HS2 now offers ‘very poor value for money’, MPs warn

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

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.

The Department for Transport disagreed with the report and said HS2 would be built “at the lowest reasonable cost”.

It comes as separate analysis suggests the UK’s big infrastructure projects are too expensive and take too long.

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.

HS2 new map

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.”

A spokesperson for the Department for Transport said: “We disagree with the committee’s assessment. Their estimated cost figure for Phase 1 also does not reflect our decision to secure private funding for Euston, or the direction not to proceed beyond the Midlands.”

They added that plans for the Euston station had already received extensive support from the private sector to invest, offering a regeneration opportunity similar to that seen in the Battersea area in London around the Nine Elms station.

“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,” they added.

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.

A spokesperson for HS2 Ltd said: “We’ve been clear about our cost challenges, which have been compounded by significant levels of inflation.

“HS2 Ltd is now under new leadership and implementing changes across the programme aimed at controlling costs and learning the lessons of the past.”

It comes as separate analysis from Boston Consulting Group’s Centre for Growth suggests that infrastructure projects in the UK are often too costly and take too long to deliver.

It looked at data from 2,300 infrastructure projects from rail and road to school and hospital builds across 16 countries in the last two decades.

It found that average cost per unit for both road and rail projects was higher than in other similar countries including France, Germany, Australia and the United States.

Over three quarters of UK rail projects it looked at went over budget and more than half were delivered late – although these levels of overruns were common in other countries too.

Updating the planning system and addressing how risk is measured and governed across big projects were among the measures it said could help address the issues.

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Source: bbc.co.uk

By David Ryckman