Recommendations & Conclusions
7 items
4
Conclusion
Tenth Report - HS2 and Euston
Acknowledged
Developing Euston is dependent on attracting private finance to pay for it, but the Department does not yet have any plan for how to do so and has to make investment decisions soon to protect long-term value for money. Despite the intention to scale back the station itself compared with …
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Developing Euston is dependent on attracting private finance to pay for it, but the Department does not yet have any plan for how to do so and has to make investment decisions soon to protect long-term value for money. Despite the intention to scale back the station itself compared with previous plans, redevelopment work at Euston remains a huge and complex project. Government has redirected £6.5 billion (in 2023 prices) of expenditure away from Euston, and the Department is now looking for private funding to cover the costs of the re-scoped Euston station and the over-site development. It is also considering ways the private sector might contribute towards the cost of tunnelling from Old Oak Common to Euston. The Department has previously had more modest proposals for private sector investment HS2 and Euston 7 at Euston rejected by HM Treasury due to the risks involved. The Department told us there is ‘in principle’ interest from the private sector, but that it needs to decide on the financing model. The Department does not yet have a plausible or detailed proposition it could take to the market and it is likely to take significant time to develop one. There are urgent decisions the Department must make on funding the tunnelling from Old Oak Common to Euston or it will incur much greater costs from stopping and restarting work. Recommendation 4: The Department should: a) Develop plans for a range of private investment scenarios, including different levels of public finance, as part of its consideration of how to progress with the station at Euston; and b) Decide soon how to proceed with the tunnelling from Old Oak Common to Euston to best protect value for the taxpayer.
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Government response AI summary
The government agrees and is continuing to define and develop a range of development models and financing mechanisms for Euston, including options for funding the tunnelling from Old Oak Common. Preparatory works are ongoing, but no specific plans or decisions are detailed yet.
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HM Treasury
16
Conclusion
Tenth Report - HS2 and Euston
Acknowledged
The Department’s November 2023 update to Parliament stated that “No decisions have been made on the train service that will run when HS2 is operational.”33 The Department told us it had developed “an outline train specification that sets out an assumed service”, but before bringing it into service there would …
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The Department’s November 2023 update to Parliament stated that “No decisions have been made on the train service that will run when HS2 is operational.”33 The Department told us it had developed “an outline train specification that sets out an assumed service”, but before bringing it into service there would need to be proper consultation nearer the time. Final decisions would need to take account of the economic conditions and the demand at the time. It explained that some assumptions are more certain, for example between Birmingham and London, but it needed to work out how to optimise services beyond that, across HS2 and Network Rail, to optimise the whole corridor. The Department said it would continue to look at optimising the benefits of Phase 1 and what the optimal train service to run is, but final decisions would be made much closer to opening.34
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Government response AI summary
The Department restates its position that no decisions have been made on the train service that will run when HS2 is operational and that final decisions will take account of economic conditions and demand at the time.
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HM Treasury
20
Conclusion
Tenth Report - HS2 and Euston
Acknowledged
Notwithstanding the Board and Director level changes referenced above, HS2 Ltd also acknowledged that it needed to think about its capacity and capability throughout to deliver the task ahead. It told us it was going through that process and highlighted three areas it needed to address: more people to focus …
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Notwithstanding the Board and Director level changes referenced above, HS2 Ltd also acknowledged that it needed to think about its capacity and capability throughout to deliver the task ahead. It told us it was going through that process and highlighted three areas it needed to address: more people to focus on railway systems; more skills to bear 33 HS2 6-monthly report to Parliament: November 2023 34 Qq 64–66 35 Q 61; Department for Transport: NETWORK NORTH: TRANSFORMING BRITISH TRANSPORT, CP 946, October 2023 (page 18) 36 Qq 70, 71 37 Q 61 38 Qq 114, 115 39 Q 119 HS2 and Euston 15 down on finances, getting the right information from the supply chain and whether it was on time, on schedule, and meeting quality standards; and more skills on managing and mitigating financial risk.40 On recruitment and retention, HS2 Ltd told us that there was a significant attraction for people to work on HS2”, but that it was a competitive recruitment market, particularly for good contract managers. Although HS2 has some flexibility in what pay it can offer, it told us that it was exposed to an overheated market and people would therefore leave, especially when being offered double or even triple their current salaries.41 Euston
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Government response AI summary
The government agrees with the committee's observation that HS2 Ltd needs to address its capacity and capability, stating it is supporting HS2 Ltd's comprehensive change programme to ensure the right skills are in place, with an update expected by Spring 2024.
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HM Treasury
25
Conclusion
Tenth Report - HS2 and Euston
Acknowledged
We raised the issue that private sector involvement and finding would be dependent on there being greater certainty on dealing with issues in and around Euston. The state of the general property market in the area and how much infrastructure the public sector provides will be critical factors in how …
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We raised the issue that private sector involvement and finding would be dependent on there being greater certainty on dealing with issues in and around Euston. The state of the general property market in the area and how much infrastructure the public sector provides will be critical factors in how much the private sector will pay for the whole site. The Department said it had started to discuss with Treasury Colleagues, the IPA and DLUHC how to start turning this into a proposition that would allow it to have a deeper engagement with the market in order to ensure and test appetite. It said that both the Secretary of State and the Chancellor have had conversations with developers who have said that in principle they can see lots of attractions.52 But the Department recognised that there was a lot of work to do if the ambition of private sector funding is to be realised, noting that “We need to have a coherent and plausible position to interface sensibly with the private sector.”53 Land and property disposal
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Government response AI summary
The government agrees with the committee's observation on the need for certainty regarding Euston to attract private sector involvement, stating that work is underway to develop funding packages and financing mechanisms to maximize private investment for the Euston Quarter, with a target for Summer 2024.
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HM Treasury
30
Conclusion
Tenth Report - HS2 and Euston
Acknowledged
The Department has said that the decision not to proceed with HS2 phases 2a, 2b and East will unlock £36 billion (2023 prices) and that “every penny of the £19.8 billion committed to the Northern leg of HS2 will be reinvested in the North; every penny of the £9.6 billion …
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The Department has said that the decision not to proceed with HS2 phases 2a, 2b and East will unlock £36 billion (2023 prices) and that “every penny of the £19.8 billion committed to the Northern leg of HS2 will be reinvested in the North; every penny of the £9.6 billion committed to the Midlands leg will be reinvested in the Midlands; and the full £6.5 billion saved through our new arrangements for Euston will be spread across every other region in the country. This will be money additional to the local transport, road and rail budgets allocated at the last Spending Review and additional to what those organisations were expecting for the next decade.”60 The Department told us these figures were assumed savings from not continuing with the HS2 phases, with the 2019 prices previously used inflated to 2023 prices.61
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Government response AI summary
The government agrees with the committee's observation that the Network North funds will be reinvested. They state that progress will be reported for individual schemes as they mature, covering funding, location, and timescales, and that all schemes will undergo business case approval.
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HM Treasury
31
Conclusion
Tenth Report - HS2 and Euston
Acknowledged
In its Network North paper the Department described a number of road and rail projects to be included in what will be funded from the £36 billion, subject to approval of business cases.62 The Department told us that these “alternative investments” ranged from specific projects like Northern Powerhouse Rail to …
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In its Network North paper the Department described a number of road and rail projects to be included in what will be funded from the £36 billion, subject to approval of business cases.62 The Department told us that these “alternative investments” ranged from specific projects like Northern Powerhouse Rail to uplifts in city regional sustainable transport funding and local integrated transport funding, and that it would assess projects “in the normal way rather than as a bundle.63 It explained that “about half” of the £36 billion would, in effect, be given to other parties through devolved funding arrangements, with the principle being that it should be for mayors, local authorities and others to decide what the key priorities are in their areas.64 The Department said that there are other specific projects, some of which are well advanced and some of which are going to take a very significant amount of further work.65 The Department told us that the money would be spent broadly to the same timescales as it would have been under HS2, up to 2041, but with the potential of bringing benefits earlier.66
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Government response AI summary
The government agrees with the committee's description of the Network North projects and funding distribution. They reiterate that progress will be reported on individual schemes as they mature and that all will undergo business case approval and formal governance.
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HM Treasury
32
Conclusion
Tenth Report - HS2 and Euston
Acknowledged
The Department told us it had already announced separately how some of this funding will be redirected.67 For example, on 23 October it announced a £150 million reallocation of HS2 funding to support bus services.68 It also announced additional funds for mayoral combined authorities to be provided through City Region …
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The Department told us it had already announced separately how some of this funding will be redirected.67 For example, on 23 October it announced a £150 million reallocation of HS2 funding to support bus services.68 It also announced additional funds for mayoral combined authorities to be provided through City Region Sustainable Transport Settlements.69 In written evidence provided after the session the Department added that it had made a commitment to increase the government contribution to ‘most existing Major Road Network and Large Local Major road schemes’ from 85% to 100%, subject to business case approval.70 We asked when there would be a profiled list, with costs, of what is going to be delivered with the £36 billion. The Department said it would be wanting that internally and would talk to Ministers about how to provide transparency by making some of it public.71 In written evidence provided after the session, the Department added 60 Department for Transport: NETWORK NORTH: TRANSFORMING BRITISH TRANSPORT, CP 946, October 2023 (page 23) 61 Q 141 62 Department for Transport: NETWORK NORTH: TRANSFORMING BRITISH TRANSPORT, CP 946, October 2023 63 Qq 112, 113 64 Q 145 65 Q 145 66 Qq 114, 142 67 Q 143 68 Major £150 million funding boost for local bus services as fare cap set to be extended – GOV.UK (www.gov.uk) 69 Network North CRSTS2 indicative allocations, 4 October 2023 - GOV.UK (www.gov.uk); q143 70 Correspondence from the Department for Transport to the Public Accounts Committee, dated 8 December 2023 71 Q 143 HS2 and Euston 19 that it was working closely with Number 10 and the Cabinet Office to deliver the Network North programme effectively and to share public updates on progress against projects and schemes included in the announcement regularly.72 72 Correspondence from the Department for Transport to Public Accounts Committee, dated 8 December 2023 Q 143 20 HS2 and Euston
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Government response AI summary
The government agrees with the committee's points on funding redirection and previous announcements. They confirm that progress will be reported against individual Network North schemes as they mature, covering funding, location, and timescales, with all schemes subject to business case approval and formal governance.
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HM Treasury