Recommendation 16

The Department is having to manage significant inflationary cost pressures across its spending on major infrastructure projects, particularly from higher costs of construction materials.37 For example when we examined progress on the HS2 programme in May 2022, HS2 Ltd told us that it was seeing ‘30% to 40% swings in the cost of raw material’.38 In the 2022 Autumn Statement, HM Treasury set out that there would be no increase to departments’ cash settlements for the current Spending Review period to 2024–25 and so departments were expected to absorb the higher costs from inflation within existing cash budgets.39 As a result, the Department announced in March 2023 its decisions to pause new construction work at Euston and on Phase 2a (between Birmingham and Crewe) for the next two years, along with some of its road-building programme, to stay within its cash budgets.40