Sector - Central Government

PAC release damning HS2 report

A damning new report from the Public Accounts Committee (PAC) states that HS2 offers ‘very poor value for money for the taxpayer’ following the cancellation of its latter stages into the North.

The PAC’s report is the latest addition to over a decade of scrutiny raising concerns around the management of HS2.

The report states that Government has accepted that delivering only Phase I will not be value for money, as its total costs significantly outweigh its benefits, and that the Department for Transport (DfT) has told the PAC it was still better to complete Phase I – a calculation made by excluding the £23bn* spent to date, and including as a benefit of the project avoiding approximately £11bn* of remediation costs from cancelling entirely. The PAC says it has been left with little assurance over the calculations, and calls for a clear summation of Phase One’s benefits.

The report raises questions as to the many as-yet unknown ramifications of the decision to cancel HS2’s Northern leg. These range from how land and property now no longer needed will be disposed of, taking into account the needs of the taxpayer, local interests and fairness to those who have had their properties compulsorily purchased; impacts on other rail projects dependent on the cancelled phases; what will be delivered with a redirected £36bn and when; down to how the high-speed trains (which will likely run slower than existing trains on tracks not designed for their speed) will operate as part of the network.

As repeatedly highlighted by the PAC, cost overruns and delays have been a constant problem throughout the whole HS2 project. The estimated cost of the completion of Phase I with inflation range as high as £67bn**. T|he PAC state that poor cost management indicates a failure of governance and oversight at both HS2 Ltd and DfT, and the report calls for answers within six months as to how these issues will now be brought under acceptable and properly accountable control.

The report warns there are also urgent decisions to be made on funding the development of HS2 Euston, which is dependent on attracting private finance to pay for it. The Government has no plan yet on how to make this happen, and the PAC is highly sceptical that investment can be attracted of the scale and speed required to make Euston a success.

Dame Meg Hillier MP, Chair of the Committee, said: “The decision to cancel HS2’s Northern leg was a watershed moment that raises urgent and unanswered questions, laid out in our report. What happens now to the Phase 2 land, some of which has been compulsorily purchased? 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 deliver the best possible value for the taxpayer?

“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 with many unanswered questions and risks still attached to delivery of even this curtailed project.”

In response, Railway Industry Association Chief Executive Darren Caplan said: “The report by the Public Accounts Committee raises many questions which remain unanswered, not least of which is how HS2 going to operate as railway. Ministers urgently need to make decisions on this point and others to ensure both sunk and future investment deliver value for money for taxpayers and the railway.

“It remains RIA’s view that the full benefits of HS2 can only be realised by building the full HS2. However, going forward RIA and our members are committed to working with the Government on the trajectory of future rail investment and how this meets long-term demand for rail capacity across the UK network. It is imperative that options are kept open as the scope of work on this is developed.”

*2019 prices

**2023 prices

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