Recommendation 17

We have examined numerous projects over the years where cost estimates have increased significantly over the life of the project. Optimism bias in government is a significant factor in nearly every project we look at. Another, related, factor is a tendency in government to approve projects before they have been developed sufficiently for there to be confidence in the accuracy of the cost estimate. High Speed 2 has been a case in point. In our February 2024 report on the High Speed 2 programme, we stated that HS2 Ltd had estimated that the cost to complete Phase 1 between London and Birmingham will be £49 billion to £57 billion (2019 prices) and could rise by a further £8 billion to £10 billion due to inflation since 2019. This is substantially higher that the budget of £44.9 billion that was set in 2020. The IPA told us, and HM Treasury agreed, that departments should be using ranges of potential costs until a project is sufficiently mature to finalise a funding package. But, although HS2 Ltd is now using ranges of potential costs, the IPA noted that plans for High Speed 2 had only reached maturity level of 10% when the final business case—the point at which projects are approved to begin construction—was approved.18