Source · Select Committees · Public Accounts Committee
Recommendation 5
5
Rejected
Provide clear explanations of HS2 Euston cost estimate maturity and risks in six-monthly updates
Conclusion
The Department’s reports to Parliament on the HS2 Programme did not reflect the significant level of uncertainty in its estimated cost of Euston station. From October 2020 through to its six-monthly update in October 2022, the Department HS2 Euston 7 has reported to Parliament that the cost pressure at Euston was around £400 million, and the focus of its accompanying narrative was that work was ongoing to reduce this. However, this reported cost pressure is less than one-fifth of the £2.2 billion amount by which HS2 Ltd’s latest cost estimate exceeds the original £2.6 billion budget for the station. The Department claims that until February 2023, £400 million was the only known and validated cost pressure, and it had hoped that the move to a 10-platform single-stage build would enable it to manage that pressure. HS2 Ltd says that it was aiming more for a cost of £3.3 billion, which was its estimate in April 2021 (£700 million above budget), but that it was only when it got the construction partner’s assessment at the end of 2022 that it had a clear understanding of the construction costs. This was as part of the two-stage procurement process that HS2 Ltd is employing on the programme. Previous updates to Parliament now appear to have been unrealistic in respect of cost pressures at Euston, with the risks that the costs of construction could be significantly higher not having been disclosed in the Department’s updates. Recommendation 5a: The Department should provide, as part of its six-monthly updates to Parliament on the HS2 programme, clear explanations of the maturity of its cost estimates and the risks that could result in material changes to provide greater transparency. (b) We note that our sister committee the Transport Select Committee asked questions at their hearing on the 21 June 2023 (Questions 163 to 167, Oral Evidence) in relation to the six monthly reports to Parliament. They queried:
Government Response Summary
The government disagreed with the recommendation to include clear explanations of cost estimate maturity and risks in six-monthly updates, stating that while committed to transparency, Benefit-Cost Ratios will not be included in these reports.
Government Response
Rejected
HM Government
Rejected
The government disagrees with the Committee’s recommendation. External factors affected the department’s original plans for an earlier publication of the HS2 Parliamentary Report, which was further delayed as it has taken time to work through the implications of the 2023 Spring Budget. The department remains committed to transparency and providing a timely and accurate update on HS2 in the next Parliamentary Report. Details regarding the cost information reported in the Parliamentary Report provided in October 2022 are outlined in paragraph 5.2 above. Reporting progress on the programme in 2019 values does not reflect the significant inflation that has occurred since and the department intend to work with HM Treasury to update the price base, subject to agreement between both parties. The department provides Benefit-Cost Ratio (BCRs)s within business cases. This will not be included within the six-monthly reports to Parliament. The department expects to publish the next report no later than 6 months after the previous one.