16.Euston is an important and complex part of the High Speed Two programme and involves building new platforms, extending bridges, tunnelling and building connections to the underground system in a tight urban environment.36 The Department told us that Euston is currently estimated to cost £2.2 billion, including £239 million allocated as contingency. HS2 Ltd told us that it is “looking to find a more cost-effective solution based on the number of trains and the number of platforms”.37 The Department told us there are essentially three projects at the Euston site: building the HS2 station; planning for potential changes to the existing Network Rail station; and, planning for an oversite development around the station.38
17.Euston station was originally intended to open with the rest of Phase One in 2026, however significant cost and schedule pressures have pushed back the opening date to between 2031 and 2036.39 HS2 Ltd informed us that Euston had been scrutinised under the Oakervee Review, with discussions on whether the railway should terminate at Old Oak Common. The Department assured us that it still plans to terminate the railway at Euston, not Old Oak Common.40
18.HS2 Ltd stated it had spent around £30 million designing Euston station based on the Phase One hybrid Bill, and the design is ready for planning consent.41 However, the Department and HS2 Ltd told us that there are now choices to be made about aspects of the station, some of which are included in the Oakervee Review. These aspects include the number of platforms, the number of services an hour and whether the station should be designed and built in one or two stages. We were told by HS2 Ltd that these choices have quite big cost and schedule implications.42 The Department, HS2 Ltd and Network Rail are working together to revise their plans, to best optimise the design and delivery of the station as a whole.43
19.HS2 Ltd also informed us that there are links between High Speed Two and the underground network at Euston, including integration with Euston and Euston Square, and potentially Crossrail 2, although the Department informed us that the scheme does not depend on Crossrail 2 to disperse passengers.44 A decision on Crossrail 2 has not yet been made but HS2 Ltd assured us that it would not expect a big impact on London Underground services if it did not go ahead. If changes are made to Euston, HS2 Ltd estimates that it will need to undertake a further year of design work before resubmitting for planning consent.45
20.The High Speed Two programme is complex and involves many interrelated elements, including land and property, high-speed rail infrastructure systems, designing and building stations and constructing the railway itself. HS2 Ltd is expected to manage these concurrently over decades.46 For Phase One, HS2 Ltd is at different stages of contracting for the different elements of the project and told us that it is yet to agree prices for Euston and Old Oak Common, and yet to contract the northern stations, railway systems and trains. HS2 Ltd said that it has contracted about 50% in total for Phase One but has estimated around 78% of the Phase One costs are supported by input from the supply chain.47
21.Phase Two of the HS2 programme provides connections to the existing railway to enable journeys to Liverpool, Newcastle, Edinburgh and Glasgow, with Phase 2b specifically connecting high-speed trains to the existing Midland Main Line railway. At the time of the NAO’s latest report on HS2, the hybrid Bill for Phase 2a had been deposited and was being scrutinised in preparation for Royal Assent in early 2020, and the Department had been planning to begin the hybrid Bill process for Phase 2b in June 2020.48 When we questioned the Department on timescale and interactions between Phases 2a and 2b, it told us that the hybrid Bill for Phase 2a had now been revived in Parliament and work on an Integrated Rail Plan for Phase 2b had been announced, due to be finalised this year.49 The Department explained that the plan will look at the potential for Phase 2b savings and whether Phase 2b can be effectively delivered alongside planned or potential investments in the Midlands and the North of England, such as Northern Powerhouse Rail. The plan will be informed by an assessment of the rail needs of the Midlands and the North by the National Infrastructure Commission and will also include the Infrastructure and Projects Authority (IPA) review on Phase One learnings.50
22.We were interested to hear from the Department whether its criteria for environmental project assurance had changed since the plans for Heathrow Airport’s third runway were ruled illegal by the Court of Appeal as the plans did not take account of the Paris climate Agreement, non-CO2 emissions and emissions post-2050.51 The Department responded that it is still assessing the consequences of the judgement on project delivery. We asked whether HS2 Ltd and the Department had undertaken an assessment on the programme’s alignment with the Government’s climate change policies.52 The Department told us that the programme’s business case had long considered carbon benefits and carbon impact assessments have been published as part of the Phase One and Phase 2a Environmental Statements. It informed us that the programme will support the transition to a net-zero carbon economy through reducing carbon emissions from passenger and freight journeys. For example, the Department told us that High Speed Two will offer seven times less carbon emissions per kilometre travelled by a passenger than an equivalent journey in a car, and 17 times less than a domestic air flight. It also stated that rail freight produces 76% less carbon dioxide per tonne of cargo than its equivalent on the road.53 The IPA’s review on lessons as part of the Integrated Rail Plan is set to report on the effects of environmental mitigation on costs of delivery.54 In light of the Government’s net-zero 2050 target, the Oakervee Review said that in the short to medium term, construction of High Speed Two is forecast to add carbon emissions, but HS2 Ltd estimates the programme could save around 11 to 12 million tonnes of CO2-equivalent over the first 60 years of operation. The review concluded that the ability to reduce carbon emissions in Phase One construction may be limited, so focus should be placed on Phase Two.55
23.HS2 Ltd and the Department needed to deposit a hybrid Bill in Parliament to give them the legal powers to build Phase One. As part of the scrutiny process, extra requirements for the programme were introduced. These included commitments to change the design of the railway, such as lowering it beneath ground level, increasing the length of tunnelling and erecting noise barriers. While it is difficult to isolate the impact of these commitments from other design choices and legal requirements, indicative analysis by HS2 Ltd suggests that the costs of commitments known as ‘undertakings and assurances’ may be around £1.2 billion, compared with the allowance of £245 million included in its April 2017 estimate.56 This is a cost the Department sees as a “significant additional element”.57
24.In light of this, we asked HS2 Ltd how it could assure us that Phase 2a cost estimates for the hybrid Bill will be more accurate than Phase One. HS2 Ltd informed us that the Phase 2a bill process has already been different to Phase One; there was a greater level of public consultation before the Bill entered Parliament and the process is being delivered at a slower pace than for Phase One, which HS2 Ltd anticipate will lead to fewer commitments being needed in Parliament. HS2 Ltd stressed that lessons and insights from Phase One are being applied to Phase 2a. For example, HS2 Ltd is able to use its database of 12,000 cost rates, developed as part of Phase One, to more accurately estimate the true cost of a commitment, leading to a more robust cost estimate.58
25.In response to being questioned on how it is learning lessons from major programmes, the Department explained that, in 2019, it published a joint report with the IPA, on lessons for the sponsorship of major projects. The report sets out 24 best practice lessons for delivering major projects, drawing on challenges from projects such as Crossrail, Thameslink and Great Western Railway.59 Previous Committee reports have also highlighted opportunities for learnings from these programmes.60 The Department told us that it is embedding the lessons from its report into the delivery of High Speed Two. It pointed to lessons such as using realistic ranges for costing and schedules rather than fixed points, taking action to reset the programme rather than continuing and hoping it is brought back under control, using benchmarking to test and assure cost estimates and strengthening HS2 Ltd’s Board.61
26.The Department told us that there are important lessons to learn from High Speed Two which are relevant for all major project delivery teams. Lessons include understanding the scale and complexity of the programme, the capability requirements and expectations placed on HS2 Ltd to deliver, as well as lessons around over-optimism.62 In addition, the Department informed us that it had asked the IPA to undertake a detailed examination into Phase One to look for opportunities to deliver Phase 2b more efficiently.63
27.In addition to implementing the Department/IPA report lessons, the Department explained that it has tasked Ian King, its lead non-executive Director, to ensure best practice is embodied across the whole transport portfolio. The Department provided more detail, informing us that it is strengthening its portfolio management and risk assessment processes, has made changes to its investment committee to improve effectiveness and is recruiting more senior capability, all in a bid to learn from its programmes.64
28.We also asked about what lessons the Department had learned on its approach to skills and retention. We heard it is working to ensure best practice is embedded across the portfolio. The Accounting Officer for the Department also told us that there should be greater continuity of tenure in key departmental roles. In the case of High Speed Two, however, there has not been a high level of churn within her senior team.65
36 Q 66; C&AG’s Report, para 3.5
37 Qq 69,71–72; Letter from Permanent Secretary, Department for Transport to Chair of Committee of Public Accounts dated 13 March 2020, The cost of the HS2 station at London Euston
38 Q 66; C&AG’s Report, para 3.5
39 Letter from Permanent Secretary, Department for Transport to Chair of the Committee of Public Accounts dated 2 March 2020, HS2 section and appendix D; C&AG’s Report, para 1.11, Figure 5
40 Qq 76, 77
41 Qq 67, 76
42 Qq 66, 68
43 Q66
44 Q 73; Letter from Permanent Secretary, Department for Transport to Chair of Committee of Public Accounts dated 13 March 2020, Dispersal of passengers arriving on HS2 at Euston station
45 Qq 67, 73–74
46 Q 58; C&AG’s Report, paras 1.4–1.5
47 Qq 109–111
48 Q 34; C&AG’s Report, paras 1, 1.9, Figure 1
49 Qq 78, 81, 83
50 Qq 81, 83; Letter from Permanent Secretary, Department for Transport to Chair of the Committee of Public Accounts dated 2 March 2020, Appendix C
51 Q 119; Written statement to Parliament from Department for Transport and the Rt Hon Grant Shapps MP delivered on 27 February 2020, Aviation update: 27 February 2020
52 Qq 119, 120
53 Qq 120–121; EV xx Letter from Permanent Secretary, Department for Transport to Chair of Committee of Public Accounts dated 13 March 2020, HS2’s effect on the UK’s climate change targets
54 Letter from Permanent Secretary, Department for Transport to Chair of the Committee of Public Accounts dated 2 March 2020, Appendix C
55 Oakervee Review of HS2 published 11 February 2020, Conclusion 5, paras 5.30–5.31, 5.33–5.34
56 C&AG’s Report, paras 2.17–2.18
57 Q 35
58 Q 130
59 Q 82
60 Committee of Public Accounts, Completing Crossrail, One Hundred and Ninth Report of Session 2017–19, HC 2127, July 2019, Learning lessons; Committee of Public Accounts, Modernising the Great Western Railway, Forty-fourth Report of Session 2016–17, HC 776, March 2017, para 5; Committee of Public Accounts, Update on the Thameslink Programme, Twentieth Report of Session 2017–19, HC 466, February 2018, para 5.
61 Qq 82–83
62 Qq 58, 80
63 Qq 81, 83
64 Q 83
65 Qq 82–85
Published: 17 May 2020