The Chamberlain News

HS2 ‘to reach Birmingham on time and on budget’, city leader claims

HS2 will be delivered on time and on budget and services between Birmingham and London will begin running in 2026 as planned, city council leader John Clancy has forecast.

Cllr Clancy was responding to a National Audit Office report which found the high speed rail project to be running over budget and which suggested the timetable for opening the line might have to be put back a year.

At the moment according to the NAO report there is only a 60 per cent chance of HS2 phase one being delivered within the £27 billion estimated cost. Forecast costs have risen by £204 million.

The Department for Transport has asked HS2 Ltd to cut costs in order to increase the probability of delivering within budget to 80 per cent and the NAO has warned the project may not meet expected cost benefit ratios.

HS2 Ltd is also struggling to deliver phase two of the high speed line from Birmingham to Manchester and Leeds within budget and has found only £2 billion of a £9 billion savings package.

Cllr Clancy said he had spoken to HS2 Ltd chair Sir David Higgins who had assured him the high speed rail route would be delivered within budget and was on track for 2026 despite the NAO report.

Transport Secretary Patrick McLoughlin also sought to paint a rosy picture of HS2 progress.

He said the NAO report was confirmation the project “is on track” and added that HS2 will “rebalance our economy and generate colossal benefits for the supply chain”.

An HS2 company spokesperson said the project would be delivered within budget.

“Major engineering projects such as HS2 are a learning curve in which the method of construction as well as cost control evolve as they reach a more mature and detailed design stage which incorporates the lessons learned from other projects both here and abroad,” the spokesperson added.

Birmingham city council, which is relying on HS2 arriving at the planned Curzon Street station to trigger massive jobs growth and regeneration, is said to be taking a relaxed view of the NAO report, noting that it is far from unusual for a public sector infrastructure project cost more than estimated.

A hybrid Bill giving approval for HS2 phase one is still before Parliament and is expected to be approved before the end of the year although there are fears this may be delayed if a post-Brexit General Election is called.

The council leader believes Brexit makes it more rather than less likely that the Government will press ahead with HS2 because Ministers recognise the need to repair the “disconnect” between London, the Midlands and the north which was demonstrated in the referendum results.

He added:

We’ve already spoken at length to HS2 who remain confident they will stick to the 2026 timetable and we are hopeful that will be the case. The EU referendum has shown that the Midlands and the north feel disconnected from London, so the need for HS2 is greater than ever.

I’ve said all along that HS2 will be a game-changer here in Birmingham and the British economy needs thriving, growing and confident cities outside London.

This isn’t just about transport links, it’s about business opportunities and jobs and I look forward to welcoming HS2 to Birmingham.

The NAO report warned:

There is less contingency to deliver phase one than the Department and HS2 Ltd were aiming for at this stage, and this forecast assumes that planned efficiencies totalling £1.47 billion will be realised.

Cost estimates for phase two are at a much earlier stage of development and some elements are unfunded. At the 2015 Spending Review, the estimated cost of phase two exceeded available funding by £7 billion. Since then work by the Department, HS2 Ltd and a review commissioned by the Cabinet Office has identified potential savings of £9 billion, £2 billion of which have been secured.

There is a risk that the combined impact of cost and schedule pressures result in reduced programme scope, and lower the benefit cost ratio. The benefit cost ratio for phase one assumes that the programme is delivered well within its available funding.

If the outturn is closer to, or exceeds, available funding, which, given current cost and schedule pressures, is a possibility, then the benefit cost ratio, including wider economic benefits, would fall from 1.7 to around 1.5.

According to the NAO report, effective integration of HS2 with the wider UK rail system is challenging and poses risks to value for money.

The Department for Transport is being urged to address a number of issues including how HS2 services will complement or compete with other rail services, and how HS2 will interact with proposed improvements in the North.

Failure to fully understand these interactions and make decisions in the right sequence will make delivering the programme more challenging. It could also mean decisions are made now which reduce benefits or increase costs across the network in future. The Department is now developing a long term vision for the whole rail system.

Amyas Morse, head of the National Audit Office, said:

HS2 is a large, complex and ambitious programme which is facing cost and time pressures. The unrealistic timetable set for HS2 Ltd by the Department means they are not as ready to deliver as they hoped to be at this point. The Department now needs to get the project working to a timescale that is achievable.