Source · Select Committees · Public Accounts Committee
Recommendation 12
12
Accepted
HS2 cost increases driven by inflation, supply chain issues, and poor financial management.
Conclusion
To explain cost increases since 2020, the Department pointed to several factors including: Covid, inflation, Ukraine, the supply chain and the scale of the cost of dealing with ‘planning and consenting’. It said that poor cost information and cost reporting from the supply chain had been a significant contributing factor, and that financial and risk management broadly had not been as robust and as good as it needed to be. The Department acknowledged the need for HS2 Ltd to focus on building the organisation, the capability, the processes and the leadership to drive a relentless focus on cost control.27
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.