From the PAC report – “No clear end in sight”

On Wednesday, the Public Accounts Committee (PAC) published their latest report into HS2.
PAC HS2 Summer 2021 report

Here are some of the points they raised in the report.

1 Progress with Phase One delivery

Cost and schedule

p9 Following cost increases and schedule delays, the Government announced an independent review of the programme in August 2019, which was published in February 2020. Following this review, the Department revised its estimates for the cost of the programme… in May 2020, we found that the High Speed 2 programme had gone badly off-course and we were unconvinced there would be no further costs increases. The Department and HS2 Ltd then reset the cost estimates and schedule for the programme during 2020. We also found the Department had failed to provide us with clear warning that value for money was at risk and concluded that the Department and HS2 Ltd’s lack of transparency and failure to tell previous committees that the programme was facing difficulties had undermined public confidence in the programme…

p10 …The Department told us that, since the programme was reset in 2020, it had made “great strides” in its oversight and governance increasing its confidence in the programme’s delivery. HS2 Ltd provided us with updated details about the estimated cost and schedule of Phase One. On schedule, HS2 Ltd told us it had a 10-year programme of work for Phase One before services started between 2029 and 2033. It further explained that it planned to complete civil construction between 2020 and 2025; railway systems between 2025 and 2028; and, commissioning, integration, driver training and entering into service between 2028 and 2030. It noted that work on station design and construction will run alongside this, and would take approximately six to seven years to complete….

…The Government’s latest range of estimated costs for Phase 1 is £35–45 billion (2019 prices).12 For Phase 2a the range is £5.2–7.2 billion (2019 prices). The latest updated forecast range for opening Phase 2a for services is 2030–2034.13 The Department told us that it expected the cost range and the schedule range for Phase 2a to be set in 2023. The current cost range for Phase 2b is £32–46 billion (2019 prices), meaning that the full railway could cost as much as £98 billion.

9. The construction of the main civil engineering components of the programme (such as tunnels and viaducts) is a major undertaking and was a major cause of delays and cost increases at the time of our last report… As a result, it expected that the construction for Old Oak Common would be £1.67 billion, Birmingham Curzon Street would be £460 million and Euston would be £2.6 billion. It explained that it had not yet agreed a contract for construction at Birmingham Interchange but expected this to cost in total between £350 million and £500 million…

…We asked the Department and HS2 Ltd how much additional costs the programme had incurred as a result of the COVID-19 pandemic. HS2 Ltd explained that it would be difficult to “unstitch the true Covid-related costs” but that at the end of 2020 it had estimated that these costs would be between £300 million and £400 million…

The design and delivery of Euston station

p12 …In our May 2020 report, we raised our concerns over the huge uncertainty remaining for Euston station, specifically the lack of clarity around the station build. The Department and HS2 Ltd told us at the time that although the design of Euston was ready for planning consent, they were looking into more cost-effective solutions for the station… When the Department responded in November 2020, it stated work was ongoing to develop an optimised design and delivery strategy to address cost pressures, with any changes expected in spring 2021. In its update to Parliament in March 2021, the Department and HS2 Ltd flagged cost pressures of £0.4 billion relating to Euston station, and noted that work to consider opportunities, efficiencies and scope reductions was underway. We therefore asked the Department about what progress it had made on Euston. It told us that “some progress” had been made, such as consideration of designs for a smaller station and improved integration with the work of Network Rail, but that a final design had not been agreed. When we pressed the Department to commit to a timeframe for final decisions on the design and delivery, it informed us it hoped to report back on a design for the station by its next six-monthly update in autumn 2021… we noted final decisions are still outstanding, with a planning decision on Euston expected in September 2022.

p13 The Department acknowledged that Euston is a “very urgent and immediate challenge”. HS2 Ltd similarly noted that decisions on the final options are time-bound, and that it was concerned that the programme will “literally run out of time”. HS2 Ltd explained that it was setting up Old Oak Common as the terminus for the railway when it first opens to decouple the delivery of this element of the programme from the risk of Euston….The Department also told us that it has separated out its work on Euston from that on the rest of the programme, due to a specific set of issues related to Euston, and that the delivery of Euston Station is now overseen by a separate body—the Euston Partnership—which is chaired by Sir Peter Hendy and is made up of representatives from, for example, HS2 Ltd, Network Rail, the London Borough of Camden, the Greater London Authority and Transport for London.

Integrating the various elements of the programme

p13 The High Speed 2 programme has many interdependent elements, including stations, infrastructure and railway systems. We raised concerns in our previous report that, given the scale of the programme and its future impact on the rail network, if the Department does not give enough attention to managing the interdependencies within the programme and other rail programmes, passengers and other services could suffer. From Crossrail, we have also seen the problems that can arise from poor integration of railway systems, and the delays and cost increases that this can cause…

p14 …HS2 Ltd recognised that the integration of railway systems would be crucial and explained that it planned to establish a collaborative alliance amongst the main railway systems contractors to encourage them to work together to deliver the integrated systems. Although HS2 Ltd’s pre-contract market engagement found suppliers to be receptive to this approach, it also admitted this was a “bold” and “complex” approach.

2 Delivering the promised benefits and improving community engagement

p16 …The Department and HS2 Ltd asserted that many of the jobs from the programme will go to those who live locally to construction sites. However, the West Midlands Combined Authority told us that of a high number of the jobs promised to be created from work at Delta Junction, just outside Birmingham, only 35 went to local people. HS2 Ltd told us that these 35 jobs related to a specific job advert issued by one of its contractors. We are also mindful of the experience of the London Olympics where the number of real, sustainable jobs for local residents was somewhat overstated by people claiming a local postcode when they were, in practice, moving in and out of the site areas on a weekly basis…

p17 …We asked HS2 Ltd whether it was confident that it had the skillset that it needed to complete High Speed 2 to the timetable and budget that had been set. HS2 Ltd replied that it was confident but not complacent and that there was increased demand for skills in construction from, for example, house building projects… HS2 Ltd also noted that the workforce for later phases of the programme, such as the installation of systems needed to operate the railway, was likely to come from a global pool as those skills are rarer in this country.

p18 The Department and HS2 Ltd told our previous Committee in 2016 that the National College for High Speed Rail would be crucial in training people in the skills required to successfully construct High Speed 2 and other infrastructure projects. For example, at the time of our evidence session in 2016, there was a contractual requirement for HS2 Ltd’s civil construction contractors to train around 2,000 apprentices in the college. However, the Department admitted that the story of the College had to date been a disappointing one. It told us that the College had now merged with the University of Birmingham as the National College for Advanced Transport & Infrastructure. It said that it was confident that its new, broader remit, a new curriculum from September 2021, and new leadership gave it an opportunity to get the best out of the college.

27. The Department explained that it was not, and had never been, directly responsible for the college as this fell under the remit of the Department for Education. It explained that it’s detailed involvement in the college had been limited and that this had “been a bit of a challenge”. It similarly noted that it had limited conversations with the University of Birmingham about the college, but confirmed that it had been involved in discussions with the Department for Education about the merger. It recognised, however, that it was within its strategic interests to have a really strong relationship with the college and ensure that it is providing skills and the curriculum that were needed.

Engagement with communities

p18 HS2 Ltd told us that the nature of the High Speed 2 programme means that the work required for it will be disruptive…The Commissioner told us that while current volumes were unsatisfactory, the scale of the programme and the number of communities it impacted meant the programme was likely to generate large number of complaints, and that volumes of complaints were likely to continue to increase as the programme developed and more communities were affected….

p19 In May 2021, the Parliamentary and Health Service Ombudsman published a report that found that HS2 Ltd had misled and failed to communicate promptly and effectively with a family whose home was being purchased to make way for the railway.  HS2 Ltd told us that although it had not accepted all the findings in the report, it had acknowledged and accepted the recommendations, and made good progress in its engagement with communities affected by the programme since.  HS2 Ltd accepted that the report “shone a light on some failings of the company several years ago”…

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