HS2 rail project faces £3.3bn funding gap, says NAO
The HS2 high-speed rail project has an estimated £3.3bn funding gap which the government has yet to decide how to fill, a report from a Whitehall spending watchdog says today.
It is not clear how HS2 – which runs through Tory heartlands and is bitterly opposed by some – will deliver and rebalance economic growth, the report by the National Audit Office (NAO) adds.
The timetable for planning phase one of the project – from London to Birmingham, with work due to start in 2016/17 – is “challenging”, the NAO says.
This “makes delivering this work difficult and increases the risk that the programme will have a weak foundation for securing and demonstrating success in the future”.
‘Unclear relationship’
Expressing “reservations” about the business case for HS2, the NAO says the Department for Transport’s (DfT) methodology for appraising the project puts a high emphasis on journey-time savings, from faster and more reliable journeys.
But the report adds that the relationship between these savings and the strategic reasons for doing the project, such as rebalancing regional economies, is unclear.
The NAO says it is also unclear whether the business case covers just phase one or the full route including phase two – the Y-shaped network from Birmingham to Manchester and Leeds, due to open in 2032/33.
The report says phase two has a strong economic case but that this is much less certain as route designs are less well-developed.
‘Funding gap’
Saying there were “risks to affordability”, the NAO continues: “The NAO estimates that there is a £3.3bn funding gap over four years (2017-18 to 2020-21) which the government has yet to decide how to fill”.
The report says this “gap in affordability” coincides with the “peak spending years for phase one”.
The NAO goes on: “The department capital forecast for these four years is £33.7bn but its capital budget if kept constant at 2014-15 levels would be only £30.4bn.”
FactCheck: tracking the cost of high-speed rail
‘Not up to scratch’
Commenting on the report, House of Commons public accounts committee chair Margaret Hodge said: “The DfT has produced a business case that is clearly not up to scratch and shows no signs of having learnt the lessons from HS1, which the committee reported on last year.”
Alison Munro, HS2 Ltd chief executive, said: “Birmingham’s position at the heart of Britain’s new high-speed rail network was set out in January with the publication of the preferred route for phase two.
“Along with significantly reduced journey times to Leeds, London, Manchester, Sheffield and the East Midlands, HS2 will free up much-needed capacity on existing lines.
“The region will also benefit from an expected 8,000 jobs created through the regeneration and development of the HS2 interchange at Birmingham airport and Curzon Street stations, as well as opportunities from the 9,000 construction jobs on phase one.”
‘Good progress’
Transport Secretary Patrick McLoughlin said: “I welcome any examination of the HS2 programme, but I do not accept the NAO’s core conclusion.
“This is because it depends too much on out-of-date analysis and does not give due weight to the good progress that has been made since last year.
“This includes the appointment of an expert management team and the announcement of detailed plans for the line north of Birmingham.”
Hilary Wharf, director of the HS2 Action Alliance, which opposes HS2, said: “NAO’s report highlights the failings in the fundamentals of HS2’s business case and is a scathing indictment of the bogus case the government has constructed.
“HS2 simply cannot withstand independent scrutiny. The NAO join a long list of independent bodies and economists who find HS2’s planning and business case woefully lacking.”