The completion and sale of High Speed 1 - Public Accounts Committee Contents

1   Delivering the line and sale of HS1 Limited

1. In 1996, the Department for Transport (the Department) awarded a contract to London & Continental Railways Limited (LCR) to build a high speed railway linking London to the Channel Tunnel (High Speed 1), and to run the British arm of the Eurostar international train service (Eurostar UK). Construction of the line was to be funded partly by government grants (£3.2 billion) and partly by LCR borrowing money, secured on future revenue from Eurostar UK. Very shortly afterwards, by the end of 1997, Eurostar UK revenues were only a half of LCR's forecasts. Consequently, in 1998, the Department and LCR had to restructure the deal and the Department agreed to guarantee most of the money LCR would borrow to fund construction. When it offered the guarantees the Department did not expect they would be called on. This is our third report on High Speed 1.[2]

2. The Department did well to oversee the construction of High Speed 1 within the revised funding and timescale that it had set in 1998.[3] This was a far better performance than some of the other rail projects that this Committee has looked at in the past, such as the West Coast Main Line upgrade.[4] The Department achieved this despite the fact that the project had successive restructurings and was complex. The line has performed to a high standard since it fully opened in November 2007.[5]

3. However, in June 2009 the Department took LCR and Eurostar into public ownership, and took on the £4.8 billion project debt which it had guaranteed. Revenues from Eurostar were insufficient to service this debt as passenger numbers since the line opened in 2007 have only been two-thirds of the level the Department had forecast in 1998. In 2010, the Department sold HS1 Limited, with a concession to operate the line for 30 years, to the private sector. The Department handled the sale of HS1 Limited well and the proceeds from the sale were, at just over £2 billion, higher than expected. The sale limits the future liabilities arising from operational risks to taxpayers.[6]

2   Committee of Public Accounts, 22nd Report of Session 2001-02, The Channel Tunnel Rail Link, HC 630; Committee of Public Accounts, 38th Report of Session 2005-06, Channel Tunnel Rail Link, HC 727; C&AG's Report, The completion and sale of High Speed 1, Session 2010-12, HC 1834, para 1.3 Back

3   Qq 24, 91, 100, 108 Back

4   Committee of Public Accounts, Thirtieth Report of Session 2006-07, The Modernisation of the West Coast Main Line, HC 189 Back

5   Qq 108; C&AG's Report, para 1.6 Back

6   Q 24; C&AG's Report, paras 2.9-2.11 Back

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Prepared 6 July 2012