Documents seen by the Independent on Sunday have confirmed an increase in the cost of Phase 1 of HS2. Up to now, the cost of the project from London to Birmingham has been officially stated as £21.4bn, but they are now “approaching £30bn” according to official documents HS2 Ltd submitted to the Treasury ahead of the Comprehensive Spending Review. When HS2 was first announced, the official cost for Phase 1 was budgeted to be £15.8bn.
Until now, with Phase 2 projected to cost £21.2bn, the official budgets for both phases of the project including contingency was £42.6bn, rising to £50.1bn when the cost of the trains are added. These costs, which were announced in 2013 but set on 2011 prices remain the official costs of the project. However estimates from sources close to Government now say the cost is “Likely to be £70bn to £80bn”, over double the £30bn the network was meant to cost when announced in 2010. This is in line with the £73bn it was reported the Treasury thought the cost of HS2 was in 2013.
It is claimed the increase in ‘out turn costs’ takes account of the rising cost of construction. However, besides shortages of building materials, wages in rail industry construction have increased 74% in just three years, which does not seem to be adequately reflected in the cost increase.
Despite this significant increase in costs, the Government are still claiming the benefit-cost ratio, which has been widely criticised by economists for adding in unsubstantiated benefits, will stay around the 2 to 1 mark.
Whilst the taxpayer is now expected to foot an increased bill for HS2, it has also been claimed the Government is already preparing the ground for a private operator to run the trains, meaning like with HS1, it could most likely be sold off at a significant loss. There are suggestions that HS2 Ltd themselves are already considering foreign buyers.
Stop HS2 Campaign Manager Joe Rukin responded:
“These figures show that since HS2 was first announced in 2010, there has been more than a doubling of the costs. With trains not due to run for over another decade, who knows where the cost of this white elephant will end up. A responsible chancellor would be asking serious questions about whether it is really worth it, but instead Mr Osborne is cooking the books to invent benefits which simply aren’t there to make HS2 look more palatable, at the same time as drawing up plans to flog it off the private sector at a fraction of the cost. If HS2 was really worth it, investors would be lining up to build it. The fact they are not shows this is nothing more than a vanity project, the costs of which will continue to spiral.”
Penny Gaines Chair of Stop HS2 added:
“It’s no surprise that Government is are working on increased cost. The supposedly generous contingency is being eaten up by costs that should have always been included, Euston is an expensive problem that HS2 Ltd have effectively given up on, and parts of HS2 are being ditched at every turn.”
“What is really surprising is that the benefit cost ratio stays so high, despite an increase in cost. For HS1, the actual costs of building it turned out to be twice the benefits. And the recent report into the economics of HS1 was so desperate to find something good to say they resorted to the line that people’s assumption that HS1 had economic benefits was a benefit in its own right.”