HS2: true cost of London-Birmingham line is more like £66bn, boss admits

[dutchman]

Inflation means project £8bn-£10bn more expensive than 2019 estimate, MPs told



The estimated cost of the HS2 line from London to Birmingham has ballooned to as much as £66bn, the scheme’s executive chair has told MPs.

Jon Thompson told the transport select committee on Wednesday that the current estimate for the first phase of the line could add “between £8bn and £10bn” to the current top-end estimate of £56.6bn.

The discrepancy in estimates is because the current £56.6bn price tag the government and HS2 have been quoting is in 2019 prices and does not reflect the jump in inflation after the coronavirus pandemic and Russia’s invasion of Ukraine.

Thompson’s testimony comes only months after Rishi Sunak announced at the Conservative party conference in October that he would be axing the planned HS2 line north of Birmingham, citing cost concerns as the driving factor.

The cost of the high-speed rail project has risen repeatedly in the last decade, with the line from London to Birmingham forecast to cost £19.4bn in 2013.

Since then there have been a number of revisions, including the last one in November, where HS2 revealed that it now estimated the cost of the line to be between £49bn and £57bn.

Thompson told MPs: “If you brought the estimate for 2019 prices up to 2023-24 prices, you’d be adding somewhere between £8bn and £10bn further [to the cost]. Construction inflation over the last three years has been 27% … steel has risen by 47%, rebar 53%, concrete 48%, and so on.”

The government currently has a policy in which it only updates the prices for big infrastructure projects at spending reviews, meaning the HS2 phase 1 cost has stayed at a level put forward in September 2019, when Sajid Javid was chancellor.

Thompson was critical of this process, saying it created hassle for the organisation in converting all invoices and contracts into 2019 prices.

“[It] is, to be frank with you, an administrative burden of some significance in the organisation because all of the invoices we get we have to then deflate backwards to 2019 prices even though we’re paying him at 2024 prices,” he said.

“Then we have to adjust the accounts to account for that, so it is a significant administrative faff.”

The HS2 boss said there were four main reasons for the steep cost increase over the years, including the increase in inflation and revisions to scope of the project since it first received parliamentary approval, with changes including more tunnelling through the Chilterns. He added that poor delivery by HS2 and its contractors on some of the major tunnelling and bridge projects along the line had added to costs.

Thompson said the fourth driver of cost increases was down to “systemic problems” with the way the country delivered large infrastructure projects, claiming that budgets were often set before the true scale of the works were known.

He said: “The budget needs to be set early on in order for an outline business case to be approved by the government.

“The original estimate for phase 1 [of HS2] was £30bn, something that is based on very, very immature data. You don’t have a design; you haven’t procured anything. There is no detail in which you can cost anything.”

[rebbonk]

It was nothing more than a vanity project from the word go. But, a select few have made money from us plebs

[dutchman]

HS2 now offers 'very poor value for money', MPs warn



The cancellation of HS2's northern legs means the project will be "very poor value for money", MPs have warned.

The Public Accounts Committee report also said it was "sceptical" government would attract enough private investment to build a key new station at Euston.

In October, the prime minister announced the parts of the high-speed rail line linking the West Midlands to Manchester, and to the East Midlands, would be cancelled due to spiralling costs.

Rishi Sunak also said HS2's station at London Euston would only be built if private investment was secured.

The new report from the Commons' Public Accounts Committee (PAC) raises questions about the impact of those decisions.

It says that there are "many uncertainties" in the government's assessment that it was better to complete Phase 1 of the project, rather than cancel the whole high-speed railway programme.

It also says that the government "has accepted" that only delivering Phase 1 to Birmingham "will not be value for money, as its total costs significantly outweigh its benefits".

HS2 Ltd executive chairman Sir Jon Thompson, who has led the project since Mark Thurston left his role as chief executive in September, recently warned that the estimated cost for Phase 1 had soared to as much as £66.6bn, against a budget of £44.6bn, using 2019 prices.

The Department for Transport told MPs on the committee charged with scrutinising the project that it was still better to complete Phase 1 because that would avoid some £11bn in costs that would result from its cancellation.

But the report said: "The PAC has been left with little assurance over the calculations, and calls for a clear summation of Phase 1's benefits."

Dame Meg Hillier, who chairs the committee, said: "HS2 is the biggest ticket item by value on the government's books for infrastructure projects.

"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."

The document also questions how land no longer needed will be disposed of and how other rail projects dependent on the cancelled phases will be impacted.

In light of soaring prices, the MPs also called on the government and HS2 to focus on cost controls.

[dutchman]

The Department for Transport told MPs on the committee charged with scrutinising the project that it was still better to complete Phase 1 because that would avoid some £11bn in costs that would result from its cancellation.

Ah, the old "sunk cost fallacy".

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Government still buying properties along HS2 route – despite scrapping scheme



The government has paid more than £1m to buy properties along HS2’s northern leg since Rishi Sunak announced he was cancelling the scheme, the Observer can reveal.

The prime minister used his party conference speech in Manchester last year to announce he was axing the line that would have brought it to the city. It angered some senior Tories, while officials and industry insiders have since been scrambling to draw up plans for new capacity on Britain’s railways, which had been relying on HS2’s northern routes.

The three purchases completed along the Phase 2 line between Birmingham, Crewe and Manchester since Sunak’s announcement in October last year mean the taxpayer has spent £1.4m buying properties for a line that is no longer being built.

They were made under property purchase schemes set up to clear the path for HS2. Under the schemes, the state was legally obliged to follow through on purchases that were already being processed. Insiders said all three purchases had been “at an advanced stage” before Sunak cancelled the line.

A spokesperson for HS2 Ltd said: “These three property transactions all started prior to the Network North announcement in October. In the interests of fairness, and in line with our legal obligations, we are completing all purchases where the property owner wishes to proceed. This process has taken several months. In line with government advice, we’re now in the process of closing down the Phase 2 programme in an orderly fashion, while being mindful of the needs of local communities and the taxpayer.”