Source · Select Committees · Public Accounts Committee
Recommendation 13
13
Deferred
HS2 cost estimates in 2019 prices are unsatisfactory, projected to reach £80 billion.
Conclusion
We expressed to the Department how unsatisfactory we found it that the cost estimates for completing the programme are still in 2019 prices. The Department agreed, telling us that it expects that any funding agreed at the spending review will be in current prices. It also explained that this will produce an increase in the estimated total programme cost in cash terms given that the adjustment will cover a period of time that has seen very high inflation, particularly in the construction sector.22 HS2 Ltd, in January 2024 evidence to the Transport Committee, estimated that bringing its estimate in 2019 prices up to 2023–24 prices would add a further £8 billion to £10 billion to the cost of Phase 1.23 With HS2 Ltd’s latest estimate for completing Phase 1 now £54 billion to £66 billion even in 2019 prices, the total programme costs might therefore be close to £80 billion in current prices.24
Government Response Summary
The government agrees with the 'recommendation' and has commissioned a comprehensive review of the programme and its cost position, aiming to inform a programme reset in 2026. They are finalizing a cost estimating methodology, with full implementation planned as part of this reset.
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.