1Transparency and Oversight
1.On the basis of a Report by the Comptroller and Auditor General, we took evidence from the Department for Transport (the Department) and High Speed Two Limited (HS2 Ltd) on the current status of the High Speed Two programme.1
2.The High Speed Two programme aims to construct a new high-speed, high-capacity railway between London, Leeds and Manchester via the West Midlands. Phase One of the programme will run between London and the West Midlands, Phase 2a will connect the West Midlands and Crewe and Phase 2b will complete the full network to Leeds and Manchester. The Department’s objectives are to provide sufficient capacity to meet long-term rail demand, improve resilience and reliability on the rail network, improve connectivity and boost economic growth across the UK.2
3.In March 2019, HS2 Ltd formally advised the Department that it would not be able to deliver Phase One of the programme on time or within the available funding. The Department’s emerging estimate in December 2019 gave a potential cost of between £65 billion and £88 billion (2015 prices), 17% and 58% respectively more than the available funding of £55.7 billion (2015 prices). The Department and HS2 Ltd expect partial Phase One services from Old Oak Common to Birmingham Curzon Street to start between 2029 and 2033, with full services from Euston starting between 2031 and 2036. It is not clear when services on the full High Speed Two network to Leeds and Manchester will commence; HS2 Ltd estimates these will open between 2036 and 2040. The original opening dates were 2026 for Phase One and 2033 for the full network.3
The Department for Transport’s transparency with Parliament
4.The scale of the issues on the programme first became apparent to the Department and HS2 Ltd in October 2018, when contractors provided cost and schedule estimates for the main civil construction elements of Phase One. The cost estimates were 83% more than HS2 Ltd’s target and the work was set to complete between 12 and 18 months later than planned.4 The Department and HS2 Ltd developed an action plan to attempt to address the cost and schedule issues with Phase One. The plan included examining ways to make the technical design of the programme more efficient, revising commercial arrangements with contractors and examining elements of scope which could be removed from the programme.5 In March 2019, when the plan was ultimately unsuccessful, HS2 Ltd formally told the Department it had breached the terms of the Development Agreement and would be unable to deliver the programme to cost and schedule.6
5.We questioned the Department on why it had not informed Parliament about the true status of the programme, despite the significant issues it was facing.7 In October 2018, the Permanent Secretary appeared before the Committee and stated that the delay to notice to proceed to construction would not affect the overall programme schedule.8 She appeared again in May 2019, after the breach notice had been served by HS2 Ltd, and alluded that scope options were being examined to manage the affordability of the programme.9 She did not clearly set out that the programme was facing serious difficulties.10 In our most recent session we asked the Department and HS2 Ltd why the HS2 Ltd annual report and accounts for 2018–19 did not set out a forthright account of the programme’s status.11 There is no mention of delays or that costs had exceeded the budget. Instead, there were minor references to “cost and schedule pressures” leading to the revision of notice to proceed, which has allowed “better definition of the scope, cost and schedule.”12
6.The Department and HS2 Ltd defended their lack of transparency and careful wording. They told us that, as they were in the middle of a live negotiation with main civil construction contractors, there was a risk that reporting of cost increases might have prejudiced the result.13 In addition, the Department told us it did not make an announcement as Ministers had not yet decided how to proceed.14 The Permanent Secretary recognised that there had been an issue with the transparency of reporting on the programme more generally, and that Government had now made a commitment to six-monthly reporting on the programme.15
7.The Department reports to Parliament on Crossrail through an annual Written Ministerial Statement. Despite this reporting, significant cost and schedule increases were only identified and reported to Parliament at a very late stage. The Government has not yet set out the form or content of its expected reporting on High Speed Two. We would expect any reporting to include as a minimum:
- Current cost range (for each Phase);
- Current schedule range (for each Phase);
- Key milestones (achieved in period and coming in the next); and
- Key risks the programme is currently facing.
8.HM Treasury guidance states that, in addition to producing an Accounting Officer assessment for projects or programmes within the Government’s Major Projects Portfolio alongside an approval of the Outline Business Case, it is good practice to prepare an assessment for “each novel and contentious transaction or proposal”. An assessment should also be prepared if a project departs from the four standards of regularity, propriety, value for money and feasibility, or the agreed plan in terms of cost, benefits, timescales, or level of risk.16 HM Treasury guidance says that Parliament should be provided with a summary of the key points of an Accounting Officer assessment, which is then shared on the Government website, deposited in the Library of the House of Commons, and sent to the C&AG and HM Treasury Officer of Accounts. If the content is too sensitive for publication, the Accounting Officer should instead inform the Chair of the Committee of Public Accounts.17 The Department and HS2 Ltd can only authorise the start of main civil construction when certain criteria have been met, including assurance that the programme is affordable and value for money.18
9.We asked the Department whether, considering the cost overruns, it had sought a Ministerial direction or recommended cancelling investment in the programme. We heard that the Department completed four Accounting Officer assessments in 2019 to help inform this process and decision making.19 The Department told us that these formal assessments considered whether it was appropriate to continue with the project given affordability challenges, if Government policy still supported the programme, the value for money assessment and if there was prospect of a “credible” plan to bring the project within budget. The assessments also considered the risk of nugatory spend if the project were to be cancelled.20
10.The Department explained that it would have been premature to seek a direction on the programme before it consulted Ministers on the potential for a programme review. The Department also informed us that it concluded it should continue with spending on the programme throughout 2019, but only on “essential items” necessary to maintain the programme; spending on items that could wait until a decision on the programme had been made, were postponed.21
11.The Department did not share summaries of any of the four Accounting Officer assessments on Phase One with Parliament. Considering the need for greater transparency from the Department on the status of the programme, and as recommended in our past report, we questioned whether Accounting Officer assessment summaries for High Speed Two could be shared with Parliament and placed on the Government website.22 The Accounting Officer did not appear to know that summaries should be shared, and suggested that while this was not a “matter of routine”, she would consider providing this information pending checks on sensitive information.23 Later in the session, the Accounting Officer provided an update to state she would share the summaries of the assessments.24
Skills and capacity in the Department for Transport and HS2 Ltd
12.In 2013, the previous Committee concluded that the Department faced a challenge in making sure it had the right mix of skills, particularly commercial and major projects expertise.25 In 2016, the previous Committee raised the issue of skills again, highlighting that the Department may find it difficult to secure the skills required for all its major transport infrastructure plans, including HS2.26 Reports from the NAO have raised capability as a challenge27 and the recently published Oakervee Review provided numerous conclusions and recommendations on building capability in HS2 Ltd.28
13.We heard from HS2 Ltd that it had recently concluded a two-year programme that considered 24 capabilities, including leadership, governance, safety, assurance and technical skills. HS2 Ltd’s assessment of its organisational capability at the time of the NAO’s most recent report found improvements in most areas, but gaps remained in key areas such as risk management and assurance, project management and project controls.29 HS2 Ltd told us that the maturity and capability of the organisation will continue to grow and change over time, and that it had spent time choosing staff based on behavioural and technical competences.30 The Department also informed us that it is assessing HS2 Ltd’s capability as part of the notice to proceed to construction assurance process, expected by the end of March 2020. The Department explained that it had been focusing on obtaining assurance and evidence on the current level of capability, progress made and future improvements, particularly in the core areas of project controls and assurance, and commercial management. It is also looking to strengthen the capabilities of the HS2 Ltd Board.31
14.The Crossrail programme suffered with skills and capability issues during the completion stage. In 2019, the previous Committee reported that the Department and Crossrail Ltd recognised there were insufficient people involved in the programme with the necessary skills and experience of integrating different elements of a railway, which is a latter stage of the project.32 The previous Committee also reported that both the Department and Crossrail Ltd recognised that if they had acted sooner to enhance capability in Crossrail Ltd, some of the issues on the programme could have been picked up sooner.33
15.We heard from HS2 Ltd that it is using a revised commercial model with its main civil contractors, which means it bears more of the risk of cost increases.34 HS2 Ltd informed us that it has much better visibility into emerging risks through its more collaborative, less transactional relationship with its contractors and the use of integrated teams, and that the contractors are incentivised to beat cost and schedule targets to generate profit. It also told us that there is a clear definition on what risks the contractors and HS2 Ltd are each responsible for.35
1 C&AG’s Report, High Speed Two: A progress update, Session 2019–20, HC 40, 24 January 2020
2 C&AG’s Report, paras 1–3
3 C&AG’s Report, paras 5–7, 14, 25
4 Qq 37–38; C&AG’s Report, paras 14, 1.13, 2.8, Figure 6
5 Qq 38–40; C&AG’s Report, para 1.13, Figure 6
6 Qq 44–45; C&AG’s Report, para 5, Figure 2
7 Qq 36, 46–52
8 Q 49; Committee of Public Accounts, Oral evidence: Department for Transport: Implementation of Brexit, HC 1657, October 2018, Q 14
9 Qq 36, 46, 50; Committee of Public Accounts, Oral evidence: Crossrail, HC 2127, May 2019, Q 14
10 Q 50
11 Qq 41, 144–147
12 HS2 Ltd, Annual Report & Accounts, 2018 – 2019, HC 2500, July 2019
13 Qq 36, 144
14 Qq 42, 50, 52
15 Q 42, 49
16 HM Treasury, Accounting officer assessments: guidance, September 2017, Purpose and when to produce one, paras 1.2–1.3, 1.8
17 HM Treasury, Accounting officer assessments: guidance, September 2017, The commitment to publish, paras 4.1, 4.11–4.12, 4.14–4.15
18 C&AG’s Report, para 3.2
19 Q 53
20 Q 54
21 Q 54; C&AG’s Report, paras 1.18, 2.28
22 Qq 55, 134; Committee of Public Accounts, Accountability to Parliament for taxpayers’ money, Thirty-ninth Report of Session 2015–16, HC 732, May 2016, Conclusions and recommendations, para 3
23 Q 55
24 Qq 134–135
25 Committee of Public Accounts, High Speed 2: a review of early programme preparation, Twenty-second Report of Session 2013–14, HC 478, September 2013, Conclusions and recommendations, para 6
26 Committee of Public Accounts, Progress with preparations for High Speed 2, Fourteenth Report of Session 2016–17, HC 486, September 2016, Conclusions and recommendations, para 4
27 C&AG’s report, paras 24, 3.7–3.10; C&AG’s Report, Progress with preparations for High Speed 2, Session 2016–17, HC 235, June 2016, paras 9, 3.1, box 3
28 Department for Transport and High Speed Two (HS2) Limited, Oakervee Review of HS2, February 2020
29 Q 115; C&AG’s report, para 3.8
30 Qq 115, 118
31 Q 116–117, 136–141
32 Committee of Public Accounts, Crossrail: progress review, Ninety-Second Report of Sessions 2017–19, HC 2004, April 2019, para 22; Committee of Public Accounts, Oral evidence: Crossrail: progress review, HC 925, March 2019, Q 15
33 Committee of Public Accounts, Crossrail: progress review, Ninety-Second Report of Sessions 2017–19, HC 2004, April 2019, para 22
34 Q 111; C&AG Report, para 3.7
35 Qq 111–114
Published: 17 May 2020