A review into civil service failings that have contributed to delays and huge cost increases with the HS2 rail project has called for stronger oversight of major projects within departments – and more realistic pay for officials involved.
Former Ministry of Defence permanent secretary Sir Stephen Lovegrove’s recommendations also propose a culture shift away from “automatically” appointing a career civil servant as senior responsible officer for government’s biggest projects.
His report came as transport secretary Heidi Alexander told MPs that the first HS2 trains between London and Birmingham will not now run until 2036 at the earliest – and that the project budget has spiralled to between £87.7bn and £102.7bn, measured in 2025 prices.
The line was originally costed at £32.7bn and expected to begin operating between the West Midlands and central London by the end of this year. As recently as June 2024, HS2 Ltd’s official estimate of the project cost was £54bn-£66bn in “2019 prices”.
Yesterday’s reset makes clear that services between Old Oak Common in west London and Birmingham may not commence until 2039, and that high-speed trains may not run into central London until late 2043.
Lovegrove’s report was commissioned in June last year following a governance and assurance review of major transport projects conducted by James Stewart.
The former MoD perm sec and national security adviser says the “original sins” of HS2 included “gold plating” of the high-speed concept, which resulted in a bespoke and highly engineered design; main contracts being awarded prematurely; and the level of costs and risk “being very badly underestimated”.
Lovegrove says that while creating HS2 Ltd, which is wholly owned by the Department for Transport, as a delivery vehicle for the project had been an understandable approach, “the expected commercial discipline and shareholder challenge to live within agreed cost envelopes did not materialise”.
He says “unwieldy management information” reduced the ability of HS2 Ltd’s board to identify risks and costs issues with the project, and this was “inevitably replicated within government when working from the same data”. Meanwhile, a weak control environment meant cost and schedule data were “insufficiently challenged”.
Lovegrove says the civil service had been “unable to fully assess and then articulate the commercial and financial risks [related to HS2] to ministers” and had placed “too much weight” on the findings of 2020’s Oakervee Review of the project.
He says that while there is “no reason to doubt the integrity or application of the civil servants involved”, there could be no compromise in the fundamental requirements for success in relation to major projects.
Lovegrove lists those requirements as: properly constituted delivery bodies; the right officials with the right skills and experience; regular challenge; clear advice incorporating fully understood and accurately articulated risks; and well-defined and actioned frameworks of accountability.
The review states that while top-level involvement of the private sector in difficult national projects is desirable, the civil service and government “needs to be capable of delivering high quality oversight itself”.
In-house skills and better pay
Lovegrove says that despite the presence of many talented team members, “everyone” he spoke to for the review “agreed that with hindsight the civil service did not have the required capabilities, in sufficient depth, to consistently discharge its responsibilities with regards to HS2”.
The review says that opinion varies on the precise areas of skills deficit, but reports an over reliance on consultants as an alternative to “embedding strategic and private sector expertise within the client team”. It also argues that the Major Projects Leadership Academy is “failing to sufficiently develop the commercial and infrastructure project skills required by officials for the very largest and most complex programmes”.
The review says one of the reasons for setting up an arm’s-length delivery body for a major project is to buy in specialised skills that “command remuneration which is far beyond the average civil service pay”. It flags the significant disparity between the pay of the chief executive of HS2 Ltd – which routinely tops the government high-earners league table – and that of the civil service’s senior responsible officer for the project.
Lovegrove says departments sponsoring major projects should have more freedom to offer market rates of pay to officials with key roles.
“While it is inevitable that some form of arm’s length body was established to deliver HS2, to then fail to incorporate the necessary skills in the main body of the civil service to oversee that body is a false economy,” he says. “Consultants do not take responsibility for advice given to ministers, while the civil servants who do take that responsibility need to be in a position to fully understand the nature of the information they are being given to assess.”
Lovegrove says civil service sponsor and shareholding teams need to have the right combination of skills as “a fundamental design principle” and the precise skills required need to be reviewed regularly as programmes evolve in “a formal mandated proces”.
The review also calls for pay freedoms to be “extended to enable the formulation of properly constituted civil service teams”.
‘Underpowered’ and ‘superficial’ internal audit
Lovegrove says HS2 Ltd’s internal audit was repeatedly referred to as “underpowered” and “superficial” by interviewees for the review. He says the company did not, in fact, have an internal audit function of is own and relied on the Government Internal Audit Agency.
“This review has not been able to discover a full schedule of the audits performed by GIAA and the audits that there are records of flagged some relevant issues but they did not identify the major cost and schedule problems of the company,” he says. “In my view the scale and complexity of the mission of HS2 would always have been beyond the capabilities of the GIAA to address, and I would have expected either a fully professionalised internal audit function sitting within the company, or the appointment of a major audit firm to conduct internal audits on the company’s behalf.”
Lovegrove recommends that HS2 Ltd and organisations of similar type must have an internal audit function that is “well-resourced and sophisticated”.
“Above all the function must be given esteem, and in all instances [internal audit] findings must be acted upon, with any risk acceptances clearly justified,” he says.
Other recommendations include a culture shift away from “automatically” appointing career civil servants as senior responsible officers for the government’s largest projects. “More effort should be put into attracting and recruiting qualified and experienced executives from the private sector [for] programmes where it is appropriate,” the revew says. “The civil service should seek to create a pipeline of future director general SROs by bringing in qualified individuals at the deputy director/director level, providing them with relevant training and support to be successful in a government context.”
Additionally, Lovegrove recommends that the same person should not be appointed as SRO for two or more “distinctly separate programmes” and that it should be “made clear in the job descriptions for all permanent secretary roles” that oversight of major programmes will be “one of their central responsibilities”.
In her update on HS2, transport secretary Alexander said the government would respond to Lovegrove’s recommendations “after thorough consideration of the findings”.
Taxpayers ‘let down’
Alexander said taxpayers, passengers and communities along the HS2 route had been let down by years of mismanagement on the rail project.
“I share their anger about the waste and mess, but I am proud that this government has worked with HS2’s new senior team to get this project off life support and on the road to recovery,” she said.
“We will get the job done but we will also take every opportunity to save time and money in the process, getting a grip on delivery, controlling costs, and stripping out the complexity that’s plagued the project in the past.
“We can and must build big infrastructure projects in Britain. But we also need competent people in charge of them."
Slower speeds and 300 job cuts
Alexander’s update also confirmed that, when services finally start, HS2 will run at slower speeds than were originally intended: 199mph down from 324mph. The transport secretary said the speed reduction would save between £1bn and £2.5bn over the life of the delivery programme, by reducing testing and commissioning time. She said the main savings would come from avoiding risks associated with certifying a railway at a speed not operated anywhere in the world.
Alexander said the slower top speed would “bring HS2 into line with proven leading European high-speed operating standards” and support efforts to bring the services into operation safely at the lowest reasonable cost.
She also said that HS2 Ltd will have its corporate centre “reshaped” in a move that will reduce headcount “by cutting 300 corporate roles and rebalancing the organisation to better support delivery teams”.
Alexander said resources would be redirected to boost frontline delivery capacity, with the introduction of 168 “additional roles” focused on cost management, oversight and decision-making.