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MPs exert pressure on HS2 officials over new costs

MPs last week forced senior High Speed 2 officials onto the defensive following the decision to increase cost estimates for the project by £10bn.

MPs on the Public Accounts Committee (PAC) last week grilled senior officials from project promoter HS2 Ltd and the Department for Transport (DfT) about plans for the scheme.

Committee chairman Margaret Hodge noted that between March 2010 – when the original business case was made – and August 2012, the estimate of the benefits of HS2 had gone down £12.2bn while costs had gone up £2.1bn.

“So all the costs are moving in the wrong direction. Is that correct?” she asked. “Costs are going up; benefits are going down.”

DfT permanent secretary Philip Rutnam insisted that the previous figure was only an “early estimate”.

He added: “The change between the amount for phases 1 and 2 together – the figure of £32.7bn, which was used in 2012 – and the figure released last week reflects two things, principally…much more detailed design work…
and an increased amount of contingency.”

Rutnam said decisions including the addition of a tunnel from Old Oak Common to Northolt in west London had increased the cost of the scheme “for very good reasons”.

Hodge slammed the £14.4bn contingency within the new budget, which was weighted towards phase two (beyond Birmingham to Manchester and Leeds) as this remains less certain.

“That is a heck of a lot of public money set aside as a contingency,” she said. “Why so much?”

Rutnam said a risk assessment calculation was used, with an optimism bias added for phase two.

However, it emerged that the new budget, even with its large contingency, depended on the hybrid bill gaining Royal Assent by March 2015.

HS2 Ltd director general David Prout told the committee that the budget made no allowance for delays getting the enabling legislation through Parliament.

Hodge said such an assumption was “mad”, saying the equivalent bill for HS1 was three years late.

“You will not get the hybrid Bill through in the time period that you have set yourself,” she told DfT director general for HS2 David Prout. “It is overly ambitious. You have admitted that there are risks. If you do not, there will be cost implications which will take us beyond the £15.7bn and the £5.7bn contingency just for phase 1. That is what I understand you to be saying.”

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