With the latest consumer price figures, thoughts turn to questions on what the expected cost of HS2 would be, in current figures.
It seems, no-one knows: the Government are determined not to release updated costs, with Patrick McLoughlin telling the Lords Economics Affairs Committee who asked for costs in 2014 or 2015 prices “in order to ensure consistency across the programme, we are maintaining the prices for programme delivery in 2011 prices”.
Freedom of Information requests from Councillor Seb Berry to HS2 Ltd and the DfT asking for the 2015 costs were equally uninformative: HS2 Ltd claimed that they did not hold the information, and the Dft said that they had no business need for the information.
If this is true, that no-one in either the DfT or HS2 Ltd knows the cost this is a serious problem for its finances. With the 2011 cost for HS2 at £50billion, even small budget overruns will be of the order of many millions of pounds.
However, the costs of HS2 will be increasing faster than consumer inflation. The Lords Economics committee, used a very crude indexation against the Department for Business, Innovation and Skills Tender Price Indices. They said
The Department for Business, Innovation and Skills publishes Tender Price Indices, which measures the movement of prices in tenders for public sector construction contracts in the UK. This showed that the cost of public sector construction contracts increased by 13 per cent between the first quarter of 2011 and the first quarter of 2014 (the last date for which figures were available). Applying this increase to the £50.1 billion cost of HS2 would give a figure of £56.6 billion in 2014 prices.
But even this oversimplifies the picture: in two years between 2012 and 2014, rail construction workers wages rose by 74%, compared to other construction workers whose salaries were nearly flat. This means that for HS2, the Tender Price Index is highly likely to seriously underestimate any uplift in costs for such a large railway project.
A recent report in the Sunday People showed that HS2 Ltd staff were spending massively on office costs, such as an office chair for £723. HS2 Ltd claimed that they were within budget: but they were supposed to be working on detailed design for Phase 2 this year, which has not yet been announced. That will have reduced the amount the company needs to spend this year, but increase costs for later years. There is no sign that they have adjusted their budget to reflect that.
So we ask again:- what is the HS2 inflation rate?