Source · Select Committees · Public Accounts Committee
Recommendation 18
18
Accepted
Unclear purpose and drawdown mechanisms for HS2 Phase One's £4.3 billion contingency fund.
Recommendation
One potential source of additional funding to help manage higher costs from inflation and also higher costs at Euston is the government-held £4.3 billion contingency. This was set by the Department in 2020 as part of the £44.6 billion budget for the whole of Phase One.42 The Department told us that it had no expectation on what this contingency would have been needed for when it was established. However, it is also unclear on what it could be used for, with the Department acknowledging that it had ‘never reached any formal view or agreement on what basis the contingency would be drawn down on’.43 Reporting to Parliament
Government Response Summary
The government accepts the recommendation to clarify contingency use, outlining existing principles for accessing the £4.3 billion government-held contingency via the Development Agreement, and commits to providing a six-month update to the Committee.
Government Response
Accepted
HM Government
Accepted
4.6 The government agrees with the Committee’s recommendation. Target implementation date: January 2024 4.7 The Development Agreement established between the department and HS2 Ltd outlines the principles for accessing the government-held contingency on HS2. Before accessing government-held contingency, HS2 Ltd must consider the use of its existing funds, including making use of its flexibility rights and delegated contingency. The exception is any Secretary of State Retained Risk events, which results in a material and adverse impacts on HS2 Ltd.’s ability to deliver the programme, that cannot reasonably be mitigated by HS2 Ltd. These include the COVID-19 pandemic and any applicable changes to legislation, such as relevant tax reforms. Provision of government-held contingency in these scenarios remains subject to appropriate scrutiny and collective agreement by the department and HM Treasury. The department will provide an update to the Committee in six months.