Source · Select Committees · Public Accounts Committee
Recommendation 11
11
Accepted
Department's lowest Phase 1 cost estimate still exceeds allocated budget, requiring additional funding.
Conclusion
HS2 Ltd told us that its cost estimate had been the result of much detailed analysis and many meetings, all done transparently with the Department. It told us that while Ministers had committed to an opening date between 2029 and 2033, HS2 Ltd was well within that range at the moment, and was aiming for 2030.24 The Department said that it had worked off the same data and been in the same meetings as HS2 Ltd when coming up with its own overlapping but lower forecast range of costs. But it said it had taken different views to HS2 Ltd on the extent to which risks could be mitigated. The Department accepted that it and HS2 Ltd would have to bottom out differences and reach an agreed range in the next stage of work.25 But even the Department’s lowest cost estimate is higher than the reset Phase 1 budget of £44.6 billion (2019 prices), so the Department is projecting to need more money than has been allocated and will need to agree funding for that with the Treasury.26
Government Response Summary
The government agrees with the committee's observation and is taking specific steps to strengthen HS2 Ltd's leadership, including recruiting new Non-Executive Directors and a CEO, and implementing a plan to bear down on costs, reinforce cost control culture, and strengthen governance for Phase 1 delivery.
Government Response
Accepted
HM Government
Accepted
2.1 The government agrees with the Committee’s recommendation. Target implementation date: Spring and autumn 2024 2.2 HS2 Ltd’s leadership and its collective capability are critical to the success of HS2. The department commenced a recruitment exercise to identify new Non-Executive Directors in January 2024. Additionally, HS2 Ltd commenced a recruitment exercise to identify a new Chief Executive Officer in February 2024 and is also recruiting to a number of senior executive roles. 2.3 As noted in the Network North command paper of 4 October 2023, HS2 Ltd and the department are committed to: • bearing down on the costs of Phase 1 and only delivering what is essential; • embedding a singular focus on cost control in HS2 Ltd and its supply chain and being prepared to take difficult decisions on contracts, scope and benefits to hold to budget; • reinforcing the leadership of HS2 Ltd, under Sir Jon Thompson, to change the culture on cost control with challenge from the department, HM Treasury and the Infrastructure and Projects Authority; and • providing strengthened governance and control from the government whilst this reset is developed and delivered, with increased oversight and reduced delegation. 2.4 A plan has been developed by the department, HM Treasury and HS2 Ltd to implement the above commitments. The department will provide an update in its forthcoming six-monthly reports to Parliament. 2.5 HS2 Ltd and the department are working together and with the principal suppliers to ensure focus on cost-effective delivery of the remainder of the civil works. The department will provide an update on that work in forthcoming reports to Parliament, subject to commercially sensitive details.