Private investors should build High Speed 2

A radical change in spending might trigger the best outcome for the tax payer.
Not the hard working man in the office or woman teaching our children, but large wealthy global players should finance HS2 (High speed 2).
It's not that strange, after all, Evergreen 3 (massive line speed and capacity improvements) is funded by Chiltern Railways via a smart construction where the TOC (Train Operating Company) pays more to for track access charges to Network Rail who fund the project. Train operator and Network Rail happy. But the biggest winner is you and me who get it all without a penny of our tax money used.

I do support the plans for a high speed railway from London to the Midlands and Scotland, but the way of funding (tax money) and deliver timescale (over 30 years) is something I object to. At the moment the coalition government - with the Tory's at the steering wheel - are only planning to spend 750 million in the project which will cost in excess over 31 Billion in total. One really has to ask if the British tax payer should fund such a project when education and healthcare is under enormous pressure of spending cuts.

Only recently Labour announced to review their position on supporting the project. This came a bit as a surprise to me, after all, High Speed two is a Labour baby and it was them who convinced the Tory's to support the project as well. Now that the route is known in detail and millions have been spend by Greengauge 21, Network Rail and High Speed 2 Ltd. the exact price tag for building the line should be known.

And that is exactly the point where my opinion kicks in. Large consortia should be formed to build and operate HS2. With private funding from large companies the project would not hammer into the government budget and In return the investors will be granted a multi decennium lasting franchise to allow them a return of Investment (RoI) and make profit. Every company or body should be involved in funding and operating the railway. If Heathrow or Birmingham airport want a station, let them pay for it. After all it will generate a steady flow of air passengers to their airports.

Another part of this financing structure is the possibility to speed things up. Where government is planning on a 30 year construction time, private investors want to make best use of their money. And this will stimulate them to do it in half the time in order to get to the profit making business as soon as possible. If the railway has been build in 15 years rather then 30, the line would generate income much sooner, making significant reductions in spending over the total lifespan of the franchise.

Thirty billion is a lot of money to invest and no company I know of has it to play around with it. That is where government should step in. If the government really wants a high speed line to Glasgow then half of the project should be funded through taxes. Note that when twice as much money is available from day one, the project could also be build twice as fast, resulting in a 15 year construction time, dramatically improving the business case for High Speed 2.

Now that we have two parties involved in funding the railway, the operator (private sector) has the right to start operating trains for lets say 50 years in order for them to get a RoI and indeed make a profit with their operation. Over the lifetime of their fifty year franchise the average investment in the railway comes at ￡82,417 per day. If they will be able to operate 150 trains over the railway each day, the price tag per train would come at ￡550.-
And here comes the governmental involvement of the franchise. If the Government should have 50% shares in the operation they could restrict ticket fares to the normal national average plus a high speed supplement depending on destination. ￡550 per train might sound much over the entire lifetime of the franchise, but selling 10 ￡55 tickets already pay back the investment in the railway. If these trains carry an average of 150 persons the price tag of the RoI does show a very healthy business model. Please grab your calculator and start counting with me. 150 (persons) times 150 (trains per day) = 22,500 passengers per day. Do that times ￡55 (average ticket price) and we're over ￡1,2000,000 per day in ticket sales. Do that times 365 (days per year) and your looking at a figure close to 450 million. At this speed the 15 billion investment by the public sector could be regained in 33 years. But note we have calculated only 150 passengers per train. This is a "worst case scenario" with a randomly picked number of services. It might turn out this way, but it is more likely we can see up to 16 departures from London per hour. The Midland and Scotland trains to and from Heathrow not even included.

After the franchise expires the railway transfers to government hands who can sent out an invitation to tender for everyone willing to take over the service, just like other franchises.
With less support for HS2 then a year ago, the time has come to look at alternative ways of funding improvements to our railways.