Recommendation 2

Costs have continued to escalate and the Department and HS2 Ltd do not know how much the programme will now cost. This Committee has repeatedly raised concerns about the Department’s and HS2 Ltd’s management of costs. But, despite our warnings and recommendations, costs have continued to rise. The Department’s estimate of how much it will cost to complete Phase 1 is now £45 billion to £54 billion (in 2019 prices), above a budget of £44.6 billion that had been reset only three years previously in 2020. HS2 Ltd is estimating an even higher range, of from £49 billion to £57 billion (also in 2019 prices). HS2 Ltd estimates that inflation since 2019 will add a further £8 billion to £10 billion to the cost. HS2 Ltd has not been able to constrain costs in its main works civils contracts, despite this being an area we flagged for attention in spring 2020. In our view there has been insufficient senior level focus on cost control before; but HS2 Ltd says it is now implementing changes to increase its focus on cost control, for example through new senior roles and better management information. The Department has also set out its intention to bear down on the costs of Phase 1, help HS2 Ltd to change its culture on cost control, and strengthen its own governance and control of the programme with increased oversight and reduced delegation. 6 HS2 and Euston Recommendation 2: The Department and HS2 Ltd should set out in its next six- monthly update: • Progress in recruitment of Executive and Non-Executive Board roles at HS2 Ltd. • How they are going to ensure that effective cost controls, oversight, transparency, design, and contracting are put in place so that cost overruns and delays which have been a constant problem throughout the whole HS2 project will now be brought under acceptable and properly accountable control. • Progress in reviewing existing contracts to ensure that contractors are now incentivised to minimise costs.