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The estimated cost of building the UK’s HS2 high-speed railway between London and Birmingham has soared to as much as £67bn, according to the project’s top executive, who said there was no guarantee it would not rise further.
Sir Jon Thompson, chair of HS2, told MPs on Wednesday that the official estimate for what remains of the controversial scheme was between £49bn and £56.6bn but this was in 2019 prices. Adjusting for inflation would add up to another £10bn, he said, adding that the government had currently budgeted at the lower end of the official estimate.
The scheme has been plagued by delays and cost overruns ever since it was given the go-ahead more than a decade ago. 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.
Before that decision the official estimate upper price tag for the whole project was £70bn in 2019 prices.
Asked by MPs on the House of Commons transport select committee whether costs could now be contained, Thompson replied: “I still can’t give any guarantees.”
He said the reason the project was still costed in 2019 prices despite the high inflationary environment was due to the “government’s longstanding policy that infrastructure estimates are only updated at Spending Review points”.
He warned that the decision to cancel the remaining northern section of the project could lead to a reduction in rail capacity between London and Manchester. This was because HS2 trains running north of Birmingham would now have to use the existing West Coast mainline and were expected to be shorter than planned to fit into existing platforms.
He said the reasons for the spiralling costs included an original estimate that was too low because it was based on “immature data” — the price tag for the entire line to Leeds and Manchester was put at £32.7bn when it was approved in 2012.
A decision to use cost-plus contracts, an increase in tunnelling, complications with ground conditions, “poor delivery on our part” and inflation had all pushed up the price, Thompson, a former head of HM Revenue & Customs who joined HS2 in April 2021 and was appointed chair last February, added.
“The government decided and the company decided to let cost-plus contracts where 99 per cent of the financial risk is with the government. And only 1 per cent is with the contractor, which is extraordinary,” Thompson said. “You’re almost incentivising somebody to go over the budget.”
As part of efforts to cut costs, the government stripped HS2 of responsibility last year for rebuilding London’s HS2 terminus at Euston and paused work on the station while it set up a development corporation to oversee that work. Thompson said this process would take at least 18 months. Ministers want to tap private sector funding for that part of the project.
With no set date for the completion of work on Euston, Thompson said he expected HS2 services would start from a new transport hub at Old Oak Common in west London to Birmingham between 2030 and 2033.