The HS2 project has seen costs rise and its ambitions curtailed, but calls for the programme to be ‘reset’ raise more questions than answers. Tim Clark reports
Over the last decade and a half the rail mega-project High Speed Two (HS2) has been called many things; many positive, some derisory. One phrase that hasn’t necessarily been connected with the project, at least until now, is the idea of a ‘reset’.
When it comes to headline costs, HS2 is certainly unique. A report by the National Audit Office in July 2024 estimated the cost to deliver Phase One at £49bn to £57bn in 2019 prices. That was placed against a Phase One budget of £45bn.
The new estimate by HS2, which was submitted to Parliament in December placed the costs at between £54bn to £66bn. What the final costs will be is still not known.
Appearing before Parliament’s Public Accounts Committee (PAC) to answer questions before the Christmas break, recently appointed chief executive of HS2 Mark Wild called for a ‘fundamental reset’ of the costs of the project, which has been sliced, diced and mixed up since it was conceived in the dying days of the last Labour government.
The question is, what does a reset actually mean? And could it really work?
“My response to this reset is, why do we need a reset? What’s changed? The need for HS2 is only more acute now than it was 15 years ago,” says rail engineer Gareth Dennis. “What it needs is the opposite of a reset. We need to stop perambulating and build the thing.
“HS2 needs to be delivered, not paused, not reset, not reconsidered, not reassessed, not consulted. We’ve done all that. Just build it. Every single month that we waste, delaying it, reassessing it, adds huge amounts of cost, not just to the capital expenditure of the project, but also the enormous economic opportunity costs of not having this infrastructure and all its secondary benefits being realised.”
As former chief executive of Crossrail, Wild has experience dealing with large infrastructure projects. He also has knowledge of how and where costs can rise. Crossrail’s budget rose from £15bn to an eventual £19bn due to cost overruns at some stations – particularly Bond Street – as well as issues ensuring the digital signalling and control systems on the train could operate smoothly.
Another question is whether the main cost overruns on the project occurred during previous phases of work that are already complete, or whether there are major cost escalations still to come.
“Geoffery Clifton Brown (the PAC committee chair) is a chartered surveyor by profession and he’s got to be asking himself, why has this gone so badly awry? Why, when tens of millions of pounds have been spent, did quantity surveyors get the figures in the programme so badly wrong,” says Doug Thornton, former property director at HS2.
“They [HS2 and the DfT] were saying in December that it’s going to take us a year to get to a position where we know how much this is going to cost. It seems mad, right?”
Many point to the civils contracts as a key area where costs rose. Responding to a question by Liberal Democrat MP Sarah Olney on whether renegotiation of contracts will be resisted by civils contractors, Wild said: “A reset provides the opportunity for a fair allocation of risk, because we want our contractors to be safe and healthy. We want them to be profitable; we want them to be productive; we want them to provide value for money […]
“We need to provide the context for a fair bargain between HS2 and the supply chain, where we get value for money and we have productivity. The problem we have at the moment is that the contracts are unproductive – we are probably making suboptimal decisions because we do not have a properly coordinated programme.”
Muddling through
According to Wild, main works contracts were signed potentially too early in the programme for the scheme. Contractors were invited to bid for up to £11bn in civils packages initially in 2016, with contracts awarded in 2017.
Commenting on the contracts Wild told Parliament: “They are of a size and scale that literally has not been done since the Victorian era. We have not built an inter-city line from London to the North of England for well over 100 years. So they are of an extraordinary scale. Secondly, and very importantly, I think they started on completely the wrong foot.
“They started in an environment where the design, the consents and the enabling works should have been completed to a higher degree. I think these projects got off on the wrong start.”
Wild goes on to suggest that at the time HS2 agreed to the contracts the design was at an immature stage, and that such contracts were signed earlier than they should. This meant that the contracts were designed to take in extra costs as they came up, which is what happened.
“Listening to the Public Accounts Committee the other day, one of the things that stuck with me is the treatment of risk,” says William Barter, independent rail operations and planning consultant.
“Risk is a big part of the cost, and they seem to have different methods and philosophies between HS2 and the DfT [on how risk is calculated] and they have to come to an agreement on that.
“Phase One costs are very much affected by what we think the end state [of the project] is going to be. Is it going to be a Y-shape like once proposed or are we really buttoning down and doing nothing but Phase One. They [politicians] really need to make their mind up on what they think the end state is going to be.”
Pinning down what an end state is also important. The discussion over HS2 has in recent years been one of cost and management, or mismanagement. The question of what the country actually needs when it comes to extra rail capacity has to a certain extent fallen by the wayside.
“The whole point of HS2 was that it was the backbone of a new kind of sustainable transport system,” Dennis adds. “Not just the railways, and not just high speed railways, but about enabling urban authorities to expand and give the combined authorities more autonomy and capacity in their own systems and urban networks. That’s the fundamental reason why HS2 is so important.”
“HS2 needs to be delivered, not paused, not reset, not reconsidered, not reassessed, not consulted. We’ve done all that. Just build it.”
Gareth Dennis
One historic issue with HS2 is that one way to ensure the hybrid bill (the main legal Act paving the way for the project) gained parliamentary approval was to give out concessions on the scope of the project to gain the necessary political backing.
The number and length of tunnels was increased, specifications for the speed were initially high, and studies of the route have been questioned for adding extra expense compared to earlier proposals (such as one known as the Arup route, which would have followed close to the existing M40 through the Chilterns). Barter questions, however, whether HS2 would have been any different even if the specifications had been lower.
“Does anybody really think that a lower-speed version of HS2 would have been less exposed to the risks of cost-plus contracts and an immature design, and lack of ministerial oversight?” asks Barter.
“Any scheme, or variant would have been exposed to the same risks of cost increase,” Barter says, adding that he has doubts that any renegotiation of the civils contracts at this stage will produce any meaningful benefit for the Department for Transport.
Political reset
It could be argued that, even if it is a given that HS2 has seen its costs rise dramatically, those costs are linked to political decision – or indecision. Even though the project has been overseen by a single ruling government for the past 14 years, there is a sense that HS2 has been used as a political football for varying prime ministers at different times.
Cost estimates for HS2 were also (depending on your point of view) unrealistically low to begin with, and thus the overrun isn’t as much a project out of control, it is the inevitable reality of an unrealistic cost estimate meeting real-life project outlays.
Thornton highlights that the need to remodel the business case for HS2 is vital to meeting Treasury stipulations, however undertaking the exercise after the decision to cut large aspects of the scheme is sub-optimal, to put it politely.
“They should have been through all of those cases now, and they ploughing ahead with HS2. What they’re saying at the meeting on December 19th is that they’re not even at first base on the business case. They haven’t even got a strategic case to keep spending money,” he adds.
It could be that the biggest reset needed on HS2 is from a political standpoint rather than a construction one. The word ‘reset’ is mentioned 52 times in the PAC hearing. What the word really means however is arguably up for debate.
Moving the margins
In an exchange between HS2 and DfT officials and chair of the PAC, Clifton-Brown, the muddling over a ‘reset’ and what renegotiation finally became clear. Due to financial rules within the project, HS2 is limited as to what it can spend, and when, which has introduced inefficiencies within the programme.
Asked by Clifton-Brown whether ‘as we sit here, is work still progressing on the ground?’ and how did MP’s know that such work was giving the tax-payer value for money, Alan Over, director general, major rail projects group at the DfT replied:
“Ideally, we would be managing against the out-turn cost on the long-range plan, because that is the best way to allow HS2 Ltd and the supply chain to be efficient. Because we don’t have that certainty at the moment, we are necessarily operating on an annual basis.
“That doesn’t mean that money can’t move in the margins between the years, but essentially we have an annual budget and an annual work plan, and that is how we are measuring performance.
“We reset that year on year, and then we can measure how much of the schedule milestones have been achieved and what the cost performance has been against the plan. I think that is a necessary short-term intervention.”
Money shifting between margins, works being done to meet an annual budget – rather than the budget for the project as a whole – is arguably an inefficient way of handling Europe’s biggest infrastructure project. Those spending rules are a governmental stipulation on cost outlays, they cannot be reset by HS2 itself.
“The question has continually been asked ‘how can we deliver the minimum, rather than the best,’ Dennis says.
Nowhere can the muddled thinking of the past decade be shown than in Euston. In an interview in 2015 former chair of HS2 David Higgins stated that there should be “no compromise” on the station terminus. In the intervening years since the design was unveiled in 2016, compromise after compromise has been put forward. As a result, design costs have skyrocketed continually.
“The 2016 [Euston] scheme worked as it enabled HS2 and Network Rail to integrate and upgrade the existing station because the new station was split into two parts. A two-stage solution was the only one that worked from a construction perspective,” Dennis adds.
“That was a design which was drawn up without a mad panic whereas every design since then has been done with designers like me working overtime desperately trying to pull something together.”
Labour, with a huge parliamentary majority has an almost unique opportunity to lay out its vision for the railways that would influence the network for half a decade or more. The question is whether HS2 is seen as a first and last high speed project – or the beginning of an era where low-carbon rail can help bring down carbon and transport costs.
Barter says: “We need to stop agonising over what our own favourite version of what HS2 would have been, and get on and build the one that we’ve actually got.”
Read next: Scientists create filter to recycle aluminium waste
Are you a building professional? Sign up for a FREE MEMBERSHIP to upload news stories, post job vacancies, and connect with colleagues on our secure social feed.
