On 18 April, Parliament’s Public Accounts Committee carried out a review of the recent Report on HS1 by the National Audit Office (NAO). Chair Margaret Hodge defined the purpose of the review as ‘What we are interested in getting out of today is a real understanding of the channel tunnel rail link, so that it can then be used by the Department for Transport to inform the approach to HS2.’
The main witnesses were Department of Transport (DfT) executives, led by Philip Rutnam, the new Permanent Secretary and Steve Gooding, Director General, Domestic Group DfT.
One of the lessons to be learnt from HS1 was how badly wrong the passenger forecast numbers were (they are still a third less than predicted in 1995 and 1998). Margaret Hodge was incredulous when she pointed out that the DfT are predicting and justifying their investment in HS2 by assuming a doubling of growth compared to that predicted for HS1. Her irritation was compounded by the fact that the calculations seem to change annually and that the base-line Gross Domestic Product figures were outdated. When challenged, Mr Rutnam finally admitted that the GDP used in this latest calculation was the Office of Budget Responsibility (OBR) GDP figure from March 2011, and that the GDP figure from the OBR in the autumn would be incorporated soon and a revised Benefit Cost Ratio issued this summer.
The BCR is a key measure of the viability of a project. For the current HS2 proposal, this has dropped from 2.4 in March 2010 to 1.4 in January 2012, when Justine Greening gave the green light to proceed. In April, DfT confessed to an error in their calculations and published a revised a BCR of 1.2. This meant that the BCR used by Ms Greening to justify going ahead was overstated. As the GDP number published in the autumn was lower than that announced in March, we can expect a further decline in the BCR.
It was at this point that Ms Hodge asked if the HS2 proposal had been through the gateway process in the cabinet with the Major Projects Authority and what status it has received on the traffic light system that is used. Steve Gooding (Director General, Domestic Group, DfT) reluctantly admitted that it was Amber/ Red. “Not good enough” said Ms Hodge.
Briefly, an Amber/Red score is defined as, ‘The Successful delivery of the project is in doubt, with major risks or issues apparent in a number of key areas. Urgent action is needed to ensure these are addressed, and whether resolution is feasible.’
Ms Hodge went on to berate the DfT over its failure to evaluate HS1.
While accepting that a complete evaluation would take time, she pointed out that evaluations should have been made in order to find out:
• ‘Why you got the passenger numbers wrong’
• ‘Why you had to change your target costs’
• ‘Why you could not raise the private finance’
Alison Doggett, Chairman of The Chiltern Society, said: “This PAC enquiry has flushed out some fundamental weaknesses in the HS2 business case. A key question now is: with a further reduction in BCR and an Amber/Red rating, will Ms Greening honour Philip Hammond’s response to the Transport Select Committee ‘that below 1.5 he would need to seriously review the viability’ of this monumental generational project? It is time to time to re-evaluate what sort of high-speed rail network the UK really needs and can afford.