Tuesday 3 September 2019 12:44 pm

HS2 faces seven-year delay as costs set to balloon to £88bn

The real cost of HS2 could spiral to £88bn as the project faces years of delays, according to an explosive report authored by the chair of the controversial UK infrastructure project.

Allan Cook, who has carried out an internal review of the project, said he did not believe the scheme, which will link London to the north in stages, could be delivered within the official budget of £56bn.

Read more: HS2 faces the scrap after Boris Johnson kicks off review into troubled HS2

Cook estimates that the scheme will cost in the range of £72bn to £78bn, based on 2015 prices.

But the transport secretary, Grant Shapps, said that based on 2019 prices, the high speed line could end up costing between £81bn and £88bn.

In a statement, Shapps said: “Colleagues will see that the chairman of HS2 does not believe that the current scheme design can be delivered within the budget of £55.7bn, set in 2015 prices.

“Instead he estimates that the current scheme requires a total budget – including contingency – in the range of £72 to £78bn, again in 2015 prices.

“I therefore think it is worth also updating the House in current prices. Adjusting by construction cost inflation, the range set out in Allan Cook’s report is equivalent to £81 to £88bn in 2019 prices, against a budget equivalent to £62.4bn.”

The HS2 chairman also believes there could be seven-year delay to HS2, with the whole project being completed by 2040 instead of 2033.

Phase one, which will connect London to Birmingham, was scheduled to be completed by 2026 but Cook says it is more likely to open between 2028 and 2031.

Phase two, which will connect Manchester to Leeds, was supposed to open by 2033 but this could be pushed back to 2035 and 2040.

Cook’s assessment is separate to the review that is being carried out by former HS2 chairman Douglas Oakervee and HS2 critic Lord Berkeley, which is due to finish in the autumn.

That review will look into how and whether the project should go ahead.

Cook said that while HS2 remains the “right strategic answer” for Britain’s railways, the entire business model “needs to be reset”.

The original plans did not take sufficient account of the compound effect of building a high-speed line through a more densely populated country with more difficult topography than elsewhere – and doing so whilst complying with higher environmental standards

Equally, the existing cost/benefit model, which was designed for smaller scale schemes, has proved inadequate in capturing the full transformational effect of HS2, particularly on changing land values. This transformation is already being demonstrated in Birmingham.

Therefore, the budget and target schedule for the programme have proved unrealistic, while at the same time the benefits have been understated.

Given the above, the budget, schedule and business model for HS2, as well as the way it interfaces with the rest of the rail network, need to be reset – reflecting the different maturity of the phases – to ensure the programme delivers the greatest possible benefit for the country in the most cost-effective way.

Allan Cook, HS2 chairman

Andy McDonald, the shadow transport secretary, said: “Successive Conservative transport ministers have shown themselves to be utterly incompetent and unable to oversee the finances and governance of HS2, among other infrastructure projects.

“This government has misled both parliament and the public about the cost of HS2. People need to have confidence in the project, so this delay is bad news for the UK transport system as a whole and the north of England in particular.”

An HS2 Ltd spokesperson said: “The report by our chairman Allan Cook is an assessment of the current status of the HS2 programme. It examines the comprehensive and far-reaching benefits of HS2 for the country, which are more significant than those previously taken into account. It also examines the challenges facing the project. It sets out a rigorous cost and schedule range for delivery of the programme under its current scope.

Read more: Government knew ‘for years’ that HS2 will blow its budget

“The assessment makes clear that HS2 remains a compelling strategic answer for Britain’s future transport needs, relieving overcrowding and congestion on our roads and railways, and reducing the carbon footprint of the UK. It will drive economic growth and regeneration in our regions, and bring Britain closer together.

“The assessment of phase one is based on the significant work carried out so far, which has given us detailed insight into the scale and complexity of the programme. The assessment of phase 2b takes into account lessons learnt on phase one.”