Watchdog MPs ‘more concerned than ever’ about handling of HS2

£67bn project will be “very poor value for money” and DfT doesn’t understand how scaled-back proposals will work, Public Accounts Committee warns
Construction work for one of the viaducts that will carry HS2 trains into Curzon Street Station in Birmingham Photo: HS2 Ltd

By Jim Dunton

07 Feb 2024

Plans to pare back the under-construction High Speed Two rail network, cancelling extensions to Manchester and the East Midlands, have left watchdog MPs “more concerned than ever before” for the multi-billion-pound infrastructure project, according to a new report.

Members of parliament’s Public Accounts Committee said the programme, which is currently proposed to connect London with Birmingham and provide a link to the existing West Coast Main Line in Staffordshire, now represented “very poor value for money for the taxpayer”.

They said that the Department for Transport and its wholly-owned project-delivery company HS2 Ltd did not yet know what the impact of prime minister Rishi Sunak’s October decision to cancel the Northern phases of HS2 would be, or how the project would need to adapt to be delivered successfully.

Concerns include slower running speeds for bespoke HS2 trains once they are on older tracks and reduced capacity on services north of Birmingham because platforms capable of accommodating full-length HS2 trains will no-longer be constructed.

Shortly after Sunak’s Conservative Party Conference announcement, DfT permanent secretary Dame Bernadette Kelly produced a cost-benefit analysis suggesting it was better to complete phase one of the line than to abandon it.

However MPs noted that the total costs of phase one would “significantly outweigh” its benefits and the department's case for proceeding hinged on excluding the £23bn already spent on the project from the calculations. In addition, the analysis classed as a benefit the fact that by carrying on with phase one rather cancelling the project entirely,  government would avoid paying  roughly £11bn of remediation costs.

In the report, committee members say they have been left with “little assurance” over the calculations, and call for a clear summation of phase one’s benefits.

HS2 executive chair Sir Jon Thompson told MPs on parliament’s Transport Committee last month that he believed the cost of delivering phase one of HS2 could be as high as £67bn in 2023-24 prices because of inflationary pressures.

The government’s current budget for the project is £45bn. DfT’s estimate for the delivery of HS2 phase one prior to October’s announcement was £45bn-£54bn, measured in 2019 prices. However, the revisions involve removing the delivery of a new HS2 terminus at Euston from the project scope, which would reduce the overall cost.

Sunak’s changes envisage private-sector funding delivering the station, linked to the construction of new homes at Euston, freeing up £6.5bn. The government is also keen to secure additional private-sector funding for the tunnels needed to link Euston with Old Oak Common in north-west London, which will be the initial terminus for HS2 services under the current vision.

PAC members warn in today’s report that they are “highly sceptical” that investment of the scale and speed required to make Euston a success can be secured because the government lacks “a plausible or detailed proposition” to present to the market.

MPs also express concerns that DfT needs to make urgent decisions on funding the tunnelling from Euston to Old Oak Common, or risk incurring much greater costs from stopping and restarting work.

Committee chair Dame Meg Hillier said Sunak’s decision to cancel HS2’s “Northern leg” had been a watershed moment that raised pressing and so-far unanswered questions.

“What happens now to the phase two land, some of which has been compulsorily purchased?,” she asked. “Can we seriously be actively working towards a situation where our high-speed trains are forced to run slower than existing ones when they hit older track? Most importantly, how can the government now ensure that HS2 delivers the best possible value for the taxpayer?”

She added: “HS2 is the biggest ticket item by value on the government’s books for infrastructure projects. As such, it was crying out for a steady hand at the tiller from the start.

“But, here we are after over a decade of our warnings on HS2’s management and spiralling costs – locked into the costly completion of a curtailed rump of a project and many unanswered questions and risks still attached to delivery of even this curtailed project.”

PAC members called on DfT to set out in its revised business case for HS2 how it has sought to maximise benefits from phase one, what benefits will now be delivered, and how success will be measured.

MPs also asked the department and HS2 Ltd to explain how they will ensure cost overruns and delays that have dogged the project so far can be “brought under acceptable and properly accountable control”.

Alongside his announcement scrapping the Manchester leg of HS2, Sunak said the anticipated £36bn in savings from the move would be directed to a range of smaller-scale transport projects dubbed Network North. But a list of expected costs and benefits for the projects has yet to be published.

MPs asked DfT to explain how it will report and update the list of projects by region that will be funded by money redirected to Network North, what timescale the projects will be delivered to, and how it will ensure value for money is achieved.

A DfT spokesperson said the department disagreed with PAC members’ appraisal of the challenges faced by the project, and added that the cost of HS2 phase one was currently being “reassessed”.

“Our plans for Euston have already received extensive support from the private sector to invest and will offer a world-class regeneration opportunity, mirroring the successful Kings Cross and Battersea and Nine Elms development programmes,” they said.

“The permanent secretary has already written to the committee chair setting out her assessment on value for money, and we have repeatedly made clear we will continue to deliver HS2 at the lowest reasonable cost, in a way that provides value for taxpayers.”

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