HS2 risks not priced in at the start, say auditors

Image caption A proposed design for an HS2 train

No-one took full account of how complex and risky the HS2 high-speed rail project was likely to be, says the government spending watchdog.

The Department for Transport (DfT) and HS2 Ltd did not allow for all uncertainties when estimating initial costs, said the National Audit Office.

In 2015, HS2 was due to cost £56bn.

Earlier this week, however, a leaked government-commissioned review suggested that the total could reach £106bn.

The DfT and HS2 Ltd “have not adequately managed risks to taxpayer money”, the NAO said in a progress update.

This led to the project being over budget and behind schedule, it added.

“Significant challenges to completing the programme and delivering value for taxpayers and shareholders remain,” the NAO report said.

Lessons to learn

The first phase of the project, between London and Birmingham, is due to open at the end of 2026, with the second phase to Leeds and Manchester expected to be completed by 2032-33.

Despite concerns about the rail link, Europe’s largest infrastructure project, work is not on hold and the project currently gets through about £250m a month.

Gareth Davies, the head of the NAO, said: “There are important lessons to be learned from HS2, not only for the Department for Transport and HS2 Ltd, but for other major infrastructure programmes.

“To ensure public trust, the Department and HS2 Ltd must be transparent and provide realistic assessments of costs and completion dates as the programme develops, recognising the many risks to the successful delivery of the railway that remain.”

A DfT spokesperson said: “The department has supported this review and is already acting on many of its recommendations. To ensure transparency around the project, we have worked closely with the NAO to provide information on the latest cost and schedule estimates for HS2.

“We recognise that there have been significant underestimations of both the cost and schedule of HS2 in the past, which is why we commissioned the Oakervee review to provide advice on whether and how to proceed with HS2.”

Employers’ organisation the CBI said that whatever the misgivings, the project should go ahead.

Matthew Fell, the CBI’s chief UK policy director, said: “HS2 is an ambitious project and the National Audit Office’s report usefully highlights the challenges of delivering large-scale infrastructure. But what is clear to the CBI, and business generally, is the colossal cost of not delivering HS2.

“If the government truly believes in levelling up the regions, especially the Midlands and the North, it should deliver HS2 in full.

“It is exactly the post-Brexit project the government should be championing.”

This is a slap on the wrist for HS2 Ltd and the Department for Transport.

When you consider the massive overspend on HS2, headlines about underestimating the scale of the project and not acknowledging associated risks are hardly surprising.

As the government decides the fate of the project, there are a few interesting nuggets.

The report paints a picture of a high speed line like no other in Europe. HS2 plans 18 trains per hour. Other lines in Europe typically run between two and six trains an hour.

The incredibly high spec justifies the high price tag, supporters say.

Critics say it’s one reason why the project is flawed.

The government’s review of HS2 has looked at a series of options, like reducing the spec of HS2.

But as this report acknowledges, civil servants have looked at ways of making the project more affordable before.

In short, tinkering with aspects of this project, like reducing the very high speed of the trains, wouldn’t save huge amounts of money.

There is a stark contrast in its assessment of the two phases.

Although it criticises the substantial overspend on phase one – London to Birmingham – the National Audit Office does now believe that the costings on that part of the project are “robust”.

Inevitably phase two – Birmingham to Manchester and Birmingham to Leeds – which is at a very early stage, is in a very different position.

In fact phase two is at such an early stage that this report concludes that no assessment for the overall cost of HS2 can be made with any real certainty.

We visited two vast construction sites at Curzon Street in Birmingham and in Solihull.

When you see the scale and type of work underway, like moving a bridge over a motorway, then it is hard to imagine that the government will pull the plug on phase one.

Given the scepticism of some figures within government and recent leaks in the media, the future of phase two is less certain.

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