main Lines were likely to be overwhelmed, he said.

The Department for Transport issued additional figures which predicted that if passenger demand continued to grow at current rates until 2049, the BCR will increase to £4.50 for every £1 spent.

The 150-page economic analysis published on Tuesday forecasts that HS2 would deliver better value for the economy than the building of Crossrail but less than the Jubilee line.

David Prout, director general of HS2, said there was a stark choice between a capital city surrounded by a “rust belt” or by other strong cities which would be revitalised by the network linking London, Manchester, Birmingham and Leeds.

Labour declined to give its full support to the project, based on the latest report. Ed Balls, shadow Chancellor, said: “When you have got a project of this scale - £50 billion potentially - you have got to know that it is really value for money.

"In the last couple of years the Government has been all over the place and the costs have got out of control. So my message to David Cameron and George Osborne is 'Get a grip - you shouldn't be cheerleaders, you should be taking a hard-headed look at costs and benefits'.”

Mr McLoughlin warned Labour that it needed to make a proper, unequivocal commitment to HS2 for the scheme to progress, ahead of a Parliamentary bill next March, which would allow construction to start in 2017.

The minister told a rail conference in Manchester: “No one seriously thinks our current rail network can just carry on for the next 20, 50, 100 years. A patch-and-mend job will not do. The only option is a new north-south railway.”

The report found that passenger demand would far outstrip seats on intercity and commuter trains running north from London by 2026, even outside peak hours.

The additional capacity generated by HS2 would mean the total number of seats on trains serving Euston rising from 11,300 today to 34,900 in 2033.

Journey times between destinations not directly served by high-speed rail would be reduced. Bristol to York wold take 2h 45mins instead of the current 3h 59m, and Nottingham to Newcastle would drop from 2h 50 mins to 2h 3mins.

HS2 would produce London-Birmingham journey times of just 49 minutes, with London-Manchester coming down to one hour 8 minutes and London-Leeds down to one hour 22 minutes.

Mr Prout said the strategic case was based on HS2 travellers paying the same rate of fares as "normal" travellers. Pressed on whether there would, in fact, be a premium fare for those using the new line, Mr Prout said it would be his firm intention to advise ministers to have the same fare structure for HS2 as for existing long-distance travellers.

Mr Balls was warned that his “negative” views about HS2 could spark a Labour “civil war” between the party leadership and Midlands and the north of England.

Sir Albert Bore, Birmingham City Council leader, urged Labour to get behind HS2 and not to “boost opposition to the project by appearing to question its value very publicly”.

Penny Gaines of the Stop HS2 organisation said: "Building HS2 would cause years of disruption at Euston, and other places on the rail network as well as chaos along the route of HS2, with roads being diverted during the build and in some places permanently shut.”

The new study has cut by one-third the value put on saving an hour's worth of time getting between meetings or workplaces on a quicker train, to reflect that productive work is also done while travelling.