2 Delivering value for money
8. Several of the Department's past projects have
taken longer than was originally planned, partly in order to control
costs. For example some major work on the West Coast Mainline
modernisation programme was delayed by 18 months, and phase two
of the Thameslink programme was extended by three years.[11]
9. The Department acknowledged that good planning
and preparation determine success on major programmes, and told
us that this is its current focus on High Speed 2. The Department
expects that Royal Assent on the Hybrid Bill for phase one of
the programme will now be achieved by December 2016. At the time
of our September 2013 report High Speed 2: a review of early
programme preparation, the Department was aiming to achieve
this by March 2015. According to the Department, the revised timescale
will allow it to get the planning right, and it still expects
to begin construction in 2017 and complete phase one by 2026.[12]
10. The Department told us that it is important that
HS2 Limited takes the time to get the planning right and does
not rush towards the procurement and construction phase. It told
us that it is taking steps to bring forward some activities that
would normally take place once Royal Assent has been achieved
to help get the programme ready for construction. For example,
the Department and HS2 Limited are putting in place legal agreements
now, which will set out the respective roles of the two organisations
and establish the basis for how the Department will hold HS2 Limited
to account. In addition, HS2 Limited has appointed a Chief Executive
in charge of construction and is recruiting people for the construction
phase of the programme. The Department explained it is taking
these steps at an earlier stage than it did on Crossrail.[13]
11. 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 and that it will complete the whole
of High Speed 2, including buying the trains, within the overall
funding envelope of £50 billion set by the Chancellor. £21.4
billion includes the generous contingency of £4-5 billion
and we are concerned that the contingency has been pre-empted
before construction has even started. The Department also acknowledged
that there is currently less certainty about the costs on phase
two. In addition, High Speed 2 is a highly complex programme,
but the Department told us it is confident that it has taken account
of challenges, such as the risk of flooding on the water courses
that the route passes through.[14]
12. The Department's budget for High Speed 2 has
a generous contingency, which the Department told us is based
on an assessment and quantification of risks to the programme.
This includes provision for likely inflation which is based on
the Treasury's guidance on the rates to apply. However, construction
costs can increase more quickly than general inflation. When the
National Audit Office reported on High Speed 2 in 2013, the Department
estimated that phase one would cost between £15.4 billion
and £17.3 billion.
13. The Department has now revised the budget for
phase one and considers that it is 95% likely that it will deliver
phase one within the allocated £21.4 billion of funding.
The earlier cost estimates were set with a 50% likelihood that
the programme would be delivered within the available funding.
To achieve this increased confidence, the Department increased
the required contingency provision by between £4 billion
and £5 billion. The Department told us that it is not assuming
that it will spend all its contingency, but that it has already
spent some on, for example, concessions made to petitioners to
the Hybrid Bill.[15]
14. We have seen academic research by the Omega Centre
for Mega Projects in Transport and Development—part of University
College London—which suggested that the cost of delivering
a kilometre of railway varies significantly from country to country.
The research stated that the cost per kilometre of the Channel
Tunnel Rail Link was much higher than the Valence-Marseille line
in France and the Köln-Rhein line in Germany. The Department
told us that it is interested in learning from construction techniques
that are used overseas to reduce costs, and it cited examples
from France such as the laying of tarmac along the route of the
new railway to make it easy for lorries to bring supplies to build
the next section of railway.[16]
15. In addition to funding from the general taxpayer,
the Department and Transport for London used various means, including
a supplement to business rates in London, to help pay for Crossrail.
However, the Department told us that the benefits from Crossrail
are concentrated in London, and that a rate supplement to reduce
the burden on the general taxpayer would not be appropriate for
High Speed 2, because the benefits are spread very widely. However,
economic benefits, from which businesses will presumably benefit,
remain central to the rationale for High Speed 2. The Department
did accept that there may be potential to raise some private finance
for some elements of the programme such as development around
stations.[17]
16. Economic benefits and regeneration have been
central to the objectives of a number of the programmes we have
looked at before; High Speed 1, Crossrail and High Speed 2 in
particular. Seven years after High Speed 1 was completed there
has been good progress in regenerating areas around King's Cross
and Stratford. The Department conceded that there had been insufficient
planning for benefits from High Speed 1 Ebbsfleet in Kent, which
was one of the main areas where substantial benefits were expected.
It also acknowledged that there had been very little progress
in Ebbsfleet and that it would have liked to have seen regeneration
there much earlier.[18]
The Department told us that the government is now putting in place
an urban development corporation at Ebbsfleet, and there is also
a mayoral development corporation planned for Old Oak Common,
which is on the Crossrail route.[19]
17. The Department has accepted 18 of the 19 recommendations
of Lord Deighton's Growth Task Force for High Speed 2, which emphasised
the need for a more active approach to make sure that regeneration
happens. The Department is currently considering how to take these
recommendations forward.[20]
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. However, it also told us that
it is looking into establishing an organisation to work with local
areas on, for example, land assembly and specialist planning around
the stations to drive the regeneration. So far, however, on a
£50 billion programme, the Department has earmarked only
£2.5 million of funding to support local areas. This funding
will go to Birmingham and Solihull to help them plan for development
around stations.[21]
11 C&AG's report, para 4.3 Back
12
Q 3; Committee of Public Accounts, High Speed 2: a review of early progress, Session 2013-14, HC478, 9 September 2013
Back
13
Qq 41-49 Back
14
Qq 54, 62-66 Back
15
Qq 50-72; Committee of Public Accounts, High Speed 2: a review of early progress, Session 2013-14, HC478, 9 September 2013, paragraph 13
and Q 40 Back
16
Qq 69, 157-160; http://www.omegacentre.bartlett.ucl.ac.uk/studies/cases/hsr-ctrl_2.php
Back
17
Qq 145-151 Back
18
Qq 73-4, 84, 146; C&AG's report, figure 2 Back
19
Q 83 Back
20
Q 74 Back
21
Qq 79-81, 73-74 Back
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