Source · Select Committees · Public Accounts Committee
Recommendation 12
12
Deferred
HS2 Ltd's latest Phase 1 cost estimate significantly exceeds prior figures and funding envelope.
Conclusion
Prior to the October 2023 announcement, HS2 Ltd estimated that the total costs of Phase 1 would be £49 billion to £57 billion. The Department’s estimate was lower, at £45 billion to £54 billion but still above the funding envelope of £44.6 billion set in 2019. These estimates were all calculated 14 Qq 72–73 15 Qq 5, 37, 39 16 Qq 1, 6–7, 12 17 C&AG’s Report, Figure 8 18 Qq 6, 9, 13 19 Q 12 12 using 2019 prices.20 HS2 Ltd has continued to assess the cost of the programme and provided an even higher estimate to its Board in June 2024 of £54 billion to £66 billion, again still in 2019 prices. HS2 Ltd told us that this was based on new information and data from the supply chain. The Department reported that this estimate had been included in its six– monthly report to Parliament for the purposes of transparency. However, it was highly uncertain and subject to further assurance, and had not been approved by the HS2 Ltd Board or by the Department. Also, the estimate did not take into account work as part of resetting the programme and any private financing.21
Government Response Summary
The government agrees with the 'recommendation' and commits to finalizing a cost estimating methodology over the summer, with full implementation as part of the programme reset in 2026, following a comprehensive review by the HS2 Ltd CEO.
Government Response
Deferred
HM Government
Deferred
2.1 The government agrees with the Committee's recommendation. Target implementation date: Spring 2026 2.2 The Secretary of State has commissioned the CEO of HS2 Ltd to undertake a comprehensive review of the programme, including HS2's current cost position and the capability and culture of HS2 Ltd, and to make recommendations to inform the programme reset. 2.3 The department and HS2 Ltd have agreed the areas of cost estimation that need to be addressed to enable a robust and reliable life-cycle cost of HS2 to be set, these include, reset of project schedule and duration, consolidation of costs incurred, scope delivered, quantities remaining and an evaluation of supply chain productivity. 2.4 The department is working closely with HS2 Ltd, accompanied by NISTA and HM Treasury advice, to finalise the cost estimating methodology over the summer and to fully implement it as part of the reset of the programme in 2026. 2.5 Once this process is complete, the department will provide a further update to inform the Committee at the earliest opportunity providing additional further details on the agreed approach to cost estimation methodology.