HS2 is beyond saving and poses risk to UK’s reputation, MPs conclude

HS2 is beyond saving and must be studied by future governments as a “cautionary tale” on how “not to run a major project,” a cross-party group of MPs has concluded.

In one of its most damming-ever reports, the Public Accounts Committee (PAC) said it was “long past the point” of offering recommendations on how to turn HS2’s fortunes around.

MPs now support a “fundamental reset” to limit as much further damage to the public purse and the UK’s overall reputation as possible.

“We are sceptical of government’s ability to successfully deliver even a curtailed scheme, one which we already know will on its face bring very poor value for money,” Geoffrey Clifton-Brown MP, chair of the committee, said on Friday.

“The question has instead become: What possible benefit can the government now salvage for the taxpayer, from a mess that presents real risks to the UK’s overall reputation?”

Neither the DfT nor HS2 Ltd understand how much the scheme will cost, when it will be completed or what benefits will be delivered.

Estimates suggest total costs could reach close to £80bn, up from an initial budget of £33bn when work began 13 years ago. A figure has yet to be agreed by either the DfT or HS2 Ltd, however.

MPs singled out the delivery and development of Euston and poorly judged contracting policy as key problem areas.

They also noted recent reports surrounding a £100m “bat tunnel” in Buckinghamshire, which single handedly doubled the cost of that section of the route and has become a poster boy for unnecessary spending.

“The fact that the Department and HS2 Ltd chose this solution leaves us concerned that the cost to the public purse was not properly front and centre to their decision making,” they said.

Plans for Euston carry ‘huge risk’

Rachel Reeves confirmed in the Autumn Budget the high-speed line would terminate at Euston rather than Old Oak Common in London’s western suburbs.

But there is still “no clear plan” for the station’s delivery and development of the surrounding area, the PAC said.

It is “sceptical” the private sector will stump up enough cash despite the bold claims of former ministers.

This could leave taxpayers on the hook for a significant proportion of the estimated £6bn cost of delivery and reaffirms a prior warning from London Mayor Sir Sadiq Khan.

Local residents, businesses and passengers have suffered for years amid the noise and pollution created by construction in the area.

The DfT’s current proposals carry “huge risk” as no final delivery model exists for work at Euston or how it connects to the surrounding commercial development.

City AM reported allegations of misconduct in the award of a major development contract at Euston to the property firm Lendlease, earlier this month.

Lendlease’s UK construction arm was sold to US private equity in January and it is currently in the process of winding down its European operations and focusing on its home country, Australia.

Completing the Euston section will take more than a decade even if the issues are resolved, according to the PAC.

HS2 construction contracts ‘unacceptable’

HS2 is in the process of renegotiating the terms of its construction contracts as it attempts to bring down rapidly-rising costs.

Officials in 2020 first attempted to revise the arrangements by taking more of the risk off the back of the project’s four joint-venture contractors.

The PAC warned at the time HS2 Ltd would need the “right commercial skills” given it had agreed to front a greater proportion of the costs.

HS2 has since admitted it did not “heed the warnings” and would need to go back to the drawing board to re-negotiate more favourable terms.

The current state of play is “unacceptable to the public purse,” MPs said on Friday.

However, they remain “unconvinced that there are incentives for the contractors to make significant changes and deliver significant cost savings.”

“There is also a risk that the main contractors pass any financial consequences down the supply chain to small and medium-sized enterprises who may find it more difficult to absorb such changes.”

No option for a turnaround

The PAC’s report lays bare the scale of the task facing HS2’s new chief executive Mark Wild. A veteran of the sector and deeply respected, Wild rescued Crossrail from trouble many years ago.

But the committee believes neither the DfT nor HS2 Ltd have the skills or capabilities needed to successfully deliver the programme.

“We are not convinced that the Department has sufficiently considered how it could bring fresh thinking to its own leadership of HS2, or whether it has the right skills and capabilities in place to lead the programme effectively and credibly,” it said.

Speaking on behalf of the MPs, Clifton Browne said: “This committee has scrutinised HS2 since its inception.

“Our report lays out a catalogue of warnings proceeding from that scrutiny which, if heeded, may have brought about a different outcome.

“Both DfT and HS2 Ltd. must now begin the hard work of making this project the best possible version of itself in the circumstances, while swiftly addressing the needs of those impacted by decisions made under this scheme who are still waiting for answers.”

He added: “It is ultimately the Department of Transport that has failed to manage this enormous project and manage HS2 properly. This is likely to have wasted billions of pounds of taxpayers money in delays and overspends.

“The department as well as resetting the project must now reset itself to manage this project to a workable conclusion in line with the eventually agreed budget and timescale.”

A spokesperson for HS2 Ltd said: “Mark Wild, our new chief executive, agrees with the committee’s conclusion that there has been failure in the management of HS2’s cost and schedule. He is taking decisive action to get the project back on track at the lowest feasible cost.

“His fundamental reset is critical to ensure the successful delivery of HS2’s goals – driving economic growth and connecting our biggest cities with fast and reliable journeys.”