Cost of remaining HS2 leg to soar by another £10bn, rail boss admits
The chief of the HS2 project has admitted that costs for the remaining HS2 leg between London and Birmingham are set to soar by up to £10bn.
Sir Jon Thompson, chief executive of HS2 Ltd, told MPs on the transport select committee that the cost for Phase 1 of the project was between £49bn and £56.6bn at 2019 prices, but adjusting for inflation meant the costs could now be as high as £66.6bn.
The entire project, including the now-scrapped Birmingham to Manchester leg, was originally estimated to cost £37.5bn at 2009 prices, which would be around £57.1bn in 2023.
Sir Jon said the cost of HS2 had risen so dramatically because the original budgets had been set to low, while poor delivery and high inflation had also driven up spends.
“This is a systemic problem. It’s not just about HS2, it’s about large projects that the Government funds. The budget needs to be set early on in order for an outline business case to be approved by the Government, sometimes by Parliament,” he said,
The HS2 Ltd boss said the initial estimate for the project, which was around £30bn, was based on “very, very immature data” and was presented when there was “no detail on which you can cost anything.”
He added: “If you say to a builder, can you give me a quote for an extension, they walk around and say ‘it’s £50,000-something’.
“But then you get into the detailed design, you know exactly how big it is, what surfaces you want, how much concrete needs to be poured. Unsurprisingly, you get a better number.
“That’s the situation here. The situation with HS2 in my opinion is the estimate was poor, the budget was set too early, and then when you get further into it, you get much better information. Then on that basis, you can cost it out with more accuracy and then you discover it’s higher.”
Sir Jon also criticised the Government over the “administrative faff” of having to set costs for the project at 2019 prices.
“It is the Government’s long-standing policy that infrastructure estimates are only updated at Spending Review points, that’s my understanding of it,” he said.
“So that’s why we’re still working to 2019 prices and the whole conversation about 2019, which is to be frank with you an administrative burden of some significance in the organisation.
“All of the invoices we get we have to then deflate backwards to 2019 prices even though we’re paying them at 2024 prices.”
Prime Minister Rishi Sunak announced during his speech at Conservative Party conference last October that he would axe the Birmingham to Manchester leg of HS2, and pledged to spend the £36bn saved by the move to fund hundreds of other transport schemes.
But the move was criticised by a number of high-profile Conservative MPs, including former prime ministers Boris Johnson and Theresa May, as well as several political leaders from the North and the Midlands.
Official documents released following the announcement suggested that the Government expected the cost of the remaining HS2 leg “should lie between £45bn and £54bn” but that HS2 Ltd should keep its budget “at the lower end of this range”.
Sir Jon told MPs that he did not believe the project could be delivered for £45bn, and claimed he had held more than 50 meetings attended by Department for Transport (DfT) officials to discuss the rising costs.
He added that one option to reduce the budget could be removing the responsibility of upgrading Euston station from HS2, but that he had “doubt” over whether it would be enough to reach the Government’s target.
