This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.
This is the full report, read the report summary.
The High Speed Two (HS2) programme aimed to construct a new high speed, high-capacity railway between London, the West Midlands and the north of England. It consisted of different phases, with Phase 1 (between London and the West Midlands) most advanced. On 4 October 2023, the Prime Minister announced that Phase 1 would continue but that all other phases would be cancelled in response to increasing costs on the programme. The government would instead invest £36 billion (in 2023 prices) from the cancelled phases into other transport programmes and projects as part of its Network North: transforming British transport plan. The government also announced that the HS2 Euston station design would be simplified and that private sector investment would be found to deliver the project, releasing £6.5 billion (in 2023 prices) of planned expenditure. The Department for Transport is the sponsor of the HS2 programme and HS2 Ltd is responsible for delivering it.
The Department published an Accounting Officer Assessment, of whether completing Phase 1 of HS2 between Euston and Birmingham meets the value for money requirements of Managing Public Money. The Department concluded that it did, based on continuing Phase 1 from this point in time, excluding money spent to date (sunk costs estimated at £24.6 billion at 2019 prices), and taking account of the cost of remediation work (estimated at £11 billion at 2019 prices) required were Phase 1 to be cancelled. The Accounting Officer also wrote to us to explain the details of the assessment, setting out the methodology used and the uncertainties in several of the assumptions used. In that letter the Department also confirmed that if it considered Phase 1 as a whole then “Taking an estimated range for the total costs of Phase 1 and assessing them against the estimated total benefits (i.e. including sunk costs and excluding remediation costs) [it] would result in a BCR [Benefit Cost Ratio] range significantly below 1 and would represent poor Value for Money.”
1. HS2 now offers very poor value for money to the taxpayer, and the Department and HS2 Ltd do not yet know what it expects the final benefits of the programme to be. The Department acknowledges that building just Phase 1 will not be value for money because total costs will significantly outweigh benefits. However, in October 2023 the Department’s Accounting Officer did assess that, excluding the £23 billion that had been spent to date (in 2019 prices), it was value for money to continue and complete Phase 1. There are many uncertainties in this assessment and we were left with little assurance over the calculations. In particular, the Department needed to include as a benefit the £11 billion (in 2019 prices) of costs avoided from not cancelling the whole project, in order to justify continuing. Even with such assumptions the potential benefits are low, with between £1.10 and £1.80 of benefit for every £1 to be spent completing the project. The Department also has further work to do to before it fully knows what the potential benefits will be. The Department will now need to revise its business case for Phase 1, which it expects to complete during the first half of 2024.
Recommendation 1:
a) In its revised business case, the Department should set out clearly how it has sought to maximise benefits from Phase 1, what benefits it will now plan to deliver and how it will measure success; and
b) It should also set out when it will produce its benefits realisation plan and, as part of that, how it will work across government and local authorities to deliver the outcomes it seeks.
2. Costs have continued to escalate and the Department and HS2 Ltd do not know how much the programme will now cost. This Committee has repeatedly raised concerns about the Department’s and HS2 Ltd’s management of costs. But, despite our warnings and recommendations, costs have continued to rise. The Department’s estimate of how much it will cost to complete Phase 1 is now £45 billion to £54 billion (in 2019 prices), above a budget of £44.6 billion that had been reset only three years previously in 2020. HS2 Ltd is estimating an even higher range, of from £49 billion to £57 billion (also in 2019 prices). HS2 Ltd estimates that inflation since 2019 will add a further £8 billion to £10 billion to the cost. HS2 Ltd has not been able to constrain costs in its main works civils contracts, despite this being an area we flagged for attention in spring 2020. In our view there has been insufficient senior level focus on cost control before; but HS2 Ltd says it is now implementing changes to increase its focus on cost control, for example through new senior roles and better management information. The Department has also set out its intention to bear down on the costs of Phase 1, help HS2 Ltd to change its culture on cost control, and strengthen its own governance and control of the programme with increased oversight and reduced delegation.
Recommendation 2: The Department and HS2 Ltd should set out in its next six-monthly update:
3. The Department and HS2 Ltd do not yet know what the impact of the decision to cancel Phase 2 will be on the HS2 programme and how HS2 Ltd will need to adapt so it can be successfully delivered. HS2 Ltd and the Department need to work through in detail how they will close-down work on the cancelled sections of HS2. The Department does not yet understand how the high-speed trains will operate as part of the rail network or how the HS2 line will connect to the West Coast Mainline to maximise benefits from Phase 1. For example, trains designed for the high-speed line will likely be slower when on the West Coast Mainline compared to the existing tilting rolling stock as they will not be able to travel on the older track infrastructure at the speeds they were designed for. It will also need to identify ways to resolve impacts on other projects, such as Northern Powerhouse Rail which will need a new revised scope. HS2 Ltd acknowledges that it needs to think about the capabilities the organisation needs to complete the tasks ahead. HS2 Ltd says, however, that although it has flexibility in the pay it can offer, competitors can offer much higher salaries still, impacting on its recruitment and retention.
Recommendation 3: The Department and HS2 Ltd should set out in its next six-monthly update:
4. Developing Euston is dependent on attracting private finance to pay for it, but the Department does not yet have any plan for how to do so and has to make investment decisions soon to protect long-term value for money. Despite the intention to scale back the station itself compared with previous plans, redevelopment work at Euston remains a huge and complex project. Government has redirected £6.5 billion (in 2023 prices) of expenditure away from Euston, and the Department is now looking for private funding to cover the costs of the re-scoped Euston station and the over-site development. It is also considering ways the private sector might contribute towards the cost of tunnelling from Old Oak Common to Euston. The Department has previously had more modest proposals for private sector investment at Euston rejected by HM Treasury due to the risks involved. The Department told us there is ‘in principle’ interest from the private sector, but that it needs to decide on the financing model. The Department does not yet have a plausible or detailed proposition it could take to the market and it is likely to take significant time to develop one. There are urgent decisions the Department must make on funding the tunnelling from Old Oak Common to Euston or it will incur much greater costs from stopping and restarting work.
Recommendation 4: The Department should:
a) Develop plans for a range of private investment scenarios, including different levels of public finance, as part of its consideration of how to progress with the station at Euston; and
b) Decide soon how to proceed with the tunnelling from Old Oak Common to Euston to best protect value for the taxpayer.
5. The Department and HS2 Ltd do not yet know when they will dispose of land and property no longer needed and how they will balance different interests. The Department has spent over £600 million on land and property (in 2019 prices) along the section of the route that has now been cancelled. Part of this land may be required for other projects, such as Northern Powerhouse Rail, but the Department is looking to release land for other purposes quickly. When disposing of the land, HS2 Ltd and the Department will need to ensure that this is done in a way that protects the taxpayer as well as local interests, while also being fair to those who have had their properties compulsorily purchased. The sale of land and property can take many years, with individuals seeking to buy back land no longer needed for Phase 1 finding the process difficult and lengthy. There is a moral expectation that government should expedite opportunities for people who wish to buy back their land and property where they have been required to sell it.
Recommendation 5: The Department and HS2 Ltd should, alongside the Treasury Minute response, report to the Committee their plan for land and property disposal. This plan should include:
6. The Department has yet to finalise what the redirected £36 billion (in 2023 prices) originally intended for the cancelled HS2 phases will fund or decide on when these projects can be expected to start. The Department has redirected the £36 billion that would have been spent on HS2 Phases 2a, 2b and East to a large portfolio of different road and rail projects through ‘Network North’. This funding will be available over the period up to 2041, very roughly mirroring the timings of when it would have been spent on HS2. The Department has announced how some of this funding will be redirected, such as support for bus services and additional funds for mayoral combined authorities. The Department says that the list of alternative investments contained in Network North would go through normal business case processes to be approved and while some projects are well advanced, other projects still require a significant amount of further work. There is not yet a list, with expected costs and benefits, of what projects the Department expects will be delivered over the long-term with the redirected funds.
Recommendation 6: The Department should, alongside its Treasury Minute response, report to the Committee on how it intends to report and update the list of projects by region that will be funded through money redirected to Network North, over what timescale projects will be delivered, and how it will ensure value for money will be achieved.
1. This Committee has reported regularly on progress with the High Speed 2 programme over the last decade. Our first report was in 2013 and even at that early stage we were warning about an emerging pattern of costs increasing, benefits decreasing, and the apparent lack of the necessary commercial expertise to oversee the programme. We continued to report our concerns over the years, for example being critical about the lack of transparency over increasing costs, about some of the decisions taken by management, and about engagement with the people, communities and businesses near the route. Our most recent report before this one was in July 2023, and focused on the proposed High Speed 2 station at Euston. Amongst other things we noted that the budget for Euston had proved completely unrealistic even before considering the impact of inflation, and that Parliament had again not had the transparency it needed on the likelihood of cost increases.1
2. We recalled the Department for Transport (the Department) and HS2 Ltd to give further evidence in November 2023. The Department is the sponsor of the HS2 programme and HS2 Ltd is responsible for delivering it. Our evidence session followed government’s announcement on 4 October to continue with HS2 from Euston to the West Midlands (Phase 1) but not to continue with HS2 Phases 2a, 2b and East. At the same time the government announced that £36 billion (2023 prices) previously earmarked for HS2 would be redirected to other projects across the country. With the cornerstone of this plan being ‘Network North’, which would “drive better connectivity across the North and Midlands with faster journey times, increased capacity and more frequent, reliable services across rail, buses and roads.”2 The forecast date for initial HS2 services between Birmingham Curzon Street and Old Oak Common remains within the range of 2029 to 2033, with HS2 Ltd aiming for 2030.3
3. The Department wrote to us on 4 October alongside publication of the Accounting Officer Assessment of the decision to continue with Phase 1 of HS2. The Department’s Accounting Officer stated in her letter “I should emphasise however that this is the VfM of the marginal decision to continue with Phase 1 at this stage in its delivery, in accordance with Green Book guidance. Taking an estimated range for the total costs of Phase 1 and assessing them against the estimated total benefits (i.e., including sunk costs and excluding remediation costs) would result in a BCR range significantly below 1 and would represent poor Value for Money.”4 The Accounting Officer said that at the time of her AO Assessment, the sunk costs figure had been £23 billion, but that it was probably somewhat higher now.5 On 15 November 2023, the day before our evidence session, the Department had published its latest Six-monthly Report to parliament on HS2. That confirmed spend to date on Phase 1 of £24.6 billion (at 2019 prices).6 The Accounting Officer also confirmed that remediation costs—the amount the Department would have to pay if Phase 1 were to be scrapped—would be £11 billion (2019 prices).7 As well as excluding sunk costs in its AO assessment of the decision to continue with Phase 1, the Department also treated the avoidance of the £11 billion remediation cost as a benefit.8
4. The Accounting Officer also confirmed in that letter her assessment that “the decision to continue with HS2 between Euston and Birmingham meets the tests of regularity, propriety, Value for Money (VfM) and feasibility as set out in MPM.” She further explained in the letter “I have considered this assessment against a counterfactual of discontinuing Phase 1, rather than a counterfactual of continuing with all previous phases of the scheme. Not building Phases 2a and 2b reduces the benefits enabled by Phase 1 (principally up to 8 trains per hour, instead of up to 17 trains per hour) and therefore its VfM. However, under MPM and the Green Book it is usual to assess the Value for Money of planned expenditure, and not that of decisions to reduce or cancel expenditure which could result in different Value for Money, recognising that Ministers may always choose to cancel or forgo expenditure because priorities or available funding have changed.”9
5. The Accounting Officer’s letter to us also set out some assumptions used in the Department’s calculations of the Benefit-Cost-Ratio (BCR) for the continuation of Phase 1. These included: that sunk costs are excluded from the calculation; and that remediation costs (the costs which would be incurred if Phase 1 did not proceed, for example making sites safe) had been taken into account. The application of these and other assumptions had resulted in a BCR range for the continuation of Phase 1 between Euston and Birmingham Curzon Street of 1.1 to 1.8.10 That is, benefits in the range of £1.10 to £1.80 for every £1 spent completing the project. The 4 October letter had stated a BCR range of 1.2 to 1.8, but it was reissued with the range 1.1 to 1.8, which the Department told us was a change due to having identified a transposition error in the calculation (rather than a change to the underlying assumptions).11
6. The Department told us that, despite the lower end of the BCR range being close to 1, even if it was reduced to 1 that would not reverse the assessment, on this basis, that continuing with Phase 1 was value for money. The Accounting Officer said she was not immediately concerned that the assessment was a risky one, describing it as “a fairly robust assessment and is sufficient to give me a significant degree of confidence that continuing at this point represents value for money.”12
7. The inclusion of an allowance for remediation costs if Phase 1 were to be discontinued, and the exclusion of sunk costs, had a significant impact on the calculation of a positive BCR in the range 1.1 to 1.8, and thus on the AO Assessment. In addition, the figures quoted for these elements are in 2019 prices and would be significantly higher in 2023 prices, though benefits would also be higher in 2023 terms.13 The Accounting Officer reiterated the point she had previously emphasised in her letter, stating that “if you step back, as it were, and look at the totality of benefits and of costs as if you were starting on day 1 with Phase 1, it would not achieve value for money.”14
8. The Department told us that a full, revised business case will need to be produced for Phase 1, taking account of what it now knows about costs, the changes to scope and what that means for the overall benefits.15 The Department said that key benefits remain – such as increased capacity, journey times and wider economic benefits from investment and regeneration around stations.16 But not building 2a and 2b reduces additional capacity and the possibility of faster journeys north of Birmingham, and the previous business case depended on delivering 2a and 2b.17 The Department said that there is undeniably more work to do to get to the new business case, as it represents a significant reset of the programme, and it will need to do further work both to figure out costs and on the benefits that can now be delivered. It told us it would be doing that work in the first half of 2024.18 The Department told us it would take longer than that to produce a detailed plan for a privately funded Euston development.19
9. In our previous reports we have regularly raised concerns about escalating costs and cost forecasts for the HS2 programme. For example, in our May 2020 report we commented that “The High Speed Two programme has gone badly off-course and is now estimated to cost up to £88 billion, significantly more than the original budget of £55.7 billion (both figures are 2015 prices)”.20 In our September 2021 report we noted that “The programme’s funding was reset in 2020 and is now expected to cost a total of between £72 billion and £98 billion (2019 prices). The Phase One budget is £44.6 billion including almost £10 billion of contingency (2019 prices).”21
10. HS2 Ltd’s most recent estimate for the cost of Phase 1 is that it will be in the range £49 billion to £57 billion (2019 prices). It cites a range of issues as the cause of increases, including “design performance, delivery productivity, consenting delays, and a difficult operating environment with COVID-19 and the Ukraine War affecting the supply chain.” In particular it also cites the increased cost of ‘Main Work Civils’. The Government disagrees with this forecast because a) it was drawn up by HS2 Ltd before being told of the decision to cancel Phase 2 and b) because the Department makes different assumptions on how much cost risk remains addressable. The Department’s most recently published estimate is a range of £45 billion to £54 billion (2019 prices) for the cost of Phase 1.22 After our evidence session, when giving evidence to the Transport Committee in January 2024, HS2 Ltd estimated that bringing its estimate in 2019 prices up to 2023–24 prices would add a further £8 billion to £10 billion to the cost of Phase 1. It said that construction inflation over the past three years had been 27%, with, for example, steel rising by 47%, rebar by 53%, and concrete by 48%.23
11. HS2 Ltd told us that its cost estimate had been the result of much detailed analysis and many meetings, all done transparently with the Department. It told us that while Ministers had committed to an opening date between 2029 and 2033, HS2 Ltd was well within that range at the moment, and was aiming for 2030.24 The Department said that it had worked off the same data and been in the same meetings as HS2 Ltd when coming up with its own overlapping but lower forecast range of costs. But it said it had taken different views to HS2 Ltd on the extent to which risks could be mitigated. The Department accepted that it and HS2 Ltd would have to bottom out differences and reach an agreed range in the next stage of work.25 But even the Department’s lowest cost estimate is higher than the reset Phase 1 budget of £44.6 billion (2019 prices), so the Department is projecting to need more money than has been allocated and will need to agree funding for that with the Treasury.26
12. To explain cost increases since 2020, the Department pointed to several factors including: Covid, inflation, Ukraine, the supply chain and the scale of the cost of dealing with ‘planning and consenting’. It said that poor cost information and cost reporting from the supply chain had been a significant contributing factor, and that financial and risk management broadly had not been as robust and as good as it needed to be. The Department acknowledged the need for HS2 Ltd to focus on building the organisation, the capability, the processes and the leadership to drive a relentless focus on cost control.27
13. HS2 Ltd told us more directly that 89% of the difference between the Departments’ 2020 estimate of £44.6 billion and now was about how the Main Works Civils contracts were manifesting. It said that the Government’s decision to let cost-plus contracts, with few incentives and penalties, had left HS2 Ltd without any real levers on contractors to do better in relation to schedule and costs. The Department then agreed that the Main Works Civils had been the principal driver of cost increase.28 In our May 2020 report we had noted how the revised commercial model with main civil contractors had left HS2 Ltd (and therefore the taxpayer) bearing more of the risk of cost increases. We had pointed to the corresponding need for HS2 Ltd to ensure that it had the right commercial skills to manage these arrangements, and for the Department to be able to oversee and challenge HS2 Ltd’s performance.29 HS2 Ltd told us that the decision to let cost-plus contracts had not itself made the costs increases inevitable, and that there was the key factor to consider of how well the company had managed those contracts, as well as just the form of those contracts.30
14. In its October 2023 Command Paper on Network North and its new plans for completion of Phase 1, the Department stated that “We need to make changes quickly and decisively so the remainder of HS2 is delivered as cost effectively as possible. That means:
a) Bearing down on the costs of Phase 1 and only delivering what is essential.
b) Embedding a singular focus on cost control in HS2 Ltd and its supply chain and being prepared to take difficult decisions on contracts, scope and benefits to hold to budget.
c) Reinforcing the leadership of HS2 Ltd, under Sir Jon Thompson, to change the culture on cost control with challenge from DfT, HMT and the IPA.
d) Providing strengthened governance and control from the Government whilst this reset is developed and delivered, with increased oversight and reduced delegation.”31
15. On recent development in governance in HS2 Ltd, the company told us it had streamlined executive governance to focus on costs and deliverables, and improved management information significantly, and that it had also recruited two further finance directors and established a new sub-committee for finance and performance. HS2 Ltd said it had significantly strengthened the Board with two recent appointments, and would be making two further non-executive director appointments with a particular focus on cost control. It also said it was also introducing a new ‘chief railway officer’ post from January 2024 to integrate all elements of the new railway. The chief railway officer would report directly to the new chief executive. The new chief executive has not been appointed yet, and HS2 Ltd told us the question of salary was still with Ministers to consider, but a job description and person specification had been agreed.32
16. The Department’s November 2023 update to Parliament stated that “No decisions have been made on the train service that will run when HS2 is operational.”33 The Department told us it had developed “an outline train specification that sets out an assumed service”, but before bringing it into service there would need to be proper consultation nearer the time. Final decisions would need to take account of the economic conditions and the demand at the time. It explained that some assumptions are more certain, for example between Birmingham and London, but it needed to work out how to optimise services beyond that, across HS2 and Network Rail, to optimise the whole corridor. The Department said it would continue to look at optimising the benefits of Phase 1 and what the optimal train service to run is, but final decisions would be made much closer to opening.34
17. The cancellation of other HS2 phases will inevitably result in some design changes to Phase 1. HS2 Ltd told us that the top of its list is the implications for how HS2 trains will join the West Coast Main Line. HS2 trains would have joined the line north of Manchester if Phase 2a were being built. But in order to travel on HS2 trains through to Manchester, Liverpool and Scotland, HS2 trains will now need to join it at Handsacre, which is near Lichfield.35 Once the HS2 trains have joined the West Coast Main Line they will be limited to that line speed, rather than able to travel at faster HS2 line speeds, and likely be slower than the existing tilting Pendolino rolling stock.36 HS2 Ltd described Handsacre junction as already being a choke point for the West Coast Main Line. It told us it was working with the Department to look at whether the junction needed to be bigger and what expansion might mean in terms of land and cost.37
18. We asked the Department about the impact of cancelling HS2 Phases 2 on other projects that would have had existing business cases dependent in part on Phases 2a or 2b. The Department highlighted the interdependency between 2b and Northern Powerhouse Rail and said that it would be some time before it had a business case for the revised scope of that. It said that while some of the programmes within Network North were well established, it did not yet have a business case for some of the others.38
19. We also asked whether any contracts would need to be cancelled in respect of Phase 2 and payments made to companies as a result. HS2 Ltd told us that for Phases 2a and 2b the number of contracts let was very small, but it was exposed to some legal challenge, the value of which exposure it estimated to be under £10 million.39
20. Notwithstanding the Board and Director level changes referenced above, HS2 Ltd also acknowledged that it needed to think about its capacity and capability throughout to deliver the task ahead. It told us it was going through that process and highlighted three areas it needed to address: more people to focus on railway systems; more skills to bear down on finances, getting the right information from the supply chain and whether it was on time, on schedule, and meeting quality standards; and more skills on managing and mitigating financial risk.40 On recruitment and retention, HS2 Ltd told us that there was a significant attraction for people to work on HS2”, but that it was a competitive recruitment market, particularly for good contract managers. Although HS2 has some flexibility in what pay it can offer, it told us that it was exposed to an overheated market and people would therefore leave, especially when being offered double or even triple their current salaries.41
21. In July 2023 we reported on how the Department’s previous plans for the HS2 station at Euston had proved to be unrealistic and unaffordable.42 Alongside the October 2023 cancellation of HS2 phases 2, the Department acknowledged that previous plans for the station had been unaffordable, and announced that the station design would be stripped back to focus on delivering a station that works and can be open as soon as possible. The Department announced that it “will deliver a new Euston Quarter to provide much-needed homes”, appoint a development company (separate from HS2 Ltd) to manage delivery of the project, leverage private sector investment, and by so doing release £6.5 billion (2023 prices) of previously planned expenditure.43
22. The Department confirmed to us that “At the moment we are expecting the private sector to fund the station and all the development. The benefit for developers comes from the commercial housing development.”44 It confirmed that this included looking for private funding to cover the whole cost of running from Old Oak Common to Euston.45 We noted that the Treasury had previously rejected the idea of Euston being privately funded; the Department replied that the Treasury stance had changed and that “They are now very supportive of us seeking private sector-led investment.”46 The Department told us that the expectation is that a development corporation will be set up to take the Euston plans forward, but that there are different sorts and it would be working with DLUHC and the Treasury “to develop the best possible plan to secure the ambition for Euston.”47
23. The Department confirmed it remains the Government’s ambition that Euston be the London terminus for HS2.48 But it confirmed it was still expecting trains to stop at Old Oak Common for a period of time before Euston was developed, because Euston would not be up and running in the same timeframe. The Department could not give any date or range of dates for when it thought Euston might be delivered.49
24. We raised concerns about the risk of incurring significant additional cost later if contracts for the tunnel between Old Oak Common and Euston were not let in the coming months. The Department said there were significant phasing issues of this nature for the Euston redevelopment that it would have to address pragmatically. It recognised the issue that there is a dependency on getting the tunnelling away to open Old Oak Common and said that, ultimately, it might seek funds to compensate the Government for that tunnelling from the private sector as part of the wider development – “If there is a cash flow issue, the taxpayer will probably have to substitute for that in the short term.”50 The Department told us that “The attractiveness of Euston and the high-speed station at Euston is only going to be realised if you have the approach into Old Oak Common. That is understood.”51
25. We raised the issue that private sector involvement and finding would be dependent on there being greater certainty on dealing with issues in and around Euston. The state of the general property market in the area and how much infrastructure the public sector provides will be critical factors in how much the private sector will pay for the whole site. The Department said it had started to discuss with Treasury Colleagues, the IPA and DLUHC how to start turning this into a proposition that would allow it to have a deeper engagement with the market in order to ensure and test appetite. It said that both the Secretary of State and the Chancellor have had conversations with developers who have said that in principle they can see lots of attractions.52 But the Department recognised that there was a lot of work to do if the ambition of private sector funding is to be realised, noting that “We need to have a coherent and plausible position to interface sensibly with the private sector.”53
26. HS2 Ltd told us it had spent £3.6 billion on land and property for Phase 1, and believed it had acquired more than 95% of the land it would require for Phase 1. It had spent £634 million on acquiring land and property for the HS2 phases that have now been scrapped – £273 million on Phase 2a, plus £201 million on 2b, plus £160 million on the eastern leg to Leeds.54
27. The Department said it needed to assess what land that had been acquired for Phase 2b might need to be retained for Northern Powerhouse Rail and for some local interests, where the local authorities would like to retain the land. It said that the Department and HS2 Ltd would need to make careful value for money assessments on releasing land back to the market in a way that meets local interests and protects the taxpayer. HS2 Ltd emphasised that release of Phase 2 land would take some time and not be a quick process, notably because of the six tests that made up the ‘Crichel Down’ rules.55 HS2 Ltd said that, assuming the six tests were satisfied, former owners who had been compulsorily purchased would get first refusal to buy back at current market value.56
28. We highlighted the argument for there being a moral expectation that, having cancelled Phase 2, the Government should expedite the opportunity for people to be able to buy back their house or their property. HS2 Ltd acknowledged the point while also not wanting to commit to any timescales given the rules it had to follow and the dependency on steers from Ministers. We also highlighted the argument for maximising return to the taxpayer, which could mean hanging on to property until the market improved. The Department said it was keen to ensure it respected that people had been individually impacted. It emphasised the need to consider both fairness to taxpayers and fairness to affected individuals, on which it would have to put advice to Ministers on the right balance between the two, and then enact the steer received.57 The Department’s Permanent Secretary and Accounting Officer said that, were she to be asked by Ministers to proceed in a way that was not consistent with the tests of Managing Public Money, then she would give that advice and seek a ministerial direction if required.58
29. We also highlighted that, where some Phase 1 land was going through the process of being returned (it could have been taken for temporary reasons such as utility diversions) the process had been painful and lengthy. HS2 Ltd said that land and property should be returned, once it is not needed anymore, to those who owned it before if they wanted it, subject to all of the associated rules. It said that HS2 Ltd and the Department ought to do that as fast as possible, while acknowledging that on Phase 1 it had been a “pretty slow trickle” so far. It also commented, however, that this was something of an improvement on previous policy which had been to only release any land and property at the end of the whole project. The Department added that it should look for opportunities to allow use of land no longer required if it benefits all parties to do so; for example to look at renting back rural land while the sale and purchase process goes through.59
30. The Department has said that the decision not to proceed with HS2 phases 2a, 2b and East will unlock £36 billion (2023 prices) and that “every penny of the £19.8 billion committed to the Northern leg of HS2 will be reinvested in the North; every penny of the £9.6 billion committed to the Midlands leg will be reinvested in the Midlands; and the full £6.5 billion saved through our new arrangements for Euston will be spread across every other region in the country. This will be money additional to the local transport, road and rail budgets allocated at the last Spending Review and additional to what those organisations were expecting for the next decade.”60 The Department told us these figures were assumed savings from not continuing with the HS2 phases, with the 2019 prices previously used inflated to 2023 prices.61
31. In its Network North paper the Department described a number of road and rail projects to be included in what will be funded from the £36 billion, subject to approval of business cases.62 The Department told us that these “alternative investments” ranged from specific projects like Northern Powerhouse Rail to uplifts in city regional sustainable transport funding and local integrated transport funding, and that it would assess projects “in the normal way rather than as a bundle.63 It explained that “about half” of the £36 billion would, in effect, be given to other parties through devolved funding arrangements, with the principle being that it should be for mayors, local authorities and others to decide what the key priorities are in their areas.64 The Department said that there are other specific projects, some of which are well advanced and some of which are going to take a very significant amount of further work.65 The Department told us that the money would be spent broadly to the same timescales as it would have been under HS2, up to 2041, but with the potential of bringing benefits earlier.66
32. The Department told us it had already announced separately how some of this funding will be redirected.67 For example, on 23 October it announced a £150 million reallocation of HS2 funding to support bus services.68 It also announced additional funds for mayoral combined authorities to be provided through City Region Sustainable Transport Settlements.69 In written evidence provided after the session the Department added that it had made a commitment to increase the government contribution to ‘most existing Major Road Network and Large Local Major road schemes’ from 85% to 100%, subject to business case approval.70 We asked when there would be a profiled list, with costs, of what is going to be delivered with the £36 billion. The Department said it would be wanting that internally and would talk to Ministers about how to provide transparency by making some of it public.71 In written evidence provided after the session, the Department added that it was working closely with Number 10 and the Cabinet Office to deliver the Network North programme effectively and to share public updates on progress against projects and schemes included in the announcement regularly.72
Dame Meg Hillier, in the Chair
Paula Barker
Olivia Blake
Sir Geoffrey Clifton-Brown
Ben Lake
Anne Marie-Morris
Draft Report (HS2 and Euston), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 32 read and agreed to.
Summary agreed to.
Introduction agreed to.
Conclusions and recommendations agreed to.
Resolved, That the Report be the Tenth Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available (Standing Order No. 134).
Adjourned till Monday 5 February at 3.30 p.m.
The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.
Alan Over, Director General High Speed Rail Group and SRO for HS2, Department for Transport; Dr Nick Bisson, Integrated Rail Plan and Northern Powerhouse Rail, Department for Transport; Sir Jon Thompson KCB, Executive Chair, High Speed Two (HS2) Ltd; Dame Bernadette Kelly DCB, Permanent Secretary, Department for TransportQ1–171
The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.
HS2 INQ numbers are generated by the evidence processing system and so may not be complete.
1 Bosi, Mr. Andrew (HS20011)
2 Bruce, Lieutenant Colonel Andrew (HS20002)
3 BusinessLDN (HS20004)
4 Cordiner, Mr Andrew (HS20001)
5 Gross, Michael (HS20005)
6 High Speed Rail Group (HS20006)
7 LB Camden (HS20007)
8 Manchester City Council (HS20008)
9 Smith, Chris (HS20003)
10 Transport for Greater Manchester (HS20010)
11 Watford Rail User Group; and Abbey Line Rail User Group (Watford – St Albans line) (HS20009)
All publications from the Committee are available on the publications page of the Committee’s website.
|
Number |
Title |
Reference |
|
1st |
The New Hospital Programme |
HC 77 |
|
2nd |
The condition of school buildings |
HC 78 |
|
3rd |
Revising health assessments for disability benefits |
HC 79 |
|
4th |
The Department for Work & Pensions Annual Report and Accounts 2022–23 |
HC 290 |
|
5th |
Government’s programme of waste reforms |
HC 333 |
|
6th |
Competition in public procurement |
HC 385 |
|
7th |
Resilience to flooding |
HC 71 |
|
8th |
Improving Defence Inventory Management |
HC 66 |
|
9th |
Whole of Government Accounts 2020–21 |
HC 65 |
|
Number |
Title |
Reference |
|
1st |
Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2020–21 |
HC 59 |
|
2nd |
Lessons from implementing IR35 reforms |
HC 60 |
|
3rd |
The future of the Advanced Gas-cooled Reactors |
HC 118 |
|
4th |
Use of evaluation and modelling in government |
HC 254 |
|
5th |
Local economic growth |
HC 252 |
|
6th |
Department of Health and Social Care 2020–21 Annual Report and Accounts |
HC 253 |
|
7th |
Armoured Vehicles: the Ajax programme |
HC 259 |
|
8th |
Financial sustainability of the higher education sector in England |
HC 257 |
|
9th |
Child Maintenance |
HC 255 |
|
10th |
Restoration and Renewal of Parliament |
HC 49 |
|
11th |
The rollout of the COVID-19 vaccine programme in England |
HC 258 |
|
12th |
Management of PPE contracts |
HC 260 |
|
13th |
Secure training centres and secure schools |
HC 30 |
|
14th |
Investigation into the British Steel Pension Scheme |
HC 251 |
|
15th |
The Police Uplift Programme |
HC 261 |
|
16th |
Managing cross-border travel during the COVID-19 pandemic |
HC 29 |
|
17th |
Government’s contracts with Randox Laboratories Ltd |
HC 28 |
|
18th |
Government actions to combat waste crime |
HC 33 |
|
19th |
Regulating after EU Exit |
HC 32 |
|
20th |
Whole of Government Accounts 2019–20 |
HC 31 |
|
21st |
Transforming electronic monitoring services |
HC 34 |
|
22nd |
Tackling local air quality breaches |
HC 37 |
|
23rd |
Measuring and reporting public sector greenhouse gas emissions |
HC 39 |
|
24th |
Redevelopment of Defra’s animal health infrastructure |
HC 42 |
|
25th |
Regulation of energy suppliers |
HC 41 |
|
26th |
The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system |
HC 44 |
|
27th |
Evaluating innovation projects in children’s social care |
HC 38 |
|
28th |
Improving the Accounting Officer Assessment process |
HC 43 |
|
29th |
The Affordable Homes Programme since 2015 |
HC 684 |
|
30th |
Developing workforce skills for a strong economy |
HC 685 |
|
31st |
Managing central government property |
HC 48 |
|
32nd |
Grassroots participation in sport and physical activity |
HC 46 |
|
33rd |
HMRC performance in 2021–22 |
HC 686 |
|
34th |
The Creation of the UK Infrastructure Bank |
HC 45 |
|
35th |
Introducing Integrated Care Systems |
HC 47 |
|
36th |
The Defence digital strategy |
HC 727 |
|
37th |
Support for vulnerable adolescents |
HC 730 |
|
38th |
Managing NHS backlogs and waiting times in England |
HC 729 |
|
39th |
Excess Votes 2021–22 |
HC 1132 |
|
40th |
COVID employment support schemes |
HC 810 |
|
41st |
Driving licence backlogs at the DVLA |
HC 735 |
|
42nd |
The Restart Scheme for long-term unemployed people |
HC 733 |
|
43rd |
Progress combatting fraud |
HC 40 |
|
44th |
The Digital Services Tax |
HC 732 |
|
45th |
Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2021–22 |
HC 1254 |
|
46th |
BBC Digital |
HC 736 |
|
47th |
Investigation into the UK Passport Office |
HC 738 |
|
48th |
MoD Equipment Plan 2022–2032 |
HC 731 |
|
49th |
Managing tax compliance following the pandemic |
HC 739 |
|
50th |
Government Shared Services |
HC 734 |
|
51st |
Tackling Defra’s ageing digital services |
HC 737 |
|
52nd |
Restoration & Renewal of the Palace of Westminster – 2023 Recall |
HC 1021 |
|
53rd |
The performance of UK Security Vetting |
HC 994 |
|
54th |
Alcohol treatment services |
HC 1001 |
|
55th |
Education recovery in schools in England |
HC 998 |
|
56th |
Supporting investment into the UK |
HC 996 |
|
57th |
AEA Technology Pension Case |
HC 1005 |
|
58th |
Energy bills support |
HC 1074 |
|
59th |
Decarbonising the power sector |
HC 1003 |
|
60th |
Timeliness of local auditor reporting |
HC 995 |
|
61st |
Progress on the courts and tribunals reform programme |
HC 1002 |
|
62nd |
Department of Health and Social Care 2021–22 Annual Report and Accounts |
HC 997 |
|
63rd |
HS2 Euston |
HC 1004 |
|
64th |
The Emergency Services Network |
HC 1006 |
|
65th |
Progress in improving NHS mental health services |
HC 1000 |
|
66th |
PPE Medpro: awarding of contracts during the pandemic |
HC 1590 |
|
67th |
Child Trust Funds |
HC 1231 |
|
68th |
Local authority administered COVID support schemes in England |
HC 1234 |
|
69th |
Tackling fraud and corruption against government |
HC 1230 |
|
70th |
Digital transformation in government: addressing the barriers to efficiency |
HC 1229 |
|
71st |
Resetting government programmes |
HC 1231 |
|
72nd |
Update on the rollout of smart meters |
HC 1332 |
|
73rd |
Access to urgent and emergency care |
HC 1336 |
|
74th |
Bulb Energy |
HC 1232 |
|
75th |
Active travel in England |
HC 1335 |
|
76th |
The Asylum Transformation Programme |
HC 1334 |
|
77th |
Supported housing |
HC 1330 |
|
78th |
Resettlement support for prison leavers |
HC 1329 |
|
79th |
Support for innovation to deliver net zero |
HC 1331 |
|
80th |
Progress with Making Tax Digital |
HC 1333 |
|
1st Special Report |
Sixth Annual Report of the Chair of the Committee of Public Accounts |
HC 50 |
|
2nd Special Report |
Seventh Annual Report of the Chair of the Committee of Public Accounts |
HC 1055 |
|
Number |
Title |
Reference |
|
1st |
Low emission cars |
HC 186 |
|
2nd |
BBC strategic financial management |
HC 187 |
|
3rd |
COVID-19: Support for children’s education |
HC 240 |
|
4th |
COVID-19: Local government finance |
HC 239 |
|
5th |
COVID-19: Government Support for Charities |
HC 250 |
|
6th |
Public Sector Pensions |
HC 289 |
|
7th |
Adult Social Care Markets |
HC 252 |
|
8th |
COVID 19: Culture Recovery Fund |
HC 340 |
|
9th |
Fraud and Error |
HC 253 |
|
10th |
Overview of the English rail system |
HC 170 |
|
11th |
Local auditor reporting on local government in England |
HC 171 |
|
12th |
COVID 19: Cost Tracker Update |
HC 173 |
|
13th |
Initial lessons from the government’s response to the COVID-19 pandemic |
HC 175 |
|
14th |
Windrush Compensation Scheme |
HC 174 |
|
15th |
DWP Employment support |
HC 177 |
|
16th |
Principles of effective regulation |
HC 176 |
|
17th |
High Speed 2: Progress at Summer 2021 |
HC 329 |
|
18th |
Government’s delivery through arm’s-length bodies |
HC 181 |
|
19th |
Protecting consumers from unsafe products |
HC 180 |
|
20th |
Optimising the defence estate |
HC 179 |
|
21st |
School Funding |
HC 183 |
|
22nd |
Improving the performance of major defence equipment contracts |
HC 185 |
|
23rd |
Test and Trace update |
HC 182 |
|
24th |
Crossrail: A progress update |
HC 184 |
|
25th |
The Department for Work and Pensions’ Accounts 2020–21 – Fraud and error in the benefits system |
HC 633 |
|
26th |
Lessons from Greensill Capital: accreditation to business support schemes |
HC 169 |
|
27th |
Green Homes Grant Voucher Scheme |
HC 635 |
|
28th |
Efficiency in government |
HC 636 |
|
29th |
The National Law Enforcement Data Programme |
HC 638 |
|
30th |
Challenges in implementing digital change |
HC 637 |
|
31st |
Environmental Land Management Scheme |
HC 639 |
|
32nd |
Delivering gigabitcapable broadband |
HC 743 |
|
33rd |
Underpayments of the State Pension |
HC 654 |
|
34th |
Local Government Finance System: Overview and Challenges |
HC 646 |
|
35th |
The pharmacy early payment and salary advance schemes in the NHS |
HC 745 |
|
36th |
EU Exit: UK Border post transition |
HC 746 |
|
37th |
HMRC Performance in 2020–21 |
HC 641 |
|
38th |
COVID-19 cost tracker update |
HC 640 |
|
39th |
DWP Employment Support: Kickstart Scheme |
HC 655 |
|
40th |
Excess votes 2020–21: Serious Fraud Office |
HC 1099 |
|
41st |
Achieving Net Zero: Follow up |
HC 642 |
|
42nd |
Financial sustainability of schools in England |
HC 650 |
|
43rd |
Reducing the backlog in criminal courts |
HC 643 |
|
44th |
NHS backlogs and waiting times in England |
HC 747 |
|
45th |
Progress with trade negotiations |
HC 993 |
|
46th |
Government preparedness for the COVID-19 pandemic: lessons for government on risk |
HC 952 |
|
47th |
Academies Sector Annual Report and Accounts 2019/20 |
HC 994 |
|
48th |
HMRC’s management of tax debt |
HC 953 |
|
49th |
Regulation of private renting |
HC 996 |
|
50th |
Bounce Back Loans Scheme: Follow-up |
HC 951 |
|
51st |
Improving outcomes for women in the criminal justice system |
HC 997 |
|
52nd |
Ministry of Defence Equipment Plan 2021–31 |
HC 1164 |
|
1st Special Report |
Fifth Annual Report of the Chair of the Committee of Public Accounts |
HC 222 |
|
Number |
Title |
Reference |
|
1st |
Support for children with special educational needs and disabilities |
HC 85 |
|
2nd |
Defence Nuclear Infrastructure |
HC 86 |
|
3rd |
High Speed 2: Spring 2020 Update |
HC 84 |
|
4th |
EU Exit: Get ready for Brexit Campaign |
HC 131 |
|
5th |
University technical colleges |
HC 87 |
|
6th |
Excess votes 2018–19 |
HC 243 |
|
7th |
Gambling regulation: problem gambling and protecting vulnerable people |
HC 134 |
|
8th |
NHS capital expenditure and financial management |
HC 344 |
|
9th |
Water supply and demand management |
HC 378 |
|
10th |
Defence capability and the Equipment Plan |
HC 247 |
|
11th |
Local authority investment in commercial property |
HC 312 |
|
12th |
Management of tax reliefs |
HC 379 |
|
13th |
Whole of Government Response to COVID-19 |
HC 404 |
|
14th |
Readying the NHS and social care for the COVID-19 peak |
HC 405 |
|
15th |
Improving the prison estate |
HC 244 |
|
16th |
Progress in remediating dangerous cladding |
HC 406 |
|
17th |
Immigration enforcement |
HC 407 |
|
18th |
NHS nursing workforce |
HC 408 |
|
19th |
Restoration and renewal of the Palace of Westminster |
HC 549 |
|
20th |
Tackling the tax gap |
HC 650 |
|
21st |
Government support for UK exporters |
HC 679 |
|
22nd |
Digital transformation in the NHS |
HC 680 |
|
23rd |
Delivering carrier strike |
HC 684 |
|
24th |
Selecting towns for the Towns Fund |
HC 651 |
|
25th |
Asylum accommodation and support transformation programme |
HC 683 |
|
26th |
Department of Work and Pensions Accounts 2019–20 |
HC 681 |
|
27th |
Covid-19: Supply of ventilators |
HC 685 |
|
28th |
The Nuclear Decommissioning Authority’s management of the Magnox contract |
HC 653 |
|
29th |
Whitehall preparations for EU Exit |
HC 682 |
|
30th |
The production and distribution of cash |
HC 654 |
|
31st |
Starter Homes |
HC 88 |
|
32nd |
Specialist Skills in the civil service |
HC 686 |
|
33rd |
Covid-19: Bounce Back Loan Scheme |
HC 687 |
|
34th |
Covid-19: Support for jobs |
HC 920 |
|
35th |
Improving Broadband |
HC 688 |
|
36th |
HMRC performance 2019–20 |
HC 690 |
|
37th |
Whole of Government Accounts 2018–19 |
HC 655 |
|
38th |
Managing colleges’ financial sustainability |
HC 692 |
|
39th |
Lessons from major projects and programmes |
HC 694 |
|
40th |
Achieving government’s long-term environmental goals |
HC 927 |
|
41st |
COVID 19: the free school meals voucher scheme |
HC 689 |
|
42nd |
COVID-19: Government procurement and supply of Personal Protective Equipment |
HC 928 |
|
43rd |
COVID-19: Planning for a vaccine Part 1 |
HC 930 |
|
44th |
Excess Votes 2019–20 |
HC 1205 |
|
45th |
Managing flood risk |
HC 931 |
|
46th |
Achieving Net Zero |
HC 935 |
|
47th |
COVID-19: Test, track and trace (part 1) |
HC 932 |
|
48th |
Digital Services at the Border |
HC 936 |
|
49th |
COVID-19: housing people sleeping rough |
HC 934 |
|
50th |
Defence Equipment Plan 2020–2030 |
HC 693 |
|
51st |
Managing the expiry of PFI contracts |
HC 1114 |
|
52nd |
Key challenges facing the Ministry of Justice |
HC 1190 |
|
53rd |
Covid 19: supporting the vulnerable during lockdown |
HC 938 |
|
54th |
Improving single living accommodation for service personnel |
HC 940 |
|
55th |
Environmental tax measures |
HC 937 |
|
56th |
Industrial Strategy Challenge Fund |
HC 941 |
1 Committee of Public Accounts: High Speed 2: a review of early programme preparation, 22nd Report of Session 2013–14, HC 478, 9 Sept 2013; Progress with preparations for High Speed 2, 14th Report of Session 2016–17, HC 486, 14 Sept 2016; High Speed 2 Annual Report and Accounts, 10th Report of Session 2017–19, HC 454, 15 Dec 2017; High Speed 2: Spring 2020 Update, 3rd Report of Session 2019–21, HC 84, 17 May 2020; HS2 Summer 2021, 17th Report of Session 2021–22, HC 329, 22 Sept 2021; HS2 Euston, 63rd Report of Session 2022–23, HC 1004, 7 July 2023.
2 Government press release, PM redirects HS2 funding to revolutionise transport across the North and Midlands, 4 October 2023
3 Q 56; HS2 6-monthly report to Parliament: November 2023
4 Letter from DfT to PAC (original dated 4 October, reissued on 14 November with correction to BCR range)
5 Q 15
6 HS2 6-monthly report to Parliament: November 2023
7 Q 15
8 Q 20
9 Letter from DfT to PAC (original dated 4 October, reissued on 14 November with correction to BCR range)
10 Q 46; Letter from DfT to PAC (original dated 4 October, reissued on 14 November with correction to BCR range)
11 Q 12
12 Qq 12, 13
13 Qq 15–17
14 Q 17
15 Q 25
16 Qq 21, 24
17 Qq 26, 37
18 Qq 27, 30, 31, 37
19 Qq 32, 33
20 Committee of Public Accounts: High Speed 2: Spring 2020 Update, 3rd Report of Session 2019–21, HC 84, 17 May 2020
21 Committee of Public Accounts; HS2 Summer 2021, 17th Report of Session 2021–22, HC 329, 22 Sept 2021
22 HS2 6-monthly report to Parliament: November 2023
23 Transport Committee, Oral evidence: HS2: progress update, HC 85, Q 408
24 Qq 41, 55, 56
25 Qq 56, 58
26 Qq 83–85
27 Q 59
28 Qq 59, 60
29 Committee of Public Accounts: High Speed 2: Spring 2020 Update, 3rd Report of Session 2019–21, HC 84, 17 May 2020
30 Q 95
31 Department for Transport: NETWORK NORTH: TRANSFORMING BRITISH TRANSPORT, CP 946, October 2023
32 Qq 6–11
33 HS2 6-monthly report to Parliament: November 2023
34 Qq 64–66
35 Q 61; Department for Transport: NETWORK NORTH: TRANSFORMING BRITISH TRANSPORT, CP 946, October 2023 (page 18)
36 Qq 70, 71
37 Q 61
38 Qq 114, 115
39 Q 119
40 Q 129
41 Q 132
42 Committee of Public Accounts: HS2 Euston, 63rd Report of Session 2022–23, HC 1004, 7 July 2023
43 Department for Transport: NETWORK NORTH: TRANSFORMING BRITISH TRANSPORT, CP 946, October 2023
44 Q 147
45 Q 149
46 Qq 147, 164–5
47 Qq 152–3
48 Q 160
49 Qq 155, 156
50 Qq 161–3
51 Q 166
52 Qq 166, 167
53 Q 168
54 Qq 50, 52
55 Q 122
56 Q 123
57 Qq 124, 125
58 Q 127
59 Q 128
60 Department for Transport: NETWORK NORTH: TRANSFORMING BRITISH TRANSPORT, CP 946, October 2023 (page 23)
61 Q 141
62 Department for Transport: NETWORK NORTH: TRANSFORMING BRITISH TRANSPORT, CP 946, October 2023
63 Qq 112, 113
64 Q 145
65 Q 145
66 Qq 114, 142
67 Q 143
68 Major £150 million funding boost for local bus services as fare cap set to be extended – GOV.UK (www.gov.uk)
69 Network North CRSTS2 indicative allocations, 4 October 2023 - GOV.UK (www.gov.uk); q143
70 Correspondence from the Department for Transport to the Public Accounts Committee, dated 8 December 2023
71 Q 143
72 Correspondence from the Department for Transport to Public Accounts Committee, dated 8 December 2023 Q 143