HSR and the Czech Republic

“TL;DR”

[Czech]

Our article discusses the high cost of building high-speed rail (HSR) systems in different countries, including the United States, China, France, Spain, Japan, and the United Kingdom. Most of these countries’ HSR networks are not profitable, except for the busiest lines. HSR projects are also unlikely to be carbon neutral over their lifespan. We question the viability of the Czech VRT project, which cannot be profitable and is based on exaggerated passenger numbers. We suggest that the money allocated to this project should instead be spent on healthcare, education, care for the elderly, and defence.

Full Version:

The American 77,000km Interstate Highway System cost $500 billion ($500,000,000,000) in today’s money and was paid for by those who drive on it^[1]https://www.fhwa.dot.gov/programadmin/interstate.cfm through taxes on vehicles, tyres, and mostly fuel. It carries 25% of all passenger travel and 15% of all freight in the USA. The motorway cost $6.5 million / km in today’s money.

The American 27,000 km high-speed rail (HSR) system will cost over $2 trillion ($2,000,000,000,000). It will be paid for by taxpayers and will carry less than 2% of all passenger travel and no freight^[2]https://ti.org/antiplanner/?p=17764 ^[3]https://www.cato.org/policy-analysis/high-speed-money-sink-why-united-states-should-not-spend-trillions-obsolete. The US HSR will cost $74 million / km.

Therefore the US HSR system will cost 11 times more per km than the motorway system. (74/6.5)

So we can see that the US HSR is projected to cost 137.5 times more per traveller than the motorway.  ( (25/2) * 11).

This is a good example of why the Czech high-speed rail (VRT) cannot be paid for by the passengers who use it; because they will be so few and because the real cost (without ticket subsidy) of high-speed rail is so expensive. That is why we, the taxpayers, must pay all the capital costs and most of the running costs from our wages.

Such is the case with almost all HSR projects in Europe, where there is virtually no viable line, with the possible exception of the Paris-Lyon link^[4]https://www.itf-oecd.org/sites/default/files/docs/dp201326.pdf pg 7. All the rest lose money.

The argument can be made that as taxpayers pay for roads, they should do so for rail. That argument can be extended (and it is being) to include high-speed rail. A fast train demands fewer stops and the ridership is proportional to the population density that the route serves, whereas the costs of construction and running are always present, irrespective of the population density. The counter-argument is then used that the VRT will serve international travel across the Czech Republic, from Austria to Germany. In 2011 only 6 % of long-distance European HSR passengers crossed borders^[5]https://amadeus.com/documents/en/rail/report/the-rail-journey-to-2020.pdf Figure 1.

The European Commission’s 2021 Communication regarding cross-border rail travel ^[6]https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52021DC0810, states that the number of passengers travelling on cross-border routes (high-speed and normal rail) accounts for only around 7% of total passenger traffic (see pages  2-3) and that rail is estimated to represent only around 10% of collective cross-border passenger transport within EU, Norway, Switzerland and the United Kingdom combined (page 1 & footnote 5).

Therefore cross-border HSR accounts for 0.7% of all collective cross-border travel in the European context. (7% of 10%)

Should the Czech taxpayer pay for this? Will the EU? The answer is a resounding no, on both counts.

On average, EU co-funding represented around only 11% of high-speed rail infrastructure funding in the EU^[7]https://op.europa.eu/webpub/eca/special-reports/high-speed-rail-19-2018/en/#chapter0 para 13. This reduces to 3.26% if you remove Spain from the EU’s figures; you will see why later.

Let’s take a look at some other projects: 

China.

By September 2020, China Rail Corporation’s (CRC) debt^[8]https://asia.nikkei.com/Spotlight/Caixin/China-looks-to-slow-growth-of-struggling-high-speed-rail had risen to RMB 5.57 trillion (US $850 billion) – up from RMB 5.28 trillion as of September 2019. Its debt-to-asset ratio became 65%. Most of its high-speed rail lines aren’t covering their operating costs, much less their capital costs. By the end of 2021 CRC’s debts had become $900 billion.

(Source: China Railways and Financial Times)

Entangled in an HSR debt trap, CRC’s interest payments have been significantly higher than its operating profits, shrinking its bottom line. 

China’s State Council issued a warning in early 2021 to investors to reduce their HSR spending to avoid falling further into this debt trap^[9]https://eurasiantimes.com/a-whopping-900b-debt-chinas-once-profitable-high-speed-railways/.

“With the exception of the busiest lines between the biggest cities, such as the link between Beijing and Shanghai, China’s high-speed rail network loses money. The goal of the new guidelines is to prevent further expansion, and existing projects will be unaffected”, a person familiar with the matter told Caixin^[10]https://www.caixinglobal.com/2021-03-30/china-looks-to-slow-growth-of-money-losing-high-speed-rail-101682703.html”.

Railway debt now accounts for 5% of the total Chinese GDP^[11]https://asia.nikkei.com/Business/Markets/China-debt-crunch/China-Railway-s-debt-nears-900bn-under-expansion-push. CRC is selling bonds to state-owned banks and brokerages to cover the cost; this hidden debt essentially allows the government to borrow money without adding to the official national debt. It is a similar trick to Spain – see below.

Promoters of HSR often point out that China has built more than 35,000 Km of HSR by 2020, but they fail to mention that China has also built 137,600 Km of motorways and that China has huge cities with vast populations to serve^[12]https://ti.org/antiplanner/?p=17764. Seven of these have a population in their urban area greater than that of the entire Czech Republic^[13]https://en.wikipedia.org/wiki/List_of_cities_in_China_by_population.

France.

By 2015, France’s SNCF, which operates the Train à Grande Vitesse (TGV), accrued debts of more than €45 billion ^[14]https://drive.google.com/file/d/1_TLkSO-0iebgbr42GR10FRUwrP2hZ6a-/view?usp=share_link pg 370 due to high-speed lines and has been repeatedly bailed out by the taxpayer. Half of the debt came from operating losses and the rest is from the cost of building new high-speed rail lines. These debts brought SNCF close to bankruptcy.

In his highly regarded paper ‘High Speed Rail Performance in France: From Appraisal Methodologies to Ex-post Evaluation’, Yves Crozet says: “High-speed rail is not part of the universal rail system which is regarded in France as the public system. The TGV is a commercial service aimed at users who can afford to pay. Only about 10%-15% of the French population use the TGV on a regular basis. That often-overlooked statistic explains why a TGV service cannot run profitably to all destinations. SNCF (French National Railways Company), the state-owned company which operates the TGV in France, often points out that, from its own point of view, it is only the routes serving Paris that are financially viable.”^[15]https://www.itf-oecd.org/sites/default/files/docs/dp201326.pdf pg 4.

Spain.

Over €56bn has been spent on developing HSR lines in Spain over the last 37 years, of which €14bn (25.2%) is from European Union funding^[16]https://www.railjournal.com/passenger/high-speed/spain-urged-to-rebalance-high-speed-and-suburban-rail-investment/.

Spain, which started later than France, resorted to a public-private finance initiative. The private partner has gone into debt by €16bn.

This debt is guaranteed by the Spanish taxpayer. The trick being played here has been to ensure that the debt doesn’t occur on Spain’s books. In this way, Spain can evade eurozone debt limits^[17]https://www.bloomberg.com/news/articles/2019-01-20/why-eu-s-budget-rules-invite-members-to-test-limits-quicktake. Spain has a poor economic outlook^[18]https://issuu.com/oecd.publishing/docs/spain-oecd-economic-outlook-projection-note-novemb and may be pushed over the edge if the EU changes its rules to stop this accounting trick.

The Spanish network is the least used of the world’s large high-speed networks, carrying 30 million passengers in 2018 (4.8% of all railway passengers in Spain). Since 2020, 47.3% of its funding was from the EU^[19]https://op.europa.eu/webpub/eca/special-reports/high-speed-rail-19-2018/en/#chapter5 Annex II, whereas the other 16 states that received EU funding only received an average of 3.26%.

Source: European Commission, ECA.

Japan.

In 1997 Japan’s rail debt crisis became so bad that the state-owned Japanese National Railways had a debt of 300 billion Euros (in 2022’s money), much of it due to political demands to build money-losing high-speed rail lines. So the Japanese government privatized the rail lines, selling them for less than 1% of their construction cost. Forcing the taxpayer to shoulder this helped cause the decade or more of devastation that the Japanese economy suffered afterwards.

Japan opened its first high-speed rail line in 1964. At that time 70% of passenger travel was by rail and 12% was by car. Today only 25% of passenger travel is by rail and nearly 70% is by car^[20]https://ti.org/antiplanner/?p=17764. So much for the modal shift to HSR.

The original Japanese bullet train cost nearly twice what it was projected to^[21]https://journals.sagepub.com/doi/10.7227/TJTH.24.2.6.

UK.

In the UK, the controversial  ‘High Speed 2’ HS2 has become a classic case of the “sunk costs” fallacy. This is when so much money has already been spent that it’s too late to pull back. Costs have risen by a factor of three to an official £98 bln for just the remaining parts and the Government is saddled with a monumental white elephant that is too embarrassing to stop. They are now faced with the gambler’s trap: gambling their way out of debt. But for them, it’s with taxpayer’s money. 

This is all in line with predictions that can be gleaned from Reference Class Forecasting (RCF)^[22]https://vrt.wtf/en/2022/05/17/optimism-bias-uplifts-for-rail-transport-appraisals/. RCF predicts project performance by using outcomes of similar past projects as a reference. It compares project characteristics to estimate likely outcomes more accurately than traditional methods, reducing biases and enhancing decision-making, commonly applied in complex projects like infrastructure and megaprojects.

And if you think that the $74 million / km mentioned at the start of this article for the US HSR project is outrageous, compare this with the £192 million per km cost estimated in 2020^[23]https://www.theguardian.com/uk-news/2020/feb/03/at-307m-per-mile-of-track-can-the-cost-of-hs2-be-justified for HS2.

A former cabinet minister warned she would not support any tax rises unless the Government scraps HS2. She said the new high-speed railway is an “unnecessary vanity project” as she told MPs it was clear the Government’s financial difficulties are caused by “overspending” and not due to “under-taxing” ^[24]https://www.chardandilminsternews.co.uk/news/national/23129245.senior-tory-warns-wont-support-tax-rises-unless-hs2-scrapped/.

“A Telegraph article^[25]https://www.telegraph.co.uk/business/2021/08/02/hs2-has-no-overall-green-benefit-warns-damning-report/ states that “The accelerating shift to electric vehicles means HS2 will deliver almost no environmental benefits, according to a damning report into the near-£100bn project.” The former head of the rail regulator, Stephen Glaister, told the Telegraph “You can’t say that it’s a clear carbon-reducing scheme just because it’s a railway… Carbon reduction was never a strong argument in favour of HS2, or against it.” He also said “A lot of economic arguments were put [forward] of all sorts – including the traditional cost-benefit analysis, loss of economic geography, points, regional developments, employment. At the end of the day, the evidence on almost all of those things is very weak indeed. And so it had to end up as a strategic decision. And obviously, the politicians of all parties would have made their own political calculations as part of that.” There have been calls into whether the UK parliament was misled^[26]https://www.telegraph.co.uk/news/2021/07/10/calls-inquiry-whether-ministers-misled-parliament-hs2-costs/. 

HS2, the high-speed rail project in the UK, has been given a “red” rating by the Infrastructure and Projects Authority (IPA), labeling it as “unachievable” in its latest assessment of the government major projects portfolio (GMPP)^[27]https://www.bdonline.co.uk/news/hs2-currently-unachievable-after-difficult-year-for-rail-scheme/5124342.article. Both Phase 1 and Phase 2a of the project have received this red rating, indicating significant challenges with project definition, schedule, budget, quality, or delivery benefits. The decision to pause work at the Euston station site in north London and other issues have contributed to this rating. This designation raises further concerns about the feasibility and successful completion of the HS2 project.

The Eastern leg of HS2 has since been cancelled.

This leaves the project with a ‘benefit to cost’ ratio (BCR) of 0.9:1^[28] … Continue reading (90 pence back for every pound spent). When this includes the “wider economic impacts,” HS2’s central BCR rises to 1.1; still extremely low.

Recenty, Bob Pragada, the new CEO of Jacobs, a major Fortune 500 contractor for HS2, called for a re-evaluation of the train line after it was revealed that it would exceed its budget^[29]https://www.telegraph.co.uk/business/2023/04/08/hs2-rethink-boss-largest-contractors/. Mr Pragada suggested that former Prime Minister Boris Johnson had not adequately scrutinized data on travel patterns and demand before approving the project. He suggested that the process should be flipped on its head, with data-driven decision-making on how much to spend rather than simply trying to get as much out of the budget as possible. The call for more detailed analysis comes after the UK Transport Secretary announced that HS2 would be pared back and delayed to combat the soaring cost of Europe’s biggest building project.

Lord Tony Berkeley, a Labour peer who served as deputy chairman of the Oakervee Review on whether to proceed with HS2, supported Pragada’s call for a re-evaluation of the project and said that they couldn’t get any demand forecasts out of the Department for Transport when his committee were doing their review.

Update. As of October 2023, the Western leg of HS2 has also been scrapped^[30]https://vrt.wtf/en/2023/10/04/hs2-birmingham-to-manchester-leg-scrapped/.

The HS2 project is well worth examining, as it is a similar length, contemporaneous but just ahead of the VRT,  and well documented.

And finally, the Eurotunnel, which links to High Speed 1 (HS1):

Eurotunnel provides a good case study since it was privately funded, allowing for a direct assessment of its viability. The project ended up costing 15 billion euros, which was double its original budget, and required multiple fundraising rounds, costing pensioners and other investors billions of their money. The European Investment Bank (EIB) secretly provided funds to rescue the project, which was on the brink of bankruptcy twice. The original passenger projections made by ‘Société nationale des chemins de fer’ (SNCF) were overly optimistic, and the project would likely not have gone ahead without them. As a result, creditors had to write off 5 billion Euros (54% of their claims) for the project to survive.

Czech Republic.

It’s recently been stated that outside investors will invest in the Czech VRT project. When these potential commercial investors see the figures and the sources behind the feasibility studies they will turn away. That is unless the taxpayer is forced to guarantee the potential (inevitable) debt. Only in that way will a private-public investment partnership occur. The company takes the profit and the taxpayer, the taxpayer’s children and those yet unborn will owe the debt. All for very little utility per person. 

How will our politicians explain that this money should have been spent on healthcare, education, care for the elderly and defence?

Companies have a legal obligation to their shareholders, yet the proponents of the (VRT) within the Czech Government seem to have forgotten their legal and moral responsibility to the taxpayers: the Government’s shareholders who, after all, pay their wages and elected them as their representatives. Proponents of mega-projects generally lie systematically and deliberately in order to get their projects approved; only once a project is approved do the real costs emerge, but by then so much has been spent that it’s politically impossible to pull back. The sunk costs trap.

Motorways typically have a benefit-to-cost (BCR) ratio of about 4:7^[31]https://publications.parliament.uk/pa/cm200910/cmselect/cmtran/505/50507.htm#a7. Not so HSR, which is typically less than 1.6:1. The Czech VRT project teeters close to 1:1^[32]https://vrt.wtf/en/2021/11/19/viability/. With an economic crisis, why is the Czech Government pursuing high-speed rail when they still only have dual carriageways instead of motorways?

A careful examination of Správa železnic’s(SŽ) (Czech Railway Authority) spreadsheets ^[33]https://docs.google.com/spreadsheets/d/1Mz0F9jhMgazNrDTaZZ37Cg9tlzzJygL-/edit?usp=sharing&ouid=118351092579031968104&rtpof=true&sd=true would show that the project is based on falsity. In particular, we would direct the reader to the passenger data in tables 5.6a and b of the ‘time saving’ sheets, which irrefutably shows that the project has no viability. They have contrived passenger numbers. 

An examination of the JASPERS study^[34]https://drive.google.com/file/d/1CZTg6EZlaMAV0tanISYKk5OQScWL4dR1/view?usp=share_link, which was conducted for SŽ, shows clear shortcomings in the project. This report relates to the Prague – Dresden link and was commissioned before that feasibility study was signed off by the Czech Ministry of Transport. Although the study helps SŽ meet the minimum viability thresholds, it highlights quite a few parts of the project that seem missing.

For example, table 2.1.4, uses two Chinese and Spanish projects with very high modal shift rates from other transport types to HSR. The data used indicates passenger conversions in the 30 to 40% range, whereas real EU data is 8%^[35]https://transweb.sjsu.edu/sites/default/files/1223-modal-shift-high-speed-rail-literature-review.pdf^[36]https://www.instituteforgovernment.org.uk/sites/default/files/hs2-levelling-up-stephen-glaister.pdf 22. And clauses 1.1.4 to 1.1.7 identify “required” elements that haven’t been considered in the costs. Yet the feasibility study was signed off, without them.

Conclusion: don’t trust traffic forecasts, especially for rail

Prof. Flyvbjerg

Paragraphs 4.1.4 & 4.1.5 of the JASPERS report say that investment and operational costs are included for the Czech territory only, whilst benefits are calculated for the whole project to Dresden. They go on to say: “The project as conceived is however clearly an indivisible economic unit between Prague and Dresden and the only valid approach is to make a complete assessment of this including all costs and benefits.”

JASPERS’ own sensitivity assessment of Cost to Benefit Analysis (CBA) outcomes gives a new BCR of 1.026:1, by using a  reduction factor (0.77), but this is without:

1. modal shift based on real EU data of 8% as opposed to JASPERS’ 38% (see below), 
2. Reference Class Forecasting indicates typically 30 to 64% over optimistic rates would apply on top of their figures, 
3. project cost overruns have not been properly taken into account. As we are seeing from HS2 these can be up to 3x, and project duration up to 60% longer – this means it becomes more expensive. 

In paragraph 4.1.3, JASPERS calculate a BCR of 0.6:1 with no road-to-rail shift. So we can guess that the BCR is somewhere in the middle (0.8:1) with realistic passenger numbers.

JASPERS say that without this the project is unlikely to qualify for EIB loans (para 4.1.6). They also note deficiencies in environmental analysis and climate (change) resilience and adaptation assessments. 

In paragraph 7.2.2.3 they suggest to ‘..change the perspective of the CBA to all European costs and benefits. The project is European cross-border in nature and is basically indivisible to the national level’. However, we know that cross-border HSR accounts for only 0.7% of all collective cross border travel in the European context (see above). 

And that’s not all: the JASPERS report was also used by SŽ to provide the legally required ‘counterargument’ in order to test the veracity of the project. Does this not make JASPERS a judge in their own cause and is the use of the report in this context inappropriate?

For the Prague – Brno leg, SŽ used a letter from Prof. McNaughton (former technical Director of HS2 & current Chair of International Railways Union (UIC)), who advised on the Czech VRT and a small document from SNCF (who are invested in the Czech VRT) as the counter-arguments!

If this is the case, have the feasibility studies been signed off correctly at all?

In spite of these cost omissions, double counting and peculiar passenger numbers, the BCR for the Czech project is so poor that only the most myopic would support it. That is before the reality of the real construction costs happens. As the reader will see below, the post-fact reality of railway infrastructure projects is very different to initial expectations; the reality invariably shows egregious and excessive optimism at the ex-ante (planning) stage.

Prof. Flyvbjerg et al: “The question has to be asked whether a government can act effectively as both promoter of a project, and the guardian of public interest issues such as protection of the environment, safety and of the taxpayer against unnecessary financial risks. The answer is negative.” they also say “..cost overrun must be expected and it must be expected to be intentional”^[37]‘Megaprojects and Risk’ https://amzn.eu/d/4n3bYrk pages 91 & 16. From 258 projects, covering 70 years, the authors note that cost overrun is in the same order of magnitude as it was 10, 30 and 70 years ago. In short, cost underestimation and cost overrun pay off. They have evolved as the most effective mechanisms to guarantee a project comes to fruition.

Passengers.

The following three charts demonstrate the absurdity of SŽ predictions^[38]https://www.spravazeleznic.cz/documents/50004227/134877201/Aktu%C3%A1ln%C3%AD+stav+p%C5%99%C3%ADpravy+VRT.pdf/01362f42-0983-4ea6-aaee-b2c673131aab page 11:

I take the liberty of quoting Prof. Flyvbjerg again: “Conclusion: don’t trust traffic forecasts, especially for rail”^[39]‘Megaprojects and Risk’ pg. 31.

Paragraph 81 of the European Court of Auditors ‘Special Report’^[40]https://op.europa.eu/webpub/eca/special-reports/high-speed-rail-19-2018/en which discusses the catchment area of the Madrid-Barcelona-French border HSR says: “Nine of the 14 audited high-speed lines and cross-border connections did not have a sufficiently high number of passengers in their fifteen and thirty-minute catchment areas along the line to make high-speed rail successful.”. They went on to say, in paragraph 82 that the Tokyo – Osaka HSR line was successful in part because it connected megacities with populations of several million.

Of course, the geography of the country is critical. Japan is a slim island, as is the UK. As Yves Crozet says “The French “model”, like the German “model”, teaches us a basic lesson: it is geography not economics that is the crucial factor. The key element for a high-speed line is optimal distance (between 400 and 1 000 km), sufficiently large centres of population to justify 15 to 20 return journeys per day and a customer base with the means to  pay.”^[41]https://www.itf-oecd.org/sites/default/files/docs/dp201326.pdf pg 27.

SŽ appears to have used questionable methods to calculate the catchment area for the proposed high-speed rail project in the Czech Republic. They arrived at their estimate of 5.5 million potential passengers by drawing a circle around the terminals, likely with a radius of 20 kilometers, and adding up the number of inhabitants within that circle. However, this method does not take into account the fact that many of those people may not be able to reach the terminals within the European Court of Auditors’ recommended fifteen or thirty minutes. As a result, the catchment area figures provided by SŽ may be inflated and unreliable^[42]https://www.vrtaci.cz/2021/09/09/vysokorychlostni-zeleznice-ma-vest-malebnym-kutnohorskem/.

Researchers from the Institute of Transport Economics, Geography and Policy ITREGEP, which brings together scientists from Masaryk University and Charles University, recently examined the demand for high-speed rail between Prague, Brno, and Ostrava as part of the “New Mobility” project commissioned by the Czech Ministry of Transport^[43]https://www.em.muni.cz/veda-a-vyzkum/13828-maji-vysokorychlostni-trate-v-cesku-vyuziti. Their findings are that 4,525 passengers travel by rail from Brno and Ostrava to Prague on weekdays, compared to 18,955 who use the D1 motorway in the same direction. Their surveys show that while train and bus passengers will use other means of transport during their journey, 91% of car passengers will only use a car^[44]https://www.em.muni.cz/veda-a-vyzkum/13618-odbornici-z-esf-zkoumaji-budouci-poptavku-po-vysokorychlostnich-tratich. This accords with our section ‘Modal Shift’ below, and it should be pointed out that for bus passengers transfer to the VRT, fares will have to be subsidised to a great extent; price will be the determining factor. In the JASPERS section above you will see that real EU data for modal shift is 8%. 8% of 18955 is 1517 people. That makes a total of 6042 each way. A high-speed train in the EU typically has 500 to 700 seats – so that equates to only 12 full trains per day each way – and therefore there cannot be the frequency of service to be attractive; the time savings are not there. Furthermore the document states that less than 10% of all passengers on these routes travel to work between Brno, Ostrava, and Prague.

It is noteworthy that the feasibility studies were signed off by the Ministry of Transport before their commissioned traffic analysis was concluded^[45]https://ct24.ceskatelevize.cz/domaci/3261226-vysokorychlostnimi-vlaky-mohly-potencialne-jezdit-desetitisice-lidi-denne-z-auta-ale^[46]https://www.itregep.cz/media/3388536/nova-mobilita_shrnuti_2020-cz_finalizovane_web.pdf.

The 2012 UIC study on railway infrastructure charges in Europe makes interesting reading^[47]https://drive.google.com/file/d/1B8V7NFeT2vafm9t0qt9zlYNoRAxFTz7L/view?usp=share_link pg 54. Page 54 details the track  costs per kilometer of HSR to be charged to the train operator, which range from EUR 7.09 to EUR 65.83 for various countries. The Czech Ministry of Transport states in 2017 approx EUR 1 / km^[48]https://www.dataplan.info/img_upload/7bdb1584e3b8a53d337518d988763f8d/program-rozvoje-rychlych-spojeni-v-cr.pdf pg 64 for the Czech VRT. The taxpayer will be obliged to pay for the difference. Will the private train operator reap the benefits?

Modal shift.

This is the phrase used to describe the encouragement of people from one type of transport to another. SŽ justify the VRT project with the promise of inflated passenger numbers (4x more than other EU countries). They then say that the value of the project comes from ‘time savings’ converted into money, put back into the economy. They even do this with the 30% of the passengers they say will be induced to travel who would not otherwise travel at all^[49]https://docs.google.com/spreadsheets/d/1Mz0F9jhMgazNrDTaZZ37Cg9tlzzJygL-/edit?usp=sharing&ouid=118351092579031968104&rtpof=true&sd=true. This is an obvious absurdity; you have seen above that it is typically 8%. But it is especially absurd because moving people who would not otherwise do so does not equate to a time saving but a time loss, therefore the monetization is negative, not positive. A new accounting technique has emerged ‘reverse counting’.

There is no internal air travel to speak of in the Czech Republic, and so no modal shift from that area can be made; that entire market has already moved to the existing express trains. Modal shift is driven by a combination of frequency, reliability and affordability. Frankly, no one has a good econometric understanding of what these elasticities are, and it is naive to rely on the models of engineering companies that have a vested interest.

Market share.

The UK case raises questions about whether high-speed boosts rail’s market share. The Eurostat database shows that between 2004 and 2013 shares rose from 5.7% to 8.4% without domestic high-speed rail. Rail transport grew with franchise renewal, more service frequency, improved quality, and no price decrease. Coach travel declined despite 30 years of development.^[50]https://drive.google.com/file/d/1_TLkSO-0iebgbr42GR10FRUwrP2hZ6a-/view?usp=share_link pg 375. In Spain, coaches were the preferred mode of transportation for medium-distance travel during the time period in question, accounting for 200 million trips per year, compared to trains’ 30 million. The increase in high-speed rail (HSR) ridership can be attributed to a decline in air travel.

It is reasonable to conclude that the Czech VRT project may impact the market share of České dráhy Rychlík, RegioJet, Leo Express, and Arriva, potentially affecting their ability to provide comprehensive connectivity across the country. As a result, the project could be divisive, providing high capacity for limited destinations while requiring significant taxpayer subsidies.

Connectivity.

Poor end-to-end connectivity limits the potential passenger base. This cannot be remedied with the Czech Republic’s population of only 10 million. Where do the passengers come from?

Economics.

Let’s talk about taxpayers’ money. It’s not just the entire capital infrastructure costs that must be borne by the taxpayer. For the train to have passengers, there has to be a subsidy to encourage the passenger to use it. The lower the catchment area, the lower the means to pay, the lower the frequency of service, and the less desirable in time saving, the higher must be the subsidy. Without subsidy, the VRT is too expensive and there will be little modal shift; and the feasibility studies will meet cold reality. Given the low population, the Czech VRT has necessarily high subsidies per seat on top of the 100% subsidy for the track cost. The trains have to be shorter to account for the lower population, but a higher frequency is needed to achieve some attraction. One deficiency in this balancing act, and the train will be moving very expensive air.

High-speed trains need infrastructure that has no other use. You can’t put other trains on HSR tracks and still go fast for obvious reasons. Also, the tracks planned are not capable of carrying other types of trains – because in order to keep costs down, SŽ saved on tunnels in their (approved) projects. Without tunnels, the inclines are too steep for normal trains.

The cheaper the ticket costs, the higher the subsidy from our taxes. Without frequent enough trains, any time savings will be gone and the service will not be attractive to passengers. With frequent trains, the trains will run empty because there aren’t enough passengers. The Czech Republic is too small for a viable high-speeed railway (VRT).

Once built, high-speed rail systems are expensive to maintain. Long-term capital renewal requirements include the replacement of rails and trains as frequently as every 10 years^[51]https://www.cato.org/policy-analysis/high-speed-money-sink-why-united-states-should-not-spend-trillions-obsolete#high-speed-rail-too-expensive. The Czech Republic can’t keep its ordinary rail systems in shape, therefore it is unlikely to be able to keep even more expensive high‐​speed rail lines running.

Supposed wider economic benefits of high-speed railway projects (that are used to help hide viability shortfalls) seldom appear in reality. In fact, the academic literature shows a paucity of proven ex-post wider economic value. Studies such as the Steer Group’s “High-Speed Rail in the Three Seas region – Benefits of an Integrated Network” ^[52]https://drive.google.com/file/d/1ALxfme8Op39BQVccnTlEzjk7bmk7uVXt/view?usp=share_link rely on aggregated data from national studies by stakeholders (see section 6.5 etc). In the Czech case, it is clear that base data such as passenger numbers have been optimistically contrived, benefits double counted and substantial costs unaccounted for. Furthermore, paragraph 6.10 of this report states the ‘A total present value of costs over the appraisal period of around EUR 62 bn’. The report scope covers proposed HSR networks in Poland, Estonia, Latvia, Lithuania, the north-south V42 HSR corridor and the proposed Czech HSR (VRT) network; but the Czech Ministry of Transport states the costs of the Czech VRT alone will be EUR 34 bn^[53]https://zdopravy.cz/stat-hleda-800-miliard-korun-na-vysokorychlostni-trate-138422/ so it appears from this that the authors believe that all the other lines will be built for a combined EUR 28 bn. It is a necessary inference that the feasibility studies for these other countries are also similarly “optimistic”, indicating that the underlying assumptions are uncertain and subsequent studies are based on this unstable foundation.

It is notable that the Czech Ministry of Transport does not know where the money is going to come from^[54]https://zdopravy.cz/stat-hleda-800-miliard-korun-na-vysokorychlostni-trate-138422/  ^[55]https://drive.google.com/file/d/1lxSFCqbCzKrJitsozwtUdDra77lErO1s/view?usp=share_link.

The Czech VRT project as a whole suffers from extensive optimism bias and political lying^[56]https://youtu.be/fwENxk_jnGU; it is a clear threat to the national economy. It is an attempt to borrow money to make a loss^[57]https://vrt.wtf/en/2022/04/02/hsr-does-not-sleep/.

This is not unique to the Czech Republic. HSR proponents and consultants almost invariably express excessive optimism in ridership, revenue and capital cost projections. In their famous work, ‘Megaprojects and Risk’^[58]https://amzn.eu/d/4n3bYrk, acclaimed academics Bent Flyvbjerg, Nils Bruzelius and Werner Rothengatter examined 258 transportation infrastructure “megaprojects” covering 70 years in North America, Europe and elsewhere. They found that actual ridership on passenger rail projects averaged 39% below forecast levels. In particular, they noted: “There is a massive and highly significant problem with inflated forecasts for rail projects. For two-thirds of the projects, forecasts are overestimated by more than two-thirds.” They also found significant inaccuracies in capital cost forecasting. They describe the inaccurate ridership and cost forecasts as exhibiting “optimism bias” and “strategic misrepresentation” or straight “lying” – extraordinary language for the academic sphere.

EU member states spent an average of 1.6% of GDP on defence in 2021^[59]https://www.cia.gov/the-world-factbook/field/military-expenditures/. Broken down, that was: UK 2.5%, FR 1.9% DE 1.5%, CZ 1.3%. Poland will spend 4% of GDP on defence in 2023^[60]https://www.telegraph.co.uk/business/2023/05/07/poland-europe-superpower-communism-putin-military/.

The war in Ukraine shows us that 3% is the minimum, and it used to be 7% in the USA. We are facing major budgetary problems from pensions to healthcare, to social welfare, to education, and also facing a 16% inflation rate where many people struggle to afford even the most fundamental expectations of modern life. Our government has to borrow money to pay the pensions of the elderly.  How do we tell our children that we squandered their futures, education, and childcare for a train for which no proper, thorough, independent evaluation had been done?

CO2

In 2020 HS2 Ltd. admitted^[61]https://www.thetimes.co.uk/article/hs2-will-never-be-carbon-neutral-in-120-year-lifespan-wk3s29pkl that HS2 will probably never be carbon neutral over its 120-year lifespan. There is a specious environmental argument that HS2 will transfer passengers from more carbon-intensive modes of transport. This is misguided because electric vehicles are anticipated to dominate the motor industry by the time HS2 is completed, accounting for 60% of new vehicles by  2030^[62]https://www.theccc.org.uk/wp-content/uploads/2015/11/Committee-on-Climate-Change-Fifth-Carbon-Budget-Report.pdf.

Energy.

It’s often said that HSR is energy efficient, but most estimates of HSR energy consumption are based on the energy delivered to the train, not the energy required to generate that power. Furthermore “The power required increases with the cube of the train speed,” notes engineering professor Alan Vardy^[63]https://www.wired.co.uk/article/future-of-high-speed-rail-europe. Lastly, each seat on an HSR train typically weighs about one ton when the weight of the train is divided by the number of seats. One ton, with or without a passenger witting in it.

Noise pollution.

High-speed rail is very noisy – mostly from the pantograph. Noise increases with the 4th power of the speed. It has dramatic negative effects which can be expressed as economic costs on those near the line. This is discussed in the articles “Aerodynamic noise is dominant at speeds above 250 km/h^[64]https://vrt.wtf/en/2021/11/17/aerodynamic-noise-is-dominant-at-speeds-above-250-km-h/” and “Noise limits in connection with the amendment to Czech Government Regulation No. 272/2011 Coll.^[65]https://vrt.wtf/en/2023/06/08/noise-limits-in-connection-with-the-amendment-to-czech-government-regulation-no-272-2011-coll/”

Speed.

It is enough to quote the European Court of Auditors Special Report, paragraph 40^[66]https://op.europa.eu/webpub/eca/special-reports/high-speed-rail-19-2018/en/. “This analysis of the speed yields on the lines we audited (Annex V) indicated that, on average along the course of a line, trains run at only around 45% of the line’s design speed. Only two lines operate at average speeds of more than 200 km/h, and no lines operate at an average speed above 250 km/h. The lowest speed yield on a completed high-speed line is on the Madrid-León high-speed line (39 % of design speed). The cross-border Figueres-Perpignan section also only operates at 36 % of its design speed, because it accommodates mixed traffic. Average speed so far below the design speed indicates that an upgraded conventional line would have been enough to achieve the objectives set, at a much lower cost and raises questions as to sound financial management.”

It is now accepted that for the Prague to Dresden link, the German side will run at 200kph. Given the above, that seems realistic. Accordingly, if one were to apply the same speed yields to the entire Czech VRT project, it is difficult to see that there will be any time savings at all; a worthwhile modal shift would therefore not occur and there would be little to no monetizable time savings. A reduction in any of these variables would cause the project’s BCR to drop below the minimum required to be permissible to the Czech Government.

Conclusion.

Large infrastructure projects are often a source of political and other corruption^[67]https://vrt.wtf/en/category/transparency/bid-rigging/^[68]https://vrt.wtf/en/2022/03/11/sprava-zeleznic-corruption-scandal-involved-high-level-officers/. They are almost always a source of optimism bias and playing with numbers to arrive at desired outcomes that allow a project to commence; after that, sunk costs (and the resultant political cost) stop it from being cancelled. The Czech VRT is the largest in the Czech Republic’s history, and yet no independent, professional scrutiny of the project has taken place. The public and conscientious politicians, therefore, have no objective base from which to determine the true validity of the project, or whether they are beneficiaries at all.

The project is too big, the country and its population too small, the proponents too manipulative, and the public too trusting. 

The most reliable method to determine project viability is to compare it with others. The technique is to use ex-ante and ex-post comparisons; to compare the predicted performance of many similar projects with their actual performance using Reference Class Forecasting. To do that, one needs a large data set for the most reliable statistical comparison.

A proper independent examination by the Czech Supreme Audit office with assistance from people who are independent and are worldwide experts in the field, such as Oxford Global Projects^[69]https://www.oxfordglobalprojects.com/, is essential. (They have the largest reference class database in the world). This needs to happen before any more money is spent. It needs to happen to determine if the ‘in the public interest’ test has been met properly because the evidence suggests that Czech lawmakers are being seriously misled.

From all the above, you can see that what is at stake is not an issue of believing or not believing. It is an issue of knowing or not knowing: of objectivity triumphing over subjectivity.