According to the top executive of the project, there is no guarantee that the cost will not increase further.
Sir Jon Thompson, the chair of HS2 told MPs that the official estimate of what is left of the controversial project was between £49bn to £56.6bn, but in 2019 prices. He said that adjusting for inflation would amount to an additional £10bn. The government has budgeted the lower end official estimate.
Since it was approved more than 10 years ago, the scheme has suffered from delays and cost increases. In a bid to bring the spiralling costs under control Prime Minister Rishi Sunak last year axed the Birmingham-to-Manchester section of the project, the last remaining northern section of the line.
Prior to that decision, the official estimate of the upper price tag was £70bn at 2019 prices.
Thompson responded, “I can’t make any guarantees.” When asked by the House of Commons Transport Select Committee whether costs could be reduced now, Thompson said:
He explained that the fact the project’s cost was still in 2019 prices, despite a high inflationary climate was because of “the government’s long-standing policy to only update infrastructure estimates at Spending Review point”.
He warned that cancelling the northern portion of the project would reduce rail capacity between London, Manchester and other cities. HS2 trains north of Birmingham will now use the existing West Coast Mainline, and are expected to be shorter to fit on existing platforms.
The original estimate was too low, he said, because it was based upon “immature information” — the cost of the entire line from Leeds to Manchester was set at £32.7bn in 2012 when it was approved.
Thompson, a former chief of HM Revenue & Customs, who joined HS2 April 2021, and was appointed chairman last February, said that a decision to use cost plus contracts, an increased in tunnelling, problems with ground conditions, and “poor deliveries on our part” had all pushed the price up.
“The company and the government both decided to award cost-plus contracts, where 99 percent of the financial risks are with the government. Thompson stated that only 1 percent of the risk is on the contractor. You’re almost encouraging someone to go over budget.
In an effort to reduce costs, last year the government took HS2 off the hook for the rebuilding of London’s HS2 terminal at Euston. It halted the work on the station and set up a Development Corporation to supervise the work. Thompson stated that this process will take at least 18-months. Ministers are looking to the private sector for funding.
Thompson, who said there was no date set for Euston’s completion, predicted that HS2 services from the new hub in Old Oak Common (west London) to Birmingham would begin between 2030 and 2033.
In a statement, the government stated that it was “reviewing” the scope of HS2 in order to “deliver this line at the lowest possible price for taxpayers.”