Watchdog brands stunted HS2 ‘very poor value’ and queries Euston plan

The cross-party Public Accounts Committee (PAC) inquiry into HS2 has released its scathing report into the failures on the ‘curtailed rump of a project’ and the mismanagement of the £4.8 billion Grimshaw-designed Euston terminus.

It states: ‘[Recent] events have left us more concerned about the HS2 programme than ever before.’

The committee’s chair Meg Hillier added: ‘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 delivers the best possible value for the taxpayer?’

The PAC report argues that, following the cancellation of HS2 Phase 2 from Birmingham to Manchester, Phase 1 of the project, between London and Birmingham, now ‘offers very poor value for money for the taxpayer’. It adds that the Department for Transport (DfT) and HS2 Ltd ‘do not yet know what they expect the final benefits of the programme to be’.

After the cancellation of Phase 2, the DfT’s accounting officer assessed that it would still be good value for money to continue with Phase 1. The PAC has said this assessment featured ‘many uncertainties’ and the committee was ‘left with little assurance over the calculations’.

The DfT is now working to revise its business case for Phase 1, which it expects to publish in the first half of this year.

The PAC further found that the costs of the project have spiralled so far out of control that ‘the DfT and HS2 Ltd do not know how much the programme will now cost’. It has highlighted the organisations’ failure to heed the PAC’s warnings and recommendations, which date back several years. The report states: ‘In our view there has been insufficient senior level focus on cost control.’

Another damning conclusion from the PAC report is that the DfT and HS2 Ltd ‘do not yet know what the impact of the decision to cancel Phase 2 will be on the HS2 programme and how HS2 Ltd will need to adapt so it can be successfully delivered’. The PAC has called on the two organisations to ‘work through in detail how they will close down work on the cancelled sections’.

It reiterates issues that have been raised by several critics of the decision, namely that ‘the DfT does not yet understand how the high-speed trains will operate as part of the rail network or how the HS2 line will connect to the West Coast Main Line to maximise the benefits from Phase 1’.

It adds that the DfT ‘will also need to identify ways to resolve impacts on other projects such as Northern Powerhouse Rail which will need a new revised scope’.

Moving on to HS2’s Euston terminus specifically, the DfT is doubtful about the government’s plans to deliver the full £6.5 billion for the station and the tunnel, which it wants to be primarily funded by private investors. The PAC says that the DfT ‘does not yet have any plan for how to [attract private finance] and has to make investment decisions soon to protect long-term value for money’.

The cost of HS2’s Euston terminus

It adds that the DfT ‘does not yet have a plausible or detailed proposition it could take to the market and it is likely to take significant time to develop one’. This is a significant issue as HS2 contractor Skanska Costain Strabag JV (SCS) is waiting for the green light to bore the Euston tunnels, having recently completed the Atlas Road logistics tunnel in preparation.

The PAC says that the DfT must make an ‘urgent’ decision on the funding for the tunnel from Old Oak Common to Euston ‘or it will incur much greater costs from stopping and restarting the work’.

This runs counter to the noises coming out of the DfT, with transport secretary Mark Harper having said there is ‘very extensive’ private interest and rail minister Huw Merriman saying he’s confident that private investment will turn Euston into a ‘life science quarter’.

Another issue is around the sale of land that had been safeguarded for the construction of HS2 Phase 2 between Birmingham and Manchester. The government has recently lifted safeguarding measures on the land to Crewe, in theory to sell it for other developments.

However, the PAC has found that the government has spent over £600 million (in 2019 prices) on the land and it doesn’t know ‘when it will dispose of land and property no longer needed and how it will balance different interests’. It has criticised the government’s eagerness to sell the land as quickly as possible when it could still be required for other projects such as Northern Powerhouse Rail.

It has called on the government to ensure that the sale is done in a way that protects both the taxpayer and local interests while being fair to those who had their property compulsorily purchased.

The PAC’s report then turns its attention to prime minister Rishi Sunak’s promise that ‘every single penny’ of the reported £36 billion saved by the cancellation of HS2 North would be invested in transport projects in the North.

Despite the release of the Network North document with a list of projects to be funded, the report says that the DfT has ‘yet to finalise’ what this money will be spent on and when the selected projects will be able to start. ‘There is not yet a list, with expected costs and benefits, of what projects the DfT expects will be delivered over the long-term with the redirected funds,’ it states.

One promised project is a new station in Bradford, which it says will cost £2 billion despite having done no cost calculations, business case or cost-benefit ratio to back up this pledge.

The PAC’s recommendations for the DfT and HS2 Ltd in light of its findings are detailed below.

The government should publish its official response within two months.

Hillier added: ‘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.

‘We’ve a curtailed rump of a project and many unanswered questions’

‘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 DfT spokesperson said: ‘We disagree with the committee’s assessment. Their estimated cost figure for Phase One also does not reflect our decision to secure private funding for Euston, or the direction not to proceed beyond the Midlands.

‘Our plans for Euston have already received extensive support from the private sector to invest and will offer a world-class regeneration opportunity, mirroring the successful King’s Cross and Battersea and Nine Elms development programmes.

‘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.’

An HS2 Ltd spokesperson 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.’

Northern Powerhouse Partnership chief executive Henri Murason said: ‘The fact that the business case for the remaining bit of HS2 has plummeted since the Northern leg was cancelled will not surprise the government. The Department for Transport has already admitted as much.

‘The Oakervee Review, published when Rishi Sunak was chancellor, made clear it was the Northern sections of the route to Leeds and Manchester which justified the cost of the section into London. Instead, the North is paying the price of having to placate vociferous local opponents with expensive tunnels through the Chilterns.

‘The government has a lot of work to do to put some meat on the bones of its Network North plans. Our chief focus will be to make sure that the new version of Northern Powerhouse Rail can now be delivered sooner than expected, starting with the section between Manchester Piccadilly and Manchester Airport which can be repurposed from the existing high-speed rail hybrid bill.’