HS2 'offers very poor value for money' after northern leg was scrapped, MPs claim

Prime Minister Rishi Sunak made the controversial decision in October, amid concerns about the soaring cost.

The Department for Transport (DfT) then insisted Phase 1 still offered “value for money”, partly because cancelling the entire project would incur costs of around £11bn.

However, Parliament’s Public Accounts Committee (PAC) said “there are many uncertainties in this assessment” and it was “left with little assurance over the calculation”.

The PAC 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.

“The department acknowledges that building just Phase 1 will not be value for money because total costs will significantly outweigh benefits.”

HS2 Ltd executive chairman Sir Jon Thompson has said the cost of delivering Phase 1 (London to Birmingham) could reach £66.6bn once inflation is factored in.

It comes four years after a budget of £44.6bn – in 2019 prices – was set.

He claimed the initial estimate was “too low” and based on rough plans, but there have been numerous changes to the project including “political decisions” to build hugely expensive tunnels.

PAC said there has been “poor cost management” and “a failure of governance and oversight” from HS2 Ltd and the DfT in recent years.

The Government has claimed getting private investors to pay for the redevelopment of Euston station in London will save £6.5bn, but the committee said there is “not yet any plan for how to do so”.

There is also no plan or timeline for selling off more than £600m of land and property bought to pave the way for Phase 2 and this process could “take many years”, PAC added.

In the report, the committee warned the Government “does not yet understand how HS2 will operate as a functioning railway” or know whether services will continue along the West Coast Mainline.

It comes after Sir Jon said running HS2 services on the line between Birmingham and Manchester will result in slower journeys with fewer seats, unless several stations are extended for longer trains.

Dame Meg Hillier, who chairs the committee, said HS2 has been “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,” she added.

When Douglas Oakervee conducted a review of HS2 for Boris Johnson’s government in 2020, he concluded that “Phase 1 as a standalone scheme does not represent value for money”.

He also found that if the entire HS2 network was built as originally planned – linking London, Birmingham, Manchester and Leeds – the costs would not outweigh the benefits unless the final bill exceeded £138bn.

A HS2 Ltd spokesman said: “We’ve been clear about our cost challenges, which have been compounded by significant levels of inflation.

“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 spokeswoman said: “We disagree with the Committee’s assessment.

"Their estimated cost figure for Phase 1 also does not reflect our decision to secure private funding for Euston, or the direction not to proceed beyond the Midlands.

“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 Kings 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.”