From Hansard:
Treasury Questions: Infrastructure 10th December 2013
Helen Jones (Warrington North) (Lab): Can the Chief Secretary confirm that the cost of High Speed 2 has increased by £10 billion under this Government, and can he tell the House when he will get a grip on the costs of this huge infrastructure project?
Danny Alexander: I do not recognise those figures. Back in the spending round in June, I set a cap on the costs of HS2 at £42.6 billion. We intend that it will be delivered substantially under that budget. The question for Labour Members is whether they support this project or not. Frankly, given the enormous benefits it will provide for cities across the north, Labour Members should support the scheme, not constantly undermine it.
Transport Questions: High Speed 2 Railway Line 10th December 2013
Mrs Gillan: To ask the Secretary of State for Transport with reference to his Department’s Estimate of Expense of High Speed Rail (London to West Midlands) dated 15 November 2013, if he will update that document to adjust the figures to December 2013 prices. [178665]
Mr Goodwill: The Estimate of Expense is presented in 2011 prices. This price base has been used in presenting all cost information on the project to date to enable a clear comparison of cost as the project progresses. I do not therefore intend to update the Estimate of Expense to adjust the figures to December 2013 prices.
Frightening, eros? Yes it could be…But think of some numbers- say 17 bn.or 32-33bn or if you like 42.6, why not round it up to 50.( and some would like to double that, so as to be really scary!)
Actually, as with other things, such as government computer systems, aircraft carriers, N.H.S. reorganisations, Welfare and Social Security reforms military aircraft and privatised prison reform or hospital building to quote just a few examples, the projected costs and benefits seem to have been hard to quantify, especially if they are to be developed over a long period . Furthermore, when a project is under way and the contracts let, if the government decides to change some aspect in the light of changing circumstances, then further costs arise.
With this in mind, perhaps the 10 bn. rise in the projected cost of HS2 can be understood, and so can the claim that the project could be delivered within the original budget!
This is because that budget, in 2011, included a sum to take account of inflation over the years of development and building. Also contingency provision was included for the unexpected.
Howevert earlier this year the Treasury, always on the defensive over large capital projects, decided to require that a revised budget should include an additional 10bn. as a further “contingency cushion” as one might describe it.
Were they playing safe ? Who can judge the motives of senior Treasury officials ? Were they warding off future potential criticism for allowing a potential overspend or is it just possible that having been unable to prevent Crossrail, this was a ploy to push Hs2 into the realms of the unaffordable and thus to stifle it , a tactic which has been suggested elsewhere of course.
Whatever the reason, the contingency element now amounts to at least a quarter of the budget, possibly two fifths… and the Secretary of State still maintains that the railway- that is both phases- can be built for the original figure- or even less!
If the timescale could be reduced, as has been suggested recently, then that would improve the chances of remaining within budget. We know that delay- even and especially when caused by attempts to push an expense on to another later financial year , doesn’t save money . Rather, in the long run it costs more.
Of course, all this has been known for some months, ever since the Treasury announced the need for that extra 10bn. “buffer”. I am surprised that these points don’t seem to have been understood- and also surprised that Mr. Alexander , as reported here, was not more specific in his reply.
The point about 2011 prices is important. It might be consistent but it is out of date. We need to added 7 % to the price or 10.5 % once we get into the New Year to give a fair reflection of what HS2 will cost AT CURRENT PRICE PRESENT VALUE.
So £ 42.6 billion would really equate to £ 47.1 billion.
Even £ 28 billion ( ie with no contingency at all ) would be £ 30.9 billion.
In any case these cost estimates almost certainly do not reflect the full cost of linking in with the existing network and definitely do not reflect the full environmental cost or the cost of full and fair compensation.
It is truly frightening when Danny Alexander can’t take about 33 from 42.6 and come up with anything that isn’t virtually 10.
What chance Government ever having any idea of the cost of HS2?