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24 January 2020

Government underestimated HS2 “complexity and risk”, says National Audit Office

NAO report comes in the same week that a leaked draft review into the high-speed rail link between London, Birmingham and Manchester revealed costs spiralling to an estimated 106bn.

By Samir Jeraj

The Department for Transport (DfT) has “not adequately managed risks to taxpayer money” on HS2, according to a report by the National Audit Office (NAO) released on Friday The report says the DfT “underestimated the complexity of the programme.”

The NAO report comes in the same week that a leaked draft review into HS2 by Lord Oakervee revealed spiralling costs – from £56bn to an estimated £106bn – for the high-speed rail link between London, Birmingham and Manchester. Meanwhile, a delegation of Tory MPs went to lobby Prime Minister Boris Johnson on Wednesday.  The group is calling for the money to be spent on smaller and more quickly deliverable projects in northern England, particularly newly won constituencies in the so-called “Red Wall” of previously safe Labour seats. Key advisors to Johnson, including Dominic Cummings and Andrew Gilligan, have also voiced their scepticism of HS2, with Cummings labelling it a “disaster zone.”

The NAO says HS2 Ltd and the DfT underestimated risks to the project. This meant the £7bn set aside for contingency were “not enough to address the significant cost increases that emerged.” The report  also noted the project is three to seven years behind schedule, and that the current estimated completion date of between 2036 and  2040 for the full line is subject to “significant uncertainty”.

This is the fourth report the NAO has conducted on HS2, warning as far back as 2013 that there was a gap in funding and that the schedule for the project was “overambitious”. Similar warnings were issued in 2016 and in 2018 the NAO reported the cost estimates for the land and property needed for HS2 had “increased significantly.”

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.” He added that there were still many risks to the success of the project, and that the DfT had to be realistic and transparent about costs and completion dates. If construction work does not begin by March 2020 the current opening date for the London to Birmingham section  – 2029 to 2033 – is at risk, according to the National Audit Office’s assessment.

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The report strengthens the case for Phase Two of the scheme to be delivered by a new special purpose vehicle, a proposal pushed by the Northern Powerhouse Partnership in a report published at the end of 2019. Northern Council leaders and mayors are concerned that scrapping HS2 will undermine efforts to connect the high-speed rail networks and transform the northern economy through East-West rail links from Liverpool to Hull and the North East. Conservative ministers have promised a wave of investment in northern England backed by new borrowing rules announced by Chancellor Sajid Javid. However, it is unclear whether the likely further overspend on HS2 will have an effect on projects like Northern Powerhouse rail and  £4.2bn that has been promised  for public transport projects.

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