Recommendations & Conclusions
22 items
2
Recommendation
Tenth Report - HS2 and Euston
Accepted
Costs have continued to escalate and the Department and HS2 Ltd do not know how much the programme will now cost. This Committee has repeatedly raised concerns about the Department’s and HS2 Ltd’s management of costs. But, despite our warnings and recommendations, costs have continued to rise. The Department’s estimate …
Government response. The government agrees and states that recruitment for key board and executive roles at HS2 Ltd commenced in early 2024. It reiterates commitments to bear down on costs, embed cost control, reinforce leadership, and strengthen governance with a plan developed …
HM Treasury
3
Recommendation
Tenth Report - HS2 and Euston
Accepted
The Department and HS2 Ltd do not yet know what the impact of the decision to cancel Phase 2 will be on the HS2 programme and how HS2 Ltd will need to adapt so it can be successfully delivered. HS2 Ltd and the Department need to work through in detail …
Government response. The government agrees that the HS2 Ltd Executive Chair is implementing a comprehensive change programme to adapt the organisation and ensure the right skills and capability are in place for the revised programme. The department will provide an update on …
HM Treasury
5
Conclusion
Tenth Report - HS2 and Euston
Accepted
The Department and HS2 Ltd do not yet know when they will dispose of land and property no longer needed and how they will balance different interests. The Department has spent over £600 million on land and property (in 2019 prices) along the section of the route that has now …
Government response. The government disagrees with reporting its land and property disposal plan alongside the Treasury Minute response, stating it is not yet ready. However, it commits to sharing the plan by summer 2024, which will include balancing taxpayer value for money, …
HM Treasury
6
Conclusion
Tenth Report - HS2 and Euston
Accepted
The Department has yet to finalise what the redirected £36 billion (in 2023 prices) originally intended for the cancelled HS2 phases will fund or decide on when these projects can be expected to start. The Department has redirected the £36 billion that would have been spent on HS2 Phases 2a, …
Government response. The government agrees and states the recommendation is implemented. It will report progress against individual Network North schemes as they mature, covering funding, location, and timescales, ensuring all schemes undergo business case development and formal governance for value for money.
HM Treasury
1
Conclusion
Tenth Report - HS2 and Euston
Accepted
This Committee has reported regularly on progress with the High Speed 2 programme over the last decade. Our first report was in 2013 and even at that early stage we were warning about an emerging pattern of costs increasing, benefits decreasing, and the apparent lack of the necessary commercial expertise …
Government response. The government states it will incorporate the benefits management and evaluation strategy into the programme’s updated business case. It also commits to continuing public reporting on the realisation of HS2 benefits through its six-monthly reports to Parliament.
HM Treasury
7
Conclusion
Tenth Report - HS2 and Euston
Accepted
The inclusion of an allowance for remediation costs if Phase 1 were to be discontinued, and the exclusion of sunk costs, had a significant impact on the calculation of a positive BCR in the range 1.1 to 1.8, and thus on the AO Assessment. In addition, the figures quoted for …
Government response. The government agrees to address the committee's findings on the Benefit-Cost Ratio by preparing to publish an updated programme business case in 2024, which will set out revised benefits and provide updated benefit-cost ratios for HS2 Phase 1.
HM Treasury
8
Conclusion
Tenth Report - HS2 and Euston
Accepted
The Department told us that a full, revised business case will need to be produced for Phase 1, taking account of what it now knows about costs, the changes to scope and what that means for the overall benefits.15 The Department said that key benefits remain – such as increased …
Government response. The government confirms it is preparing to publish an updated programme business case for HS2 Phase 1 in 2024, which will detail revised benefits and provide updated benefit-cost ratios, aligning with previous statements to the committee.
HM Treasury
9
Conclusion
Tenth Report - HS2 and Euston
Accepted
In our previous reports we have regularly raised concerns about escalating costs and cost forecasts for the HS2 programme. For example, in our May 2020 report we commented that “The High Speed Two programme has gone badly off-course and is now estimated to cost up to £88 billion, significantly more …
Government response. The government agrees with the implied concern regarding historical cost escalation for HS2, committing to bearing down on Phase 1 costs, strengthening HS2 Ltd's leadership through recruitment, and reinforcing governance, with updates to be provided in six-monthly reports.
HM Treasury
10
Conclusion
Tenth Report - HS2 and Euston
Accepted
HS2 Ltd’s most recent estimate for the cost of Phase 1 is that it will be in the range £49 billion to £57 billion (2019 prices). It cites a range of issues as the cause of increases, including “design performance, delivery productivity, consenting delays, and a difficult operating environment with …
Government response. The government agrees with the implied concern regarding HS2 costs, committing to bear down on Phase 1 costs, strengthen HS2 Ltd's leadership through new recruitment, and reinforce governance with updates to be provided in six-monthly reports.
HM Treasury
11
Conclusion
Tenth Report - HS2 and Euston
Accepted
HS2 Ltd told us that its cost estimate had been the result of much detailed analysis and many meetings, all done transparently with the Department. It told us that while Ministers had committed to an opening date between 2029 and 2033, HS2 Ltd was well within that range at the …
Government response. The government agrees with the committee's observation and is taking specific steps to strengthen HS2 Ltd's leadership, including recruiting new Non-Executive Directors and a CEO, and implementing a plan to bear down on costs, reinforce cost control culture, and strengthen …
HM Treasury
12
Conclusion
Tenth Report - HS2 and Euston
Accepted
To explain cost increases since 2020, the Department pointed to several factors including: Covid, inflation, Ukraine, the supply chain and the scale of the cost of dealing with ‘planning and consenting’. It said that poor cost information and cost reporting from the supply chain had been a significant contributing factor, …
Government response. The government agrees with the committee's observation and is taking specific steps to strengthen HS2 Ltd's leadership, including recruiting new Non-Executive Directors and a CEO, and implementing a plan to bear down on costs, reinforce cost control culture, and strengthen …
HM Treasury
13
Conclusion
Tenth Report - HS2 and Euston
Accepted
HS2 Ltd told us more directly that 89% of the difference between the Departments’ 2020 estimate of £44.6 billion and now was about how the Main Works Civils contracts were manifesting. It said that the Government’s decision to let cost-plus contracts, with few incentives and penalties, had left HS2 Ltd …
Government response. The government agrees with the committee's observation and is taking specific steps to strengthen HS2 Ltd's leadership, including recruiting new Non-Executive Directors and a CEO, and implementing a plan to bear down on costs, reinforce cost control culture, and strengthen …
HM Treasury
14
Conclusion
Tenth Report - HS2 and Euston
Accepted
In its October 2023 Command Paper on Network North and its new plans for completion of Phase 1, the Department stated that “We need to make changes quickly and decisively so the remainder of HS2 is delivered as cost effectively as possible. That means: a) Bearing down on the costs …
Government response. The government agrees with the committee's observation by reiterating its commitments from the Network North command paper to bear down on costs, embed cost control, reinforce leadership in HS2 Ltd, and strengthen governance, while detailing steps like recruiting new Non-Executive …
HM Treasury
15
Conclusion
Tenth Report - HS2 and Euston
Accepted
On recent development in governance in HS2 Ltd, the company told us it had streamlined executive governance to focus on costs and deliverables, and improved management information significantly, and that it had also recruited two further finance directors and established a new sub-committee for finance and performance. HS2 Ltd said …
Government response. The government agrees with the committee's observation, confirming that HS2 Ltd's leadership and capability are critical and detailing ongoing recruitment efforts for new Non-Executive Directors and a CEO to reinforce cost control and governance.
HM Treasury
17
Conclusion
Tenth Report - HS2 and Euston
Accepted
The cancellation of other HS2 phases will inevitably result in some design changes to Phase 1. HS2 Ltd told us that the top of its list is the implications for how HS2 trains will join the West Coast Main Line. HS2 trains would have joined the line north of Manchester …
Government response. The government acknowledges the implications of HS2 phase cancellations, stating it is progressing amendments to Phase 1 and working through options to enhance the Handsacre junction. It is also undertaking a review of HS2 infrastructure and managing the closedown of …
HM Treasury
18
Conclusion
Tenth Report - HS2 and Euston
Accepted
We asked the Department about the impact of cancelling HS2 Phases 2 on other projects that would have had existing business cases dependent in part on Phases 2a or 2b. The Department highlighted the interdependency between 2b and Northern Powerhouse Rail and said that it would be some time before …
Government response. The government acknowledges the interdependencies and the need for business cases, detailing ongoing work to amend safeguarding directions for former HS2 phases to allow for Northern Powerhouse Rail, with amendments expected by summer 2024. It also describes plans for orderly …
HM Treasury
19
Conclusion
Tenth Report - HS2 and Euston
Accepted
We also asked whether any contracts would need to be cancelled in respect of Phase 2 and payments made to companies as a result. HS2 Ltd told us that for Phases 2a and 2b the number of contracts let was very small, but it was exposed to some legal challenge, …
Government response. The government acknowledges the issues with cancelled contracts and legal exposure by detailing its ongoing work to bring HS2 Phase 2 work to an orderly stop, ensuring value for money. HS2 Ltd is developing detailed plans for closedown activities, including …
HM Treasury
21
Conclusion
Tenth Report - HS2 and Euston
Accepted
In July 2023 we reported on how the Department’s previous plans for the HS2 station at Euston had proved to be unrealistic and unaffordable.42 Alongside the October 2023 cancellation of HS2 phases 2, the Department acknowledged that previous plans for the station had been unaffordable, and announced that the station …
Government response. The government agrees with the committee's observation, confirming its ambition to deliver HS2 to Euston and create a transformed Euston Quarter by using alternative funding and maximizing private investment, with work currently underway to develop funding packages and financing mechanisms …
HM Treasury
22
Conclusion
Tenth Report - HS2 and Euston
Accepted
The Department confirmed to us that “At the moment we are expecting the private sector to fund the station and all the development. The benefit for developers comes from the commercial housing development.”44 It confirmed that this included looking for private funding to cover the whole cost of running from …
Government response. The government agrees with the committee's observation, confirming its ambition to deliver HS2 to Euston and create a transformed Euston Quarter by using alternative funding and maximizing private investment, with work currently underway to develop funding packages and financing mechanisms …
HM Treasury
23
Conclusion
Tenth Report - HS2 and Euston
Accepted
The Department confirmed it remains the Government’s ambition that Euston be the London terminus for HS2.48 But it confirmed it was still expecting trains to stop at Old Oak Common for a period of time before Euston was developed, because Euston would not be up and running in the same …
Government response. The government agrees with the committee's observation, reaffirming its ambition to deliver HS2 to Euston as the London terminus and committing to developing funding models and financing mechanisms to enable this, with ongoing preparatory works for tunnelling.
HM Treasury
24
Conclusion
Tenth Report - HS2 and Euston
Accepted
We raised concerns about the risk of incurring significant additional cost later if contracts for the tunnel between Old Oak Common and Euston were not let in the coming months. The Department said there were significant phasing issues of this nature 40 Q 129 41 Q 132 42 Committee of …
Government response. The government agrees with the committee's concerns, reiterating its ambition to deliver HS2 to Euston and confirming that work is underway to develop funding packages and financing mechanisms for the Euston Quarter, including options to pay for the Old Oak …
HM Treasury
26
Conclusion
Tenth Report - HS2 and Euston
Accepted
HS2 Ltd told us it had spent £3.6 billion on land and property for Phase 1, and believed it had acquired more than 95% of the land it would require for Phase 1. It had spent £634 million on acquiring land and property for the HS2 phases that have now …
Government response. The government states it is developing a programme for selling land no longer required for Phase 2 and will share the plan by summer 2024, committing to ensuring value for money and considering affected parties' interests.
HM Treasury