HS2 'offers very little value for money' after northern leg ditched, MPs warn

Rishi Sunak's plan to build HS2 between London and Birmingham but not extend it to Manchester will be "very poor value for money", cross-party MPs have warned.

The Public Accounts Committee (PAC), which examines government spending, said there are "many uncertainties" in the assessment that it was better to complete Phase 1 of the project than cancel the whole thing.

The group also said it is "highly sceptical" that the Department for Transport (DfT) will be able to attract the private investment needed for the planned central London terminus at Euston.

The report stated: "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."

A spokesperson for the Department for Transport said they disagreed with the committee's assessment.

It comes as the Conservative mayor of the West Midlands, Andy Street, and his Labour counterpart in Greater Manchester, Andy Burnham, are due to hold an event on Wednesday to outline their plans to work with private investors on improving rail in the North and Midlands.

The prime minister made the controversial decision to scrap the northern leg of the high speed rail project last year amid ballooning prices.

The estimated cost of building HS2 between London and Birmingham could be as high as £67bn, according to HS2 Ltd, up from a budget of £44.6bn in 2019.

The original bill for the whole project - at 2009 prices - was supposed to be £37.5bn.

The PAC report said there are many "unknown ramifications" of the decision to scale back the railway, ranging from how land and property no longer needed will be disposed of, impacts on other rail projects dependent on the cancelled phases, what will be delivered with the money saved, and how HS2 trains will operate on existing lines.

The report said the DfT have acknowledged to the committee that the total costs of building Phase 1 "will significantly outweigh benefits", but officials have judged that continuing with that section "was value for money", partly due to avoiding £11bn of costs that would be incurred from cancellation.

However, the report said: "There are many uncertainties in this assessment and we were left with little assurance over the calculations."

Mr Sunak's October 2023 announcement also included a new plan to rely on private investment to extend HS2 from Old Oak Common in the suburbs of west London to Euston, near the centre of the capital.

This is aimed at saving £6.5bn of taxpayers' money.

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But the PAC said: "We are... highly sceptical that the department will be able to attract private investment on the scale and speed required to make the London terminus station a success."

Dame Meg Hillier, the Labour MP who chairs the committee, said: "HS2 is the biggest ticket item by value on the government's books for infrastructure projects.

"As such, it was crying out for a steady hand at the tiller from the start.

"But, here we are after over a decade of our warnings on HS2's management and spiralling costs, locked into the costly completion of a curtailed rump of a project and many unanswered questions and risks still attached to delivery of even this curtailed project."

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The move to ditch the northern leg of HS2 was highly controversial, triggering a backlash from Tory grandees, regional leaders, businesses and the rail industry.

HS2 was touted as the UK's biggest infrastructure project and was supposed to transform public transport between London, the Midlands and the North.

Last month, HS2 Ltd executive chairman Sir Jon Thompson said reasons for the cost increase include original budgets being too low, changes to scope, lower than expected productivity, weak contractual models and inflation.

In response to the PAC report, a spokesperson for the company said they have been "clear about the cost challenges", adding: "HS2 Ltd is now under new leadership and implementing changes across the programme aimed at controlling costs and learning the lessons of the past."

A DfT spokesperson said: "We disagree with the Committee's assessment.

"Our plans for Euston have already received extensive support from the private sector to invest and will offer a world class regeneration opportunity, mirroring the successful King's Cross and Battersea and Nine Elms development programmes.

"The Permanent Secretary has already written to the Committee chair setting out her assessment on value for money, and we have repeatedly made clear we will continue to deliver HS2 at the lowest reasonable cost, in a way that provides value for taxpayers."