HS2 is over budget and behind schedule because the Government underestimated its complexity and risk, auditors have said.
A new report from the National Audit Office (NAO) warned there were ‘significant challenges’ to completing the project and delivering value for taxpayers.
Cost projections for the project have hit £106bn, and even under the Department for Transport's more conservative estimate of between £65bn and £88bn (at 2015 prices), the scheme is still running 17% to 58% over budget already - with the NAO warning the price tag could still increase.
It pointed out that full services on the entire network are now forecast to start between 2036 and 2040, which would be between three and seven years later than originally planned.
However, questions remain as to whether HS2 will be able to run the 18 trains an hour on which its revenue estimates are based. Although the NAO report assumes that this will be the case, the Government's review of the project reportedly 'points out that no other high speed line in the world runs 18 trains per hour and recommends reducing it to 14'.
The NAO also criticised the Government for not heeding its previous warnings about the difficulties in keeping to the timetable for opening Phase One, pointing out that although it warned in 2016 that the 2026 opening date was at risk, the DfT did not reset it.
Similarly the report criticises the DfT, which is responsible for funding and overseeing delivery of the railway, for setting an unrealistic forecast of the cost of Phase One, after which costs have increased on all parts of Phase One except the purchase of new trains.
The NAO said HS2 Ltd did not account for the level of uncertainty and risk in the programme when estimating the costs of Phase One in April 2017 and made an inappropriate and inadequate level of contingency.
NAO head Gareth Davies said: ‘There are important lessons to be learned from HS2, not only for the DfT and HS2 Ltd, but for other major infrastructure programmes.
'To ensure public trust, the Department and HS2 Ltd must be transparent and provide realistic assessments of costs and completion dates as the programme develops, recognising the many risks to the successful delivery of the railway that remain.’
HS2 Ltd said the vast majority of the NAO’s findings were revealed in its 2019 ‘stocktake’, by chairman Allan Cook, so that the revised costings and schedule are already widely known.
A spokesperson said: ‘After being appointed HS2 Ltd CEO in 2017, Mark Thurston identified the serious challenges of complexity and risk in the project, and he made several significant changes and improvements to the organisation, its governance and processes.
‘As the NAO recognises, this work - along with a greater understanding of the ground conditions and build requirements - means ministers have robust cost estimates for Phase One of the HS2 project. If the Government decides to proceed, HS2 Ltd has a highly-skilled team in place ready to build Britain’s new state-of-the-art, low-carbon railway.’
Despite this, the NAO said it has made a series of recommendations to government, the DfT and HS2 Ltd ‘covering the robustness of cost and schedule estimates, the capabilities needed to manage a programme of this scale and the oversight arrangements required for the remaining phases’.
The report reveals that in November 2019, the Infrastructure and Projects Authority found that 'until Phase One’s schedule and budget are reset, successful delivery of the programme appears to be unachievable'.
The DfT and HS2 Ltd now estimate Phase One to cost between £31bn and £40bn, which is £3.9bn to £12.9bn more than its available funding.
Although Phase Two is at a much earlier stage, it is already forecast to cost more than its available funding and take longer than expected.
HS2 Ltd’s current forecast for when passenger services would run on Phase 2a (West Midlands to Crewe) is between 2030 and 2031, and for Phase 2b (Crewe to Manchester and West Midlands to Leeds) is between 2036 and 2040.
The DfT estimates that costs for Phase 2a could be £6.5bn (87% higher than the available funding) and Phase 2b £41bn (63% higher than the available funding).
Matthew Fell, chief UK policy director for the CBI, said: ‘HS2 is an ambitious project and the NAO’s report usefully highlights the challenges of delivering large-scale infrastructure. But what is clear to the CBI and business generally, is the colossal cost of not delivering HS2.'
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