Lessons from major rail infrastructure programmes - Public Accounts Committee Contents

Conclusions and recommendations

1.  The Department still lacks a clear strategic plan for the rail network, and it is unclear how the Department makes decisions about which programmes to prioritise for investment. The Department acknowledged that one project can have an impact on other projects and routes, so it follows that programmes should be considered together. However, it did not provide a clear explanation for why an assessment of a high speed rail line between cities in the north of England (so-called High Speed 3) was not carried out before High Speed 2, to test whether improving connectivity in the north was a greater priority. We are also concerned that the Department continues to have a narrow geographical focus. For example, the Department is still to publish proposals for how Scotland will benefit from High Speed 2, including whether the route will be extended into Scotland.

Recommendation: The Department should set out a long term strategy covering the next 30 years for transport infrastructure in the UK, and use this strategy to inform decisions about investment priorities.

2.  We remain concerned about the Department's ability to deliver on time and budget. On some past programmes, including modernisation of the West Coast Mainline and Thameslink, the Department has needed to extend timescales and alter its approach to bring programmes back on budget and schedule. We also saw academic research which showed that the cost of delivering a kilometre of railway in the UK is higher than in other countries, and the Department acknowledges that it may be possible to make faster progress and considerable savings by adopting construction techniques used overseas. The Department acknowledges that good planning and preparation determine success on major programmes and there are some signs that this lesson is being applied. For example, the Department told us that it is applying the governance structures used on Crossrail to High Speed 2, including the separation of the Department's role as sponsor from the delivery role of HS2 Limited. HS2 Limited is recruiting the people who will build the railway now, earlier than has been done on other programmes, and has appointed a Chief Executive for Construction from Network Rail. While we recognise the importance of good preparation, we note that the scale of expenditure on High Speed 2 before the High Speed Rail Bill has been passed is unusually large.

Recommendation: The Department should apply learning from its previous projects and from overseas to speed progress and improve value for money to all projects it sponsors, including High Speed 2.

3.  We are sceptical about whether the Department can deliver value for money for the taxpayer on High Speed 2. The Department told us that it is confident that it will deliver phase one of High Speed 2 within its available funding of £21.4 billion. However, the Department has included a generous contingency within that amount to give it 95% certainty that it can deliver within the available funding. Value for money will depend not only on the programme coming in within its funding, but also on the use of contingency funds being properly controlled. The Department is less confident about current cost estimates for phase two of High Speed 2 because it is at an earlier stage of development. Nonetheless, it told us that it will complete the whole of High Speed 2 within the overall funding envelope of £50 billion. This is despite the complexity of the programme, and uncertainty around, for example, future construction inflation. The Department and Transport for London used various means including a supplement to business rates in London to help pay for Crossrail. However, even though regional economic growth is one of the objectives of High Speed 2, from which businesses will presumably benefit, the Department considers that such measures to reduce the burden on the general taxpayer are not appropriate for High Speed 2.

Recommendation: The Department should set out how it will control use of contingency on High Speed 2 and other projects, to provide assurance that generous contingency funds will not be used to hide cost overruns.

4.  There is a risk that industry does not have the capacity to deliver all current and proposed programmes. David Higgins, the Chair of HS2 Limited, has stated his belief that High Speed 2 and High Speed 3 can be built at the same time. The Department, however, told us that it would need to carry out further work to establish whether this was feasible. One of the challenges in delivering multiple programmes is whether there are the skills and capacity to do so both within government and industry. The Department is taking steps to increase its own capacity and capability to sponsor programmes, and it told us that the most acute skills shortage facing the rail industry is in signalling.

Recommendation: The Department should work with industry and with other departments responsible for major infrastructure programmes to understand gaps in industry capacity, and put in place plans to manage any gaps to ensure all programmes can be delivered on schedule and within budget.

5.  The Department has a long way to go to prove that it is being more active in realising benefits from major programmes. There was insufficient planning for regeneration at Ebbsfleet in Kent, and the expected substantial economic benefits have not been delivered, despite High Speed 1 construction being completed seven years ago. The Government is only now putting in place an urban development corporation at Ebbsfleet to rectify this. The Department told us that it has learnt and is applying this lesson on High Speed 2, and that it has accepted 18 of the 19 recommendations of Lord Deighton's Growth Task Force for High Speed 2. The Department sees it as the role of local authorities to use their existing powers and budgets to plan for development around proposed High Speed 2 stations, although it told us that it is looking into establishing an organisation to work with local areas on this. However, we remain concerned about the scale of action and resources the Department is dedicating to secure regeneration benefits from this £50 billion programme.

Recommendation: The Department should set out who is responsible for ensuring that benefits are realised, and how that work will be coordinated.

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Prepared 16 January 2015