HS2 boss admits project costs could soar to more than £66bn

The estimated cost of building HS2 between London and Birmingham has soared to as much as £66.6 billion, MPs heard.

HS2 Ltd executive chairman Sir Jon Thompson told the Transport Select Committee that the estimated cost for Phase 1 is between £49 billion and £56.6 billion at 2019 prices, but adjusting the range for current prices involves “adding somewhere between eight and 10 billion pounds”.

In 2013, HS2 was estimated to cost £37.5 billion (in 2009 prices) for the entire planned network, including now-scrapped extensions from Birmingham to Manchester and Leeds.

Inflation

Sir Jon said reasons for the cost increase include original budgets being too low, changes to scope, poor delivery and inflation.

He said: “This is a systemic problem. It’s not just about HS2, it’s about large projects that the Government funds.

“The budget needs to be set early on in order for an outline business case to be approved by the Government, sometimes by Parliament.

“At that point, people think OK the original estimate for Phase 1 was £30 billion-something.
“That is based on very, very immature data. You don’t have a design, you haven’t procured anything, there is no detail on which you can cost anything.”

He added: “If you say to a builder, can you give me a quote for an extension, they walk around and say ‘it’s £50,000-something’.

“But then you get into the detailed design, you know exactly how big it is, what surfaces you want, how much concrete needs to be poured. Unsurprisingly you get a better number.

“That’s the situation here. The situation with HS2 in my opinion is the estimate was poor, the budget was set too early, and then when you get further into it, you get much better information.

“Then on that basis, you can cost it out with more accuracy and then you discover it’s higher.”

2019 prices

On the issue of why official cost estimates are still being given at 2019 prices, Sir Jon said: “It is the Government’s long-standing policy that infrastructure estimates are only updated at Spending Review points, that’s my understanding of it.

“So that’s why we’re still working to 2019 prices and the whole conversation about 2019, which is to be frank with you an administrative burden of some significance in the organisation.

“All of the invoices we get we have to then deflate backwards to 2019 prices even though we’re paying them at 2024 prices.

“And then we have to adjust the accounts to account for that, so it is a significant administrative faff to be frank.”

Legal action

In October 2023 the Welsh Government indicated it was considering legal action against the UK government over HS2 spending.

HM Treasury has claimed that HS2 is an England and Wales capital scheme, despite not a single inch of track being laid in Wales.

This means that, unlike Scotland and Northern Ireland, Wales will receive no extra funding as a result of it being built,

The Barnett consequential payment due to Wales’ block grant without that designation was estimated to be worth £1.25bn, based on the initial costings of £25bn on the London to Birmingham section of the line.

There have previously been cross-party calls for the first leg of the project to Birmingham to be reclassified so Wales can benefit from the project.