Hidden costs could more than double the HS2 bill, says HS2AA director

“Has the Minister seen the startling information blogged this morning by Tom Edwards, the BBC transport correspondent, that evidence to the HS2 Committee suggests that hidden costs will raise the overall cost of the HS2 project from £50 billion to £138 billion? Are the Government misleading this country about just how much this folly of HS2 is going to cost?”

That was a question asked by Barry Sheerman in the House of Commons on 5th March. http://www.theyworkforyou.com/debates/?id=2015-03-05a.1061.2&m=40204      See the 9th item.

It follows a petition presented by Dan Mitchell and HS2 Action Aliiance Director Andrew Bodman to the HS2 Select Committee on March 2nd. An outline of what was said follows.

The total cost of HS2 (Phases One and Two) could well reach £138 billion, maybe more. Yet the official figure is £50 billion including trains.

The largest additional amount (£30 billion) is the ongoing subsidy that is likely to be required. Only two high speed lines in the world are thought to be profitable (Paris – Lyon and Tokyo – Osaka) and it is extremely unlikely that HS2 will join that exclusive club. A subsidy will be needed to cover the interest payments on the considerable debt incurred in building this line, higher operating costs of such trains and revenues that fail to match forecasts as passenger numbers will probably turn out to be less than expected. Several countries subsidise their high speed lines by $1bn per year or more. A £0.5bn subsidy per year has been estimated over 60 years.

It also appears that the construction costs for Phase Two have been significantly understated. At present, the estimated construction cost (without contingency) of Phase One is £108m per mile while that for Phase Two is £59m per mile. By referencing the construction cost per mile for HS1, the HS2 Phase One cost per mile seems the more likely. With the current contingency for HS2 construction costs being 70%, it means the Phase Two construction cost is likely to rise from £21.2bn to £39.4bn.

The next element to be factored in is an additional power station bearing in mind how little spare generating capacity the UK has at present. Using input from electrical engineers, it is believed that an additional medium sized power station will be required to meet the demands of these powerful trains on what will be an intensively used series of lines. £16bn has been added to cover this requirement.

Furthermore Crossrail 2 will be needed at Euston to help the onward travel of rail passengers to their end destinations. The existing Underground services will be unable to cope with such significant increases of passenger numbers once HS2 Phase Two is running, and this shortcoming has been recognised by Transport for London. We have suggested a £7bn contribution to Crossrail 2 which is approximately a quarter of its total estimated cost to ensure that this work proceeds, and in a timely fashion.

Currently there is no research and development budget for HS2 which seems extraordinary when the plan is to run trains faster than in most other countries and more intensively between London and Birmingham than on any other high speed line in the world. There are many issues needing investigation including electrical engineering, vibration, sound and other speed related issues. A nominal £5bn for research and development has been added.

Other areas that have been added include security, track maintenance and upgrading the overhead line equipment on sections of the West Coast Mainline and East Coast Mainline (used by classic compatible HS2 trains) to provide improved reliability.

There are a number of costs associated with HS2 which cannot be readily costed at this stage, e.g. the HS2 Growth Taskforce Schemes for getting cities HS2 ready.

In addition there are concerns that some of the contingency amounts may be insufficient bearing in mind the recent cost increases which have occurred on the Great Western and other electrification programmes. The cost of the Great Western Electrification programme has gone up by 70% in the latter half of 2014 alone and 180% since first conceived, while the cost of each connection to the National Grid has increased by 150%.

Dan Mitchell said he was concerned that Parliament was currently being misled as are taxpayers. He is very aware that the Public Accounts Committee and Major Projects Authority also have serious concerns regarding the cost of this significant project. Dan Mitchell has also said that £138 billion is a disproportionate amount of money to spend on a single project. He believes there are other more pressing issues to address on the rail network.

Element
Billion Pounds
Official HS2 construction cost including trains
50
Ongoing subsidy over 60 years
30
Phase Two construction cost correction
18.2
Power station and associated electrical equipment
16
Crossrail 2 contribution
7
Research and Development
5
Security
3.36
Maintenance of track
3.36
Upgraded overhead line equipment WCML and ECML
2
Additional costs of Euston station
2
Additional land costs
1.74
Maintenance of bridges
0.09
Training college
0.02
Grand Total
138.77

This total excludes inflation, cost over-runs which exceed contingency amounts, full and fair compensation for businesses and homeowners, and some unquantified elements.

The Independent reported yesterday that the Labour shadow cabinet are to look closely at the costs of HS2, saying “we have to try and drive down the costs.” It should be noted however that David Higgins was asked to look at the costs when he first started as HS2 chair. He failed to find savings, dropping instead the HS1-HS2 link and keeping the budget the same.

The transcript from this session of the HS2 Select Committee may be found through this link (paragraphs 655 – 688)- http://www.parliament.uk/documents/commons-committees/hs2/oral-evidence/020315_Uncorrected_Afternoon.pdf

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2 comments on “Hidden costs could more than double the HS2 bill, says HS2AA director
  1. Pingback: New evidence says HS2 could cost £138 billion | Save Camden from HS2

  2. The figures presented by Dan Mitchell & Andrew Bodman are no surprise and are well known in the industry. In 2012 HS2 engineers stated (off the record) that the known costs were estimated at £80 – £90bn and were certain to increase once all the engineering and compensation costs were finalised. HS2 costs were last updated in 2013 and have not been updated in line with extra tunnels, embankments and noise barriers.

    With bcr officially at 1.4, heavily based on time wasted and the Priministers recent foot in mouth announcement to MP’s that it was “vital for businesses and for individuals to be able to access Wi-Fi and do their work and all other contact while they are on trains”. That announcement does not really sit well with 79% of the bcr coming from savings on time wasted, which equates to £39bn of the costs and if only 50% of the passengers use the facilities for business this would still easily put the bcr down to less than 1.

    To finish just a thought, Labour have previously stated that there would be “no blank cheques” for HS2 and with the rapidly approaching election, who would take a bet that they will use the cost rise as a reason to pull their support for HS2 and embarrass the government.

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