The estimated cost of the HS2 line from London to Birmingham has ballooned to as much as £66bn, the scheme’s executive chair has told MPs.
Jon Thompson told the transport select committee on Wednesday that the current estimate for the first phase of the line could add “between £8bn and £10bn” to the current top-end estimate of £56.6bn.
The discrepancy in estimates is because the current £56.6bn price tag the government and HS2 have been quoting is in 2019 prices and does not reflect the jump in inflation after the coronavirus pandemic and Russia’s invasion of Ukraine.
Thompson’s testimony comes only months after Rishi Sunak announced at the Conservative party conference in October that he would be axing the planned HS2 line north of Birmingham, citing cost concerns as the driving factor.
The cost of the high-speed rail project has risen repeatedly in the last decade, with the line from London to Birmingham forecast to cost £19.4bn in 2013.
Since then there have been a number of revisions, including the last one in November, where HS2 revealed that it now estimated the cost of the line to be between £49bn and £57bn.
Thompson told MPs: “If you brought the estimate for 2019 prices up to 2023-24 prices, you’d be adding somewhere between £8bn and £10bn further [to the cost]. Construction inflation over the last three years has been 27% … steel has risen by 47%, rebar 53%, concrete 48%, and so on.”
The government currently has a policy in which it only updates the prices for big infrastructure projects at spending reviews, meaning the HS2 phase 1 cost has stayed at a level put forward in September 2019, when Sajid Javid was chancellor.
Thompson was critical of this process, saying it created hassle for the organisation in converting all invoices and contracts into 2019 prices.
“[It] is, to be frank with you, an administrative burden of some significance in the organisation because all of the invoices we get we have to then deflate backwards to 2019 prices even though we’re paying him at 2024 prices,” he said.
“Then we have to adjust the accounts to account for that, so it is a significant administrative faff.”
The HS2 boss said there were four main reasons for the steep cost increase over the years, including the increase in inflation and revisions to scope of the project since it first received parliamentary approval, with changes including more tunnelling through the Chilterns. He added that poor delivery by HS2 and its contractors on some of the major tunnelling and bridge projects along the line had added to costs.
Thompson said the fourth driver of cost increases was down to “systemic problems” with the way the country delivered large infrastructure projects, claiming that budgets were often set before the true scale of the works were known.
He said: “The budget needs to be set early on in order for an outline business case to be approved by the government.
“The original estimate for phase 1 [of HS2] was £30bn, something that is based on very, very immature data. You don’t have a design; you haven’t procured anything. There is no detail in which you can cost anything.”
A DfT spokesperson said: “This government is bearing down on the cost of HS2 and reviewing the scope of phase one to deliver the line at the lowest reasonable price for taxpayers.
“We have already taken decisive action by cancelling phase two of HS2, reinvesting every penny of the £36bn saved in local transport projects that will benefit more people in more places, more quickly.”
