Source · Select Committees · Public Accounts Committee
Tenth Report - HS2 and Euston
Public Accounts Committee
HC 67
Published 7 February 2024
Recommendations
2
Accepted
Require Department and HS2 Ltd to implement effective cost controls and oversight for programme
Recommendation
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 …
Read more
Government Response Summary
The government agrees and states that recruitment for key board and executive roles at HS2 Ltd commenced in early 2024. It reiterates commitments to bear down on costs, embed cost control, reinforce leadership, and strengthen governance with a plan developed for implementation, with updates to be provided in forthcoming six-monthly reports.
HM Treasury
View Details →
3
Accepted
Require Department and HS2 Ltd to establish revised plans for Phase 1 and organisational needs
Recommendation
The Department and HS2 Ltd do not yet know what the impact of the decision to cancel Phase 2 will be on the HS2 programme and how HS2 Ltd will need to adapt so it can be successfully delivered. HS2 …
Read more
Government Response Summary
The government agrees that the HS2 Ltd Executive Chair is implementing a comprehensive change programme to adapt the organisation and ensure the right skills and capability are in place for the revised programme. The department will provide an update on this progress in its next six-monthly report to Parliament.
HM Treasury
View Details →
28
Rejected
Balancing fairness to taxpayers and affected individuals crucial for Phase 2 land disposal.
Recommendation
We highlighted the argument for there being a moral expectation that, having cancelled Phase 2, the Government should expedite the opportunity for people to be able to buy back their house or their property. HS2 Ltd acknowledged the point while …
Read more
Government Response Summary
The government explicitly disagrees with the recommendation to expedite buy-back opportunities for former Phase 2 land owners, stating it is developing a comprehensive land disposal programme and will share its plan by summer 2024, while committing to 'look to expedite work' related to compulsorily acquired land within that programme.
HM Treasury
View Details →
Conclusions (29)
4
Conclusion
Acknowledged
Developing Euston is dependent on attracting private finance to pay for it, but the Department does not yet have any plan for how to do so and has to make investment decisions soon to protect long-term value for money. Despite the intention to scale back the station itself compared with …
Government Response Summary
The government agrees and is continuing to define and develop a range of development models and financing mechanisms for Euston, including options for funding the tunnelling from Old Oak Common. Preparatory works are ongoing, but no specific plans or decisions are detailed yet.
5
Conclusion
Accepted
The Department and HS2 Ltd do not yet know when they will dispose of land and property no longer needed and how they will balance different interests. The Department has spent over £600 million on land and property (in 2019 prices) along the section of the route that has now …
Government Response Summary
The government disagrees with reporting its land and property disposal plan alongside the Treasury Minute response, stating it is not yet ready. However, it commits to sharing the plan by summer 2024, which will include balancing taxpayer value for money, the needs of affected parties, and lessons learned from past disposals.
6
Conclusion
Accepted
The Department has yet to finalise what the redirected £36 billion (in 2023 prices) originally intended for the cancelled HS2 phases will fund or decide on when these projects can be expected to start. The Department has redirected the £36 billion that would have been spent on HS2 Phases 2a, …
Government Response Summary
The government agrees and states the recommendation is implemented. It will report progress against individual Network North schemes as they mature, covering funding, location, and timescales, ensuring all schemes undergo business case development and formal governance for value for money.
1
Conclusion
Accepted
This Committee has reported regularly on progress with the High Speed 2 programme over the last decade. Our first report was in 2013 and even at that early stage we were warning about an emerging pattern of costs increasing, benefits decreasing, and the apparent lack of the necessary commercial expertise …
Government Response Summary
The government states it will incorporate the benefits management and evaluation strategy into the programme’s updated business case. It also commits to continuing public reporting on the realisation of HS2 benefits through its six-monthly reports to Parliament.
7
Conclusion
Accepted
The inclusion of an allowance for remediation costs if Phase 1 were to be discontinued, and the exclusion of sunk costs, had a significant impact on the calculation of a positive BCR in the range 1.1 to 1.8, and thus on the AO Assessment. In addition, the figures quoted for …
Government Response Summary
The government agrees to address the committee's findings on the Benefit-Cost Ratio by preparing to publish an updated programme business case in 2024, which will set out revised benefits and provide updated benefit-cost ratios for HS2 Phase 1.
8
Conclusion
Accepted
The Department told us that a full, revised business case will need to be produced for Phase 1, taking account of what it now knows about costs, the changes to scope and what that means for the overall benefits.15 The Department said that key benefits remain – such as increased …
Government Response Summary
The government confirms it is preparing to publish an updated programme business case for HS2 Phase 1 in 2024, which will detail revised benefits and provide updated benefit-cost ratios, aligning with previous statements to the committee.
9
Conclusion
Accepted
In our previous reports we have regularly raised concerns about escalating costs and cost forecasts for the HS2 programme. For example, in our May 2020 report we commented that “The High Speed Two programme has gone badly off-course and is now estimated to cost up to £88 billion, significantly more …
Government Response Summary
The government agrees with the implied concern regarding historical cost escalation for HS2, committing to bearing down on Phase 1 costs, strengthening HS2 Ltd's leadership through recruitment, and reinforcing governance, with updates to be provided in six-monthly reports.
10
Conclusion
Accepted
HS2 Ltd’s most recent estimate for the cost of Phase 1 is that it will be in the range £49 billion to £57 billion (2019 prices). It cites a range of issues as the cause of increases, including “design performance, delivery productivity, consenting delays, and a difficult operating environment with …
Government Response Summary
The government agrees with the implied concern regarding HS2 costs, committing to bear down on Phase 1 costs, strengthen HS2 Ltd's leadership through new recruitment, and reinforce governance with updates to be provided in six-monthly reports.
11
Conclusion
Accepted
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 …
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.
12
Conclusion
Accepted
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, …
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.
13
Conclusion
Accepted
HS2 Ltd told us more directly that 89% of the difference between the Departments’ 2020 estimate of £44.6 billion and now was about how the Main Works Civils contracts were manifesting. It said that the Government’s decision to let cost-plus contracts, with few incentives and penalties, had left HS2 Ltd …
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.
14
Conclusion
Accepted
In its October 2023 Command Paper on Network North and its new plans for completion of Phase 1, the Department stated that “We need to make changes quickly and decisively so the remainder of HS2 is delivered as cost effectively as possible. That means: a) Bearing down on the costs …
Government Response Summary
The government agrees with the committee's observation by reiterating its commitments from the Network North command paper to bear down on costs, embed cost control, reinforce leadership in HS2 Ltd, and strengthen governance, while detailing steps like recruiting new Non-Executive Directors and a CEO.
15
Conclusion
Accepted
On recent development in governance in HS2 Ltd, the company told us it had streamlined executive governance to focus on costs and deliverables, and improved management information significantly, and that it had also recruited two further finance directors and established a new sub-committee for finance and performance. HS2 Ltd said …
Government Response Summary
The government agrees with the committee's observation, confirming that HS2 Ltd's leadership and capability are critical and detailing ongoing recruitment efforts for new Non-Executive Directors and a CEO to reinforce cost control and governance.
16
Conclusion
Acknowledged
The Department’s November 2023 update to Parliament stated that “No decisions have been made on the train service that will run when HS2 is operational.”33 The Department told us it had developed “an outline train specification that sets out an assumed service”, but before bringing it into service there would …
Government Response Summary
The Department restates its position that no decisions have been made on the train service that will run when HS2 is operational and that final decisions will take account of economic conditions and demand at the time.
17
Conclusion
Accepted
The cancellation of other HS2 phases will inevitably result in some design changes to Phase 1. HS2 Ltd told us that the top of its list is the implications for how HS2 trains will join the West Coast Main Line. HS2 trains would have joined the line north of Manchester …
Government Response Summary
The government acknowledges the implications of HS2 phase cancellations, stating it is progressing amendments to Phase 1 and working through options to enhance the Handsacre junction. It is also undertaking a review of HS2 infrastructure and managing the closedown of other phases, with updates due in future reports.
18
Conclusion
Accepted
We asked the Department about the impact of cancelling HS2 Phases 2 on other projects that would have had existing business cases dependent in part on Phases 2a or 2b. The Department highlighted the interdependency between 2b and Northern Powerhouse Rail and said that it would be some time before …
Government Response Summary
The government acknowledges the interdependencies and the need for business cases, detailing ongoing work to amend safeguarding directions for former HS2 phases to allow for Northern Powerhouse Rail, with amendments expected by summer 2024. It also describes plans for orderly closedown activities and future updates.
19
Conclusion
Accepted
We also asked whether any contracts would need to be cancelled in respect of Phase 2 and payments made to companies as a result. HS2 Ltd told us that for Phases 2a and 2b the number of contracts let was very small, but it was exposed to some legal challenge, …
Government Response Summary
The government acknowledges the issues with cancelled contracts and legal exposure by detailing its ongoing work to bring HS2 Phase 2 work to an orderly stop, ensuring value for money. HS2 Ltd is developing detailed plans for closedown activities, including costs and milestones.
20
Conclusion
Acknowledged
Notwithstanding the Board and Director level changes referenced above, HS2 Ltd also acknowledged that it needed to think about its capacity and capability throughout to deliver the task ahead. It told us it was going through that process and highlighted three areas it needed to address: more people to focus …
Government Response Summary
The government agrees with the committee's observation that HS2 Ltd needs to address its capacity and capability, stating it is supporting HS2 Ltd's comprehensive change programme to ensure the right skills are in place, with an update expected by Spring 2024.
21
Conclusion
Accepted
In July 2023 we reported on how the Department’s previous plans for the HS2 station at Euston had proved to be unrealistic and unaffordable.42 Alongside the October 2023 cancellation of HS2 phases 2, the Department acknowledged that previous plans for the station had been unaffordable, and announced that the station …
Government Response Summary
The government agrees with the committee's observation, confirming its ambition to deliver HS2 to Euston and create a transformed Euston Quarter by using alternative funding and maximizing private investment, with work currently underway to develop funding packages and financing mechanisms by Summer 2024.
22
Conclusion
Accepted
The Department confirmed to us that “At the moment we are expecting the private sector to fund the station and all the development. The benefit for developers comes from the commercial housing development.”44 It confirmed that this included looking for private funding to cover the whole cost of running from …
Government Response Summary
The government agrees with the committee's observation, confirming its ambition to deliver HS2 to Euston and create a transformed Euston Quarter by using alternative funding and maximizing private investment, with work currently underway to develop funding packages and financing mechanisms by Summer 2024.
23
Conclusion
Accepted
The Department confirmed it remains the Government’s ambition that Euston be the London terminus for HS2.48 But it confirmed it was still expecting trains to stop at Old Oak Common for a period of time before Euston was developed, because Euston would not be up and running in the same …
Government Response Summary
The government agrees with the committee's observation, reaffirming its ambition to deliver HS2 to Euston as the London terminus and committing to developing funding models and financing mechanisms to enable this, with ongoing preparatory works for tunnelling.
24
Conclusion
Accepted
We raised concerns about the risk of incurring significant additional cost later if contracts for the tunnel between Old Oak Common and Euston were not let in the coming months. The Department said there were significant phasing issues of this nature 40 Q 129 41 Q 132 42 Committee of …
Government Response Summary
The government agrees with the committee's concerns, reiterating its ambition to deliver HS2 to Euston and confirming that work is underway to develop funding packages and financing mechanisms for the Euston Quarter, including options to pay for the Old Oak Common to Euston section, with preparatory tunnelling works continuing.
25
Conclusion
Acknowledged
We raised the issue that private sector involvement and finding would be dependent on there being greater certainty on dealing with issues in and around Euston. The state of the general property market in the area and how much infrastructure the public sector provides will be critical factors in how …
Government Response Summary
The government agrees with the committee's observation on the need for certainty regarding Euston to attract private sector involvement, stating that work is underway to develop funding packages and financing mechanisms to maximize private investment for the Euston Quarter, with a target for Summer 2024.
26
Conclusion
Accepted
HS2 Ltd told us it had spent £3.6 billion on land and property for Phase 1, and believed it had acquired more than 95% of the land it would require for Phase 1. It had spent £634 million on acquiring land and property for the HS2 phases that have now …
Government Response Summary
The government states it is developing a programme for selling land no longer required for Phase 2 and will share the plan by summer 2024, committing to ensuring value for money and considering affected parties' interests.
27
Conclusion
Deferred
The Department said it needed to assess what land that had been acquired for Phase 2b might need to be retained for Northern Powerhouse Rail and for some local interests, where the local authorities would like to retain the land. It said that the Department and HS2 Ltd would need …
Government Response Summary
The government states it disagrees, but explains it is developing a programme for selling acquired Phase 2 land, which will balance value for money and local interests, and aims to share its plan by summer 2024.
29
Conclusion
Deferred
We also highlighted that, where some Phase 1 land was going through the process of being returned (it could have been taken for temporary reasons such as utility diversions) the process had been painful and lengthy. HS2 Ltd said that land and property should be returned, once it is not …
Government Response Summary
The government states it disagrees, but explains it is developing a programme for selling acquired Phase 2 land which will balance value for money and local interests, and aims to share its plan by summer 2024, noting it will look to expedite work for compulsorily acquired land.
30
Conclusion
Acknowledged
The Department has said that the decision not to proceed with HS2 phases 2a, 2b and East will unlock £36 billion (2023 prices) and that “every penny of the £19.8 billion committed to the Northern leg of HS2 will be reinvested in the North; every penny of the £9.6 billion …
Government Response Summary
The government agrees with the committee's observation that the Network North funds will be reinvested. They state that progress will be reported for individual schemes as they mature, covering funding, location, and timescales, and that all schemes will undergo business case approval.
31
Conclusion
Acknowledged
In its Network North paper the Department described a number of road and rail projects to be included in what will be funded from the £36 billion, subject to approval of business cases.62 The Department told us that these “alternative investments” ranged from specific projects like Northern Powerhouse Rail to …
Government Response Summary
The government agrees with the committee's description of the Network North projects and funding distribution. They reiterate that progress will be reported on individual schemes as they mature and that all will undergo business case approval and formal governance.
32
Conclusion
Acknowledged
The Department told us it had already announced separately how some of this funding will be redirected.67 For example, on 23 October it announced a £150 million reallocation of HS2 funding to support bus services.68 It also announced additional funds for mayoral combined authorities to be provided through City Region …
Government Response Summary
The government agrees with the committee's points on funding redirection and previous announcements. They confirm that progress will be reported against individual Network North schemes as they mature, covering funding, location, and timescales, with all schemes subject to business case approval and formal governance.