HS2 between London and Birmingham to cost £66.6bn
MPs have been told it's coming in way over budget
Last updated 10th Jan 2024
The estimated cost of building HS2 between London and Birmingham has soared to as much as £66.6 billion, MPs heard.
HS2 Ltd executive chairman Sir Jon Thompson told the Transport Select Committee that the estimated cost for Phase 1 is between £49 billion and £56.6 billion at 2019 prices, but adjusting the range for current prices involves "adding somewhere between eight and 10 billion pounds".
In 2013, HS2 was estimated to cost £37.5 billion (in 2009 prices) for the entire planned network, including now-scrapped extensions from Birmingham to Manchester and Leeds.
Sir Jon said reasons for the cost increase include original budgets being too low, changes to scope, poor delivery and inflation.
He said:
"This is a systemic problem. It's not just about HS2, it's about large projects that the Government funds.
"The budget needs to be set early on in order for an outline business case to be approved by the Government, sometimes by Parliament.
"At that point, people think OK the original estimate for Phase 1 was £30 billion-something.
"That is based on very, very immature data. You don't have a design, you haven't procured anything, there is no detail on which you can cost anything."
He added:
"If you say to a builder, can you give me a quote for an extension, they walk around and say 'it's £50,000-something'.
"But then you get into the detailed design, you know exactly how big it is, what surfaces you want, how much concrete needs to be poured. Unsurprisingly you get a better number.
"That's the situation here. The situation with HS2 in my opinion is the estimate was poor, the budget was set too early, and then when you get further into it, you get much better information.
"Then on that basis, you can cost it out with more accuracy and then you discover it's higher."
Following Prime Minister Rishi Sunak's decision in October 2023 to axe plans to extend HS2 beyond Birmingham, the Department for Transport (DfT) published a Network North document outlining future plans.
The document stated that the cost of Phase 1 "should lie between £45 billion and £54 billion and has been clear that HS2 Ltd should deliver at the lower end of this range".
Sir Jon told the committee that during the six months up to October last year HS2 Ltd held more than 50 meetings attended by DfT officials or their representatives to discuss the cost.
He said:
"It's for the department and the Government to decide what it wants to use that data for, but I do not believe that Phase 1 could be delivered for £45 billion."
Sir Jon said changes to the scope - such as taking responsibility for Euston away from HS2 Ltd - will reduce the company's cost of building the railway, but "whether it'll come down by anything like the number that was quoted in Network North, I doubt".
On the issue of why official cost estimates are still being given at 2019 prices, Sir Jon said: "It is the Government's long-standing policy that infrastructure estimates are only updated at Spending Review points, that's my understanding of it.
"So that's why we're still working to 2019 prices and the whole conversation about 2019, which is to be frank with you an administrative burden of some significance in the organisation.
"All of the invoices we get we have to then deflate backwards to 2019 prices even though we're paying them at 2024 prices.
"And then we have to adjust the accounts to account for that, so it is a significant administrative faff to be frank."
Sir Jon also told the committee that the decision not to extend HS2 north of Birmingham could lead to a reduction in seat capacity for train services between London and Manchester compared with today.
Initial plans for the project involved extending platforms at Crewe station and building a new station at Manchester Piccadilly to accommodate 400-metre HS2 trains.
Following Mr Sunak's changes, HS2 trains running north of Birmingham are expected to be configured to about 250 metres to fit in the stations.
Sir Jon said:
"In that scenario, there are less seats on the route from London to Manchester. In other words, capacity could go down.
"The reason why I can't be absolutely definitive about that is because it may, of course, be that somebody's got a fantastic plan to resolve that, but I'm not aware of it.
"So, under the current scenario, unless you extend Piccadilly station ... my understanding is there would be a reduction in the number of seats from London to Manchester."