HS2 between London and Birmingham but not Manchester 'very poor value for money', MPs say

Building HS2 between London and Birmingham but not extending the line to Manchester will be “very poor value for money”, MPs said.

There are “many uncertainties” in the Government’s assessment that it was better to complete Phase 1 of the project than cancel the whole high-speed railway programme, according to the Commons’ Public Accounts Committee (PAC).

The committee said it is “highly sceptical” that the Department for Transport (DfT) will be able to attract the private investment needed for the planned London terminus at Euston.

The report raises questions about the ramifications of Prime Minister Rishi Sunak’s decision to cancel HS2’s northern section in October last year amid spiralling costs.

These include how land and property no longer needed will be disposed of, impacts on other rail projects dependent on the cancelled phases, what will be delivered with the money saved, and how HS2 trains will operate on existing lines.

HS2 Ltd executive chairman Sir Jon Thompson, who has led the project since Mark Thurston left his role as chief executive in September 2023, warned last month that the estimated cost for Phase 1 has soared to as much as £66.6 billion, against a budget of £44.6 billion (in 2019 prices).

He said reasons for the cost increase include original budgets being too low, changes to scope, lower than expected productivity, weak contractual models and inflation.

The PAC report stated: “HS2 now offers very poor value for money to the taxpayer, and the department and HS2 Ltd do not yet know what it expects the final benefits of the programme to be.

“The department acknowledges that building just Phase 1 will not be value for money because total costs will significantly outweigh benefits.”

However, it noted that the DfT judged that continuing with that section “was value for money”, partly due to avoiding £11 billion of costs that would be incurred from cancellation.

The report added: “There are many uncertainties in this assessment and we were left with little assurance over the calculations.”

Mr Sunak’s October 2023 announcement also included a new plan to rely on private investment to extend HS2 from Old Oak Common in the suburbs of west London to Euston, near the centre of the capital.

This is aimed at saving £6.5 billion of taxpayers’ money.

The PAC said: “We are…highly sceptical that the department will be able to attract private investment on the scale and speed required to make the London terminus station a success.”

Dame Meg Hillier, who chairs the committee, said: “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 and many unanswered questions and risks still attached to delivery of even this curtailed project.”

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.”

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.”

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