How will high-speed rail projects be funded?

A plan for a 200mph rail link in the UK has come under some criticism due to questions over financing the project.

The high-speed train route planned by Network Rail would link London to Scotland via Manchester, but a spokesperson from the organisation was quoted in the Financial Times as asking where the money would come from to fund it.

"It is not our job to say how it is funded. We don't want to build it, we have got enough to do, but we have to plan for the network of the future," the insider stated.

The newspaper explained £41 billion was needed to build and operate the railway line for 60 years. It is thought the project would raise around £23.4 billion extra in revenue over the same period.

Currently, the UK only has one high-speed line connecting London St Pancras to the Channel Tunnel, while the likes of China and France have well-established services.

Meanwhile in America, a spokesperson from the Department of Transportation told AFT that the government will begin to announce subsidies for high-speed rail projects this autumn.

Some $8 billion has been put aside for such initiatives by President Obama's administration. The news provider pointed out that the finance would try and help the country catch up with the transport systems seen in Japan, Germany, France and China. 

Carl Atkinson, expert in Transport at PA Consulting Group comments: "The net cost of the new high speed rail line to Scotland is likely to cost in the region of £20 billion - assuming that revenue predictions are accurate.

"Whilst the business case is positive, the primary benefits, in common with many such substantial infrastructure projects, cannot easily be 'cashed in' as a source of funding.  In this case, those benefits are largely made up of the time savings made by passengers - though these obviously aren't reflected in the revenues generated by fares. 

"With a project of this scale it is inevitable that the funding will have to be derived from a number of sources, though the current economics of the transport sector make it unlikely that transport operators or infrastructure investment funds will be able to carry all the investment required on their balance sheets.  With the very substantial levels of public sector debt that we can anticipate post 2011, public sector funding for the line will also be a real challenge. 

I suspect that we are going to have to look for new approaches to funding such schemes, where the incidence of the costs and benefits are brought together over a longer timespan, with the government providing the necessary degree of certainty and guarantees."

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