Today, the National Audit Office has produced a report which amongst other things concludes that “HS2 is over budget and behind schedule because the Government and HS2 Ltd underestimated the complexity and risk involved.” The report also suggests that parliament was deliberately misled over the costs of HS2, and for the first time shows that the project has been officially rated as ‘unachievable’ twice.
The NAO make it clear that still at this stage that they don’t know what HS2 will end up costing and highlight a perfect piece of doublespeak that sums up HS2 perfectly, that in July last year HS2 Ltd concluded that Phase One is unaffordable, but the value for money of the programme remained compelling!
The National Audit Office report reveals that the Infrastructure and Projects Authority gave HS2 a red rating saying that successful delivery of the project was unachievable in both June and November 2019. An IPA red rating is officially defined as:
“Successful delivery of the project appears to be unachievable. There are major issues with project definition, schedule, budget, quality and/or benefits delivery, which at this stage do not appear to be manageable or resolvable. The project may need re-scoping and/or its overall viability reassessed.”
Following the red rating in June 2019, the Treasury undertook a progress review suggesting further scrutiny of risks to the programme and contingency was needed, but in November 2019 the IPA concluded that unless Phase One’s schedule and budget were reset, successful delivery of the programme would be unachievable.
The report also says that in March 2019, HS2 Ltd formally advised the Department for Transport that it would not be able to deliver Phase One of the programme on time or within available funding. Despite this, ministers were still telling Parliament that the budget for the project remained at £55.7bn as recently in September 2019. Additionally, in July 2019 MPs voted for Phase 2a of the project with a stated cost of £3.5bn, but the estimates today published by the National Audit Office now show the Department for Transport estimates the cost to be £6.5bn
Additionally, after much controversy in the past about the estimate for property costs, the report says the Phase 1 land and property acquisition budget was £3,562 million and in October 2019 HS2 Ltd has purchased 66% of the land required to build Phase One at a cost of £3,287 million, meaning only £275m would be left, or 8% of the budget to buy the remaining 34%. The NAO also say that at the time of publishing what is their fourth report, and after over a decade of planning, the total forecast cost for HS2 is not yet clear.
Stop HS2 Campaign Manager Joe Rukin said:
“It now is clear we have all lied to for years over the costs, timescales and benefits of this environmentally damaging project. We would say the scandal that is HS2 couldn’t get any worse than this, but we know it will. This national embarrassment has to be cancelled immediately, and surely the only question now is deciding which are the projects that will be built instead of this terminal white elephant.”
“This report is absolutely devastating, not only because the National Audit Office say the costs of HS2 still aren’t clear, the risks were never assessed properly, and their timelines make it absolutely clear that parliament was deliberately misled over the costs of HS2, but also because they have revealed that HS2 has been officially rated as red since last June, meaning successful delivery of the project is unachievable, but this fact was hidden from the public and parliamentarians.”
Penny Gaines, chair of Stop HS2, added:
“It is now beyond doubt that HS2 is a failed project with the sheer scale of the underestimation of the cost of HS2 and the massive delays now public. The rating from the Infrastructure and Projects Authority has now dropped to red meaning it is unachievable. We were still being told in July that the budget was £56bn by ministers who had been formally told by HS2 Ltd that the budget was unobtainable, and their estimates were increasing
“HS2 has burst through its budgets and wrecked its timescales. Whilst Government ministers were bleating about the budget being £56bn, they knew that HS2 Ltd had given up even pretending that the budget was possible. The Infrastructure and Projects Authority had already given HS2 a red rating, which was repeated in November last year. To say HS2 is behind schedule and overbudget minimises the sheer scale of the over-runs in both time and cost of HS2.
“Officials at the DfT have simply assumed that they could copy the costings from abroad, and build a different railway with different conditions on the ground, stations in cities rather than on the outskirts, and far more trains than comparable railways and expect HS2 to cost roughly the same. They got that totally wrong. Even HS2’s supporters recognise that HS2 Ltd is a failing and incompetent company.
“We call on Boris Johnson to put this project out of misery and cancel it immediately.”
Other highlights from the report include:
- In March 2019, HS2 Ltd formally advised the DfT that it would not be able to deliver Phase One of the programme on time or within available funding. Since then, HS2 Ltd has continued to develop cost and schedule estimates for the programme, which indicate that the programme will cost more than the available funding and be completed later than planned.
- The amount of contingency was not enough to address the significant increases in cost that emerged as the design became more detailed, and issues such as poor ground conditions came to light.
- On current plans Phase Two is forecast to cost more than its available funding and take longer than expected. Phases 2a and 2b are at much earlier stages of development than Phase One and their scope, costs and schedule are less certain. HS2 Ltd’s current forecast for when passenger services would run on Phase 2a is between 2030 and 2031, and for Phase 2b is between 2036 and 2040, three to seven years later than planned. The Department fro Transport estimates the cost of Phase 2a could increase to £6.5 billion (87% higher than the available funding of £3.5 billion) and Phase 2b to £41 billion (63% higher than the available funding of £25.1 billion).
- High Speed Two is an ambitious national programme, the construction of which will take decades. The DfT, HS2 Ltd and government more widely underestimated the task, leading to optimistic estimates being used to set budgets and delivery dates. In not fully and openly recognising the programme’s risks from the outset, the Department and HS2 Ltd have not adequately managed the risks to value for money. If these risks had been recognised and managed earlier, then the significant activity in a pressured environment over the past year trying to understand and contain cost increases may not have been necessary. There are lessons to be learned from the experience of High Speed Two for other major infrastructure programmes.
- At the time of publishing this fourth [NAO] report, the total forecast cost for the programme is not yet clear.
- In June 2019, the Chairperson of HS2 Ltd informed the accounting officer that there is no prospect of HS2 Ltd being able to deliver Phase One within the available funding or on time and provides the Department with a draft report from their review of the programme. The Infrastructure and Projects Authority undertakes a review and concludes that successful delivery is unachievable. HM Treasury undertakes a progress review suggesting further scrutiny of risks to the programme and contingency is needed.
- The NAO say that in July last year officials provided the accounting officer and HS2 Ltd chief executive with updated advice, which concludes that Phase One is unaffordable but somehow the value for money of the programme remained compelling.
- The Department for Transport concludes that it has sufficient evidence on the revised cost forecast and schedule developed by HS2 Ltd to conclude that Phase One is not affordable within the available funding and scope requirements and that it was no longer feasible for Phase One to open in 2026.
- In October, the HS2 Ltd board approved the revised Phase One forecast cost and schedule estimate and provides to the Department for approval. The forecast cost range of £38.2 billion to £40.4 billion is £11.1 billion to £13.3 billion more than the available funding, and the opening date of full Phase One services from Euston between 2031 and 2036 is at least five years delayed.
- The Infrastructure and Projects Authority undertook another review in November that concluded that, until Phase One’s schedule and budget are reset, successful delivery of the programme appears to be unachievable.
- In July 2019, the DfT assessed that it had sufficient evidence on the revised cost forecast and schedule developed by HS2 Ltd to conclude that Phase One was not affordable within the available funding and scope requirements and that it was no longer feasible for Phase One to open in 2026. The Department considered that work by HS2 Ltd with its contractors, and internal and external benchmarking, provided evidence that no further significant savings were likely: In particular:
- Work the Department for Transport had commissioned from consultants found that further efficiencies from the technical design of Phase One were unlikely to have a significant impact on cost.
- The Department commissioned consultants to benchmark the emerging forecast costs of Phase One against other ‘similar’ UK infrastructure projects, which concluded that HS2 Ltd’s forecast estimate at that time was within the range of similar projects, although at the higher end of the range.