National Audit Office on HS2 – It’s Only £55 Billion, Don’t Worry

The recent National Audit Office reportProgress with preparations for High Speed 2” got largely over-shadowed by the post referendum Brexit chaos and the two main UK political parties making Game of Thrones look like a kindergarten squabble. That’s a shame, because this programme will potentially cost the UK over £55 billion pounds – that is close to £1000 for every man, woman and child in the country. And that’s assuming it doesn’t run over-budget. When the NAO calls something “highly ambitious” then you know we’re in for potential problems!

“High Speed 2 is a highly ambitious programme to create a new high speed rail service between London to Manchester and Leeds, via Birmingham. The Department for Transport (the Department) is the sponsor of the £55.7 billion programme (2015 prices) and HS2 Ltd, a company wholly owned by the Department, is responsible for developing, building and maintaining the railway”.

It is a hugely complex programme, and the NAO’s report reflects that. Unlike some of their output, it does not provide neat sound-bites in terms of “this is a major disaster” or indeed the opposite. The picture is obviously somewhat nuanced, but overall the conclusions can perhaps be best summed up as the situation is better than it was, but there are still concerns. So “the Department and HS2 Ltd have taken steps to address weaknesses in the business case identified in our 2013 report” but the Department and HS2 Ltd. have only 60% confidence that phase 1 will be delivered on time by 2026. That number does not fill the taxpayer with confidence, we might suggest.

On the other had, potential phase 2 savings of no less than £9 billion were identified by a recent Department, HS2 Ltd and Cabinet Office review. “The Department has asked HS2 Ltd to incorporate the efficiencies and cost savings in its next cost estimate”. So we are dealing with huge number here where the forecasting variation is in the many billions. When you dig into it as little more though, you find that savings include “around £1.7 billion from higher productivity from contractors”.  What, just like that? So one wonders about the assumptions used here and just how robust they might be!

And it is no surprise that the “programme faces cost pressures”. That, along with delays, might lower the cost-benefit ratio – if HS2 is delayed, then benefits are deferred.

One surprise (for us, anyway) in the report is this. “The challenge of managing the interdependencies on the wider network should be supported by the Department’s first attempt at producing an overall strategic vision for the rail system in the UK. While it is encouraging that this is now being produced, we and the Committee of Public Accounts have been recommending that such a strategy be developed for some time and some of the challenges the Department is now facing could have been made easier if this had been completed earlier”.

So we have no strategic vision for rail, including issues such as how HS2 will affect other franchises and lines. That seems surprising, to say the least, and bears out the feeling that this is a politicians’ vanity project, rather than the carefully thought-out way to optimise £55 billion of capital investment in UK infrastructure.

Skills must be another concern, although that is not an issue really covered in the report. Whether we are talking deep railway engineering expertise, programme and project management or indeed procurement and commercial talent in the capital works field, these are not areas where we see lots of good people sitting around waiting for the call from HS2. We are starting to hear stories of very high day rates being offered to contractors and suspect that trend will only get stronger. Good news for rail procurement experts anyway.

Summing up, this is another insightful and informative report from NAO, even if it does leave the reader probably somewhat more concerned after reading than before. We will no doubt have more on HS2 here for many years to come – unless it gets cancelled during the forthcoming economic crisis.

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Voices (2)

  1. bitter and twisted:

    For the love of god cancel this white elephant.

    1. Final Furlong:

      Turning into a herd of white elephants.

      Like the Olympics. Started off as £2.5 billion budget. Ended £11 billion. Anywhere/everywhere remotely touched by events spent small fortunes on local interventions. And, get this, they declared that it was delivered under-budget!

      You would be able to demolish and rebuild every hospital in the NHS with the HS2 budget. Instead, they are building a train-set for someone who lost out on such toys in their childhood.

      Whatever word you choose – total, complete, utter – it’s all bollocks.

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