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14.09.18

HS2 land purchase costs triple in six years, ‘significant uncertainty’ remains

HS2 Ltd’s acquisition of properties has been criticised for soaring costs and slow payments in the National Audit Office’s (NAO’s) latest report on the scheme.

Only half of advance payments to claimants have been completed within the required three-month period from HS2 Ltd after receiving a claim request, the auditor said, prompting further concerns about the rate of acquisition of land for the £56bn project.

Under the compulsory purchase for Phase 1 – between London and the West Midlands – property owners must receive a payment of 90% of the estimated value of their land within three months of HS2 taking possession.

However, between March 2017 and August 2018 payments have been later than the three months or are forecast to be later in 52 out of 108 cases. For 35 of these, HS2 concluded that the main reason behind the delay is that claimants have not provided the required information in a timely manner.

Estimated costs for HS2 Ltd to buy land and property for Phase 1 have already “increased significantly” since the start of the programme, according to the spending watchdog. In 2012, HS2 Ltd’s estimate of the net cost — cost after resales — to acquire land and property that supported its first baseline cost and delivery plan was £1.1bn. By 2013, around the time the Hybrid Bill was deposited, this had increased to £1.6bn. The most recent estimate in 2017 was £3.3bn — almost triple the original estimate.

Factors behind the spike in costs included “significant additions” to the scope of the programme, such as additional junctions and route changes. “These changes have resulted in an increase in the amount and type of property required, and therefore the cost to acquire the property needed has increased by approximately £175m (2011 prices),” it added.

Despite the growing overhead for land acquisition, the NAO noted that HS2 Ltd expects that costs “will remain within available funding,” although the early stage of the programme means that there remains “significant uncertainty” about what the final costs will be.

“There is potential for further changes to the scope of the programme, and therefore the amount of land required, the number of property owners that will apply for compensation under discretionary schemes is uncertain, and the final settlement value of almost all properties, including some high-value properties, has not yet been decided,” the report found.

“Although HS2 Ltd has made efforts to improve its land and property function since 2015, there is work to be done to support claimants to receive timely compensation where they are due an advance payment.

“While HS2 Ltd’s estimate of the cost of land and property has increased significantly over time, cost estimates, particularly in this sort of major land acquisition programme, are inherently uncertain and subject to change as more information becomes known about both the design and operation of the railway, and the nature of the land and properties required.”

RTM has contacted HS2 Ltd for comment.

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