From the Archives: Hammond HS2 “significantly below” £33bn

This was originally published in June 2011, called Hammond questions his own HS2 cost figures. Since then the cost of the track has gone up to £43bn, and the trains to £7.5 bn.

Philip Hammond has spotted that the cost of HS2 concerns people. Surveys like this, a Yougov poll from last week, clearly show that many people don’t think spending £30 billion or more on a railway that links just four cities is a worthwhile investment.

Philip Hammond has been using the figure of £33 billion since early February: in a letter sent to all MPs which he signed he said:

“Phase I and II together, including the network from London to Manchester and Leeds is estimated at around £33 billion. These figures are calculated factoring in construction risk and optimism bias in accordance with Treasury methodology.”

£33 billion should – as the Secretary of State for Transport quotes it to MPs – should be a reliable indicator of the expected costs (in 2009 figures).

But in an interview (free subscription required) with the Financial Times on Friday, Philip Hammond appears to be distancing himself from the costs of the proposed railway.

‘A survey on behalf of the TaxPayersAlliance by YouGov on Saturday suggests that 48 per cent of people want to scrap the scheme – against 34 per cent who disagree – in order to “save £30bn”.

‘But Mr Hammond sought to undermine that argument by saying the scheme’s costs would be “significantly below” the numbers being discussed at present.

‘He went on: “The figure of £33bn … assumes that we build the stations ourselves, build the trains, build the track, and then, once operating, we keep ownership of it. That isn’t going to happen.”’

However, even in his comments to the Financial Times, he is being misleading.

The HS2 Ltd Consultation document clearly states on p53

2.60 The cost of constructing a Y-shaped network linking London, Birmingham, Manchester and Leeds, as well as the Channel Tunnel and Heathrow, is estimated to be £32 billion (in 2009 prices). This includes allowances for risk and optimism bias of more than 60 per cent. In addition, there would also be capital costs for rolling stock procurement and replacement of £5.3 billion and annual operating and maintenance costs of around £1.1 billion (again in 2009 prices).

So as well as £30+ billion for the tracks, there has always needed to be more money spent on the trains and the operating costs.

So, to summarise:

  • HS2 Ltd used Treasury guidance to come up with the capital cost of building HS2, which in 2009 figures is between £32 billion and £33 billion.  Philip Hammond signs a letter, sent to all MPs saying HS2 will cost £33 billion.
  • Philip Hammond signed the foreword of the main HS2 consultation document, implying that he agrees with the content of the documents.
  • The public looks at the figures and says “it’s not worth it, is it?”
  • And now Philip Hammond tries to backpaddle away from the costs of HS2.

DfT Hammond's letter to MP's re Stop HS2 - page 1

Philip Hammond's letter to MP's about Stop HS2, p2

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5 comments to “From the Archives: Hammond HS2 “significantly below” £33bn”
  1. Mr Putin is right when he says we are a very small country and trying to keep up with these large country’s is going to keep our credit card well and truly in the red for next few hundred years .We should start by scraping hs2 after all who but the top three in govenment wants this vanerty project at whatever cost .We should get our bank balance back in check and stop trying to rule the world and taking us to war every time we have a new govenment they should listen to there people a lot more to what they need at home

  2. The house valued at o and the govenment brought for 245k will that set a president for any home owners who can get a agent to value a home at less than the value due to hs2

  3. It’s about time the detailed budget was in the public domain as they seem to be implying that they could start to build it and stop if they run out of funds!

    • One of the many things that HS2 Ltd has failed to do is look at what would happen if only one of the two links north of Birmingham were built. Obviously Phase 1 (London to Birmingham) has to be done in one go, but there is no reason why the Birmingham-Manchester and Birmingham-Leeds sections need to be done at the same time. Given the likely pressures on government spending and HS2 being such a costly project, it could be more practical to build one section and then the other. As part of this HS2 Ltd would need to look into the benefits of each option. In fact this should be done anyway, as it may be that only one of the northern branches is of benefit and the other could be of little use. Also, if you only build one of the northern branches it might be possible to extend the route into Scotland.

      Obviously this might court controvesy for HS2 and lead to infighting between supporters in the northwest and the northeast (and bring in Scotland) over who should get priority. The work of HS2 Ltd is always directed at maximising public support rather than providing reliable information so this would not be something they would consider worthwhile.

  4. The whole debacle is so unintelligent , there will be a great deal of egg on many faces before it finally disappears off The Agenda. It needs to go soon. The mental anxiety being suffered by the people along the route has not yet been fully appreciated. This is no small concern.
    So many will suffer one way or another for the sake of less than one per cent of the population who will be able to use it.

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