‘Significant challenges remain’: HS2 is over budget and behind schedule, says new report

High Speed 2 is way over budget and behind schedule because the government “underestimated its complexity and risk”.

A damning report by the National Audit Office (NAO) concludes: “Significant challenges to completing the programme and delivering value for taxpayers and passengers remain.”

The cost will be far higher than the £56bn (in 2015 prices) that the Treasury has currently assigned to the rail project, and completion of the project could be up to seven years late.

HS2 is intended to be a Y-shaped railway connecting London with Birmingham on a new line though the Chilterns (Phase 1), then branching into a western extension to Manchester (Phase 2a) and an eastern arm to Sheffield and Leeds (Phase 2b).

The aim is to increase capacity on the heavily used East and West Coast main lines. It would also reduce journey times and connect the capital with other key cities including Liverpool, Newcastle, Edinburgh and Glasgow.

A year ago the then transport secretary, Chris Grayling, was insisting that the line would be on time and on budget. But the latest estimate of the cost of HS2 is now estimated by the Department for Transport (DfT) to be between £65 billion and £88 billion.

Leaks from a separate report, commissioned by the DfT and conducted by Doug Oakervee, indicate that the cost could be as high as £106bn – 89 per cent higher than originally planned.

The NAO report is scathing of the way that the project has been handled by HS2 Ltd, the company set up by the government to deliver the project. It says: “HS2 Ltd did not account for the level of uncertainty and risk in the programme when estimating the costs of Phase One in April 2017.

“It used a method for calculating contingency that was not appropriate for a programme at such an early stage of development.

“The £7bn of contingency was not enough to address the significant cost increases that emerged.”

In 2013 the NAO had warned that the 2026 opening date was “ambitious”. Three years later it again challenged the DfT’s confidence. Only late in 2019 did the department admit the target date was unachievable. Some services are now likely to begin between Old Oak Common in west London and Birmingham in 2030.

The report warns that even that date will be in doubt unless work starts on the actual line by March this year.

“By not fully and openly recognising the programme’s risks from the outset, DfT and HS2 Ltd have not adequately managed risks to taxpayer money,” concludes the report.

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.”

Around £8bn has already been spent on preparatory work on the project, even though constructing the actual line has not yet begun.

Robert Nisbet, director of nations and regions at the Rail Delivery Group, which represents train operators and Network Rail, said: “It’s time to inject some realism into the debate about HS2. There are no shovel-ready alternatives.

“To cancel it would be to worsen punctuality and overcrowding on the railway for years to come, throttling future economic growth and damaging the environment by encouraging car travel.

“By acting like a road bypass, HS2 will shift long-distance trains onto a separate new line and enable the more frequent, punctual commuter services on existing tracks that people are already crying out for.”

The government is expected to decide in the next few weeks whether or not to proceed with HS2.