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Berkeley calls for review of HS2 as predicted Phase 1 costs soar to £48bn

Developing HS2 Phase 1 from London to the West Midlands will cost an estimated £48bn – double the figure quoted by ministers in December last year, new estimates by QS Michael Byng, the author of the Suite of Rail Method of Measurement documents commissioned by Network Rail, have revealed.

Today’s revelation, according to lord Berkeley, means that the entire cost of HS2 – £48.7bn (excluding rolling stock) – will actually be taken up by Phase 1, leaving no cash left to complete Phase 2A to Crewe and Phase 2B to Leeds.

This latest development follows a plethora of problems HS2 has felt in the last few days, most recently when RTM reported that CH2M had pulled out of the contract for Phase 2B development.

Before that, MP Andrew Bridgen had been forced to apologise in Parliament for not declaring that his house was set to be bought by HS2 Ltd when he raised concerns with the project in a debate in 2015.

Two weeks ago, RTM also reported that the award of £8.6bn civil contracts for HS2 had been pushed back to June and that the company was requesting further information from the firms locked in the procurement process.

HS2 was granted royal assent in February this year, but its recent problems have cast doubt over how quickly any work can actually start on the anticipated new rail line.

The new study has led Lord Berkeley to pen a letter to the commercial secretary to the Treasury Baroness Neville Rolfe on the issue, as he wrote: “You will be aware of my statements in the Lords on several occasions recently about the costs of HS2, where I believe that the costs of Phase 1 are likely to be in the region of £54bn rather than the £24bn quoted in a Written Answer HL4189 to me from Lord Ahmad on 21 December 2016.

“HS2 do not have a properly worked up cost estimate for HS2 Phase 1. Even though we have been asking for a breakdown of their £24bn figure to demonstrate that the scope, the rates and percentage add-ons are in line with current industry experience, there appears to be nothing.”

Commenting on the costing problems raised in Byng’s estimates, Lord Berkeley added: “In spite of spending over £1bn on consultants’ fees, HS2 has no credible breakdown of the costs of Phase 1 and, in spite of several meetings, has produced no serious challenge on scope or rates to Michael Byng’s estimate of £ 48bn for Phase 1.”

He added that on the assumption that DfT estimates for Phases 2A and 2B are similarly some 50% low, then it is predicted that the Treasury will have to sanction another £50bn for these later phases if they are to happen, taking the whole project to over £100bn.

“Since the government remains committed to delivering HS2 within this funding envelope of the £55.7bn there needs to be an urgent and independent audit of scope of project and costs before any more major expenditure is committed,” said Lord Berkeley.

The project was debated in the House of Lords between Lord Berkeley and Lord Ahmad, who disagreed that HS2's figures were flimsy said that "I am confident of the robustness of our costs". 

But an HS2 spokesperson told RTM: “HS2 represents a once in a lifetime chance to rebalance the national economy. It will transform travel in this country, connecting eight of the 10 largest cities in the UK, as well as improving capacity for passengers and productivity for the economy.

“We take our responsibility to the taxpayer very seriously and are confident we can deliver this project on time and on budget.”

Top Image: HS2 Ltd Birmingham and Fazeley canal viaduct

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Chris M   04/04/2017 at 01:34

Those inflated cost figures quoted in this 'story' are the personal opinion of just one man, who is not employed by HS2 Ltd and clearly has no access to the confidential contract bids. As I said before, when the main construction contracts are signed we will soon see just how accurate HS2 Ltd's figures are. In the meantime these 'revelations' by the Lord Berkeley (which are months old) are simply a re-hash of his many long-winded statements made in the Lords. Hansard shows that all of his project wrecking amendments were voted down by a huge majority of his fellow Lords. They didn't believe his grandiose claims of impending disaster, so why should we? It's not as if as a country we have never done this kind of activity before. The contracts for HS1 were signed and the line was built on time with no busting of budgets. Crossrail is currently on time and is apparently still running to budget. So what is the evidence that HS2 is different? I would expect to see a far better standard of story from RTM than this. The claims being made by the noble Lord and his chum are no more substantiated than the scare-story stuff produced by StopHS2.

Nick   04/04/2017 at 11:43

So Chris M, you're saying we need to sign the main construction contracts first, then reveal how over budget this takes us? The NAO, the PAC and various other Govt instruments have raised concerns about the budget - not just one man. The only people who say HS2 will come in on time and on budget are the employees and contractors making huge money from the process. As for no "busting of budgets" on HS1, this is complete nonsense and I suggest you do some research. Initial budget for HS1: £2.4bn Final cost to the taxpayer: more than £10bn Don't forget those ongoing govt subsidies!

David   04/04/2017 at 19:06

As part of the HS2 consultation on route 2b in our area, we have thousands of people opposing the proposed Eastern route. Local City regions are anything but in agreement of what is the best route or provides the most cost benefit. In their consultation responses we have local authorities supporting HS2 BUT only if they get their upgrade on electrification or a new station in Sheffield . Three councils within 35 miles expecting the slow HS2 compatible service to stop at each of their towns or cities. It's absolutely ridiculous, if the projected over spend on the first phase is factual , then decisions on the next stage of the route are et to affect hundreds of people based on the massive overspend already being witnessed. Over 400 companies on HS2 books and 17 PR agencies. Conflicts of interest in contract talks , the whole thing stinks.

Tony   04/04/2017 at 19:56

This is one of the most corrupt projects the country has ever seen-all the rats are leaving the sinking ship-prout the latest rat.

Robin Lawson   05/04/2017 at 00:50

What utter twaddle. I can't believe a well respected magazine such as this one is even giving column inches to this blatant misinformation.

John Burns   05/04/2017 at 10:55

Westminster want only the London to Birmingham section done. The rest? they really do not care. If all the budget goes to phase 1 alone then fine by them. Be prepared to see HS2 end at Birmingham. The Crewe Hub is not in the budget Look at the WCML. it is twin track from Crewe northwards. Liverpool and Scotland have to use this congested stretch. The new Liverpool2 container terminal and the increasing size of the biomass terminal at Liverpool will also put great strain on this stretch as well. Drax power station are buying Louisiana Pellets in the USA giving them 100% biomass operation and surplus capacity sell on the pellets to other UK power stations. • Remove the bottlenecks on the WCML • Make the WCML 4 track from Crewe to the Liverpool branch. It needs it ►NOW◄ • Improve the WCML spur to Liverpool. • Have trains running at 140mph, or more with future stock. Then Liverpool (and Manchester) can do London in about 1.5 hours on the WCML alone. Future trains could run faster - the APT was designed to run at 155mph 35 years ago. It may be quicker from London to Liverpool using the WCML using tilting trains than non-tilting classic compatibles on HS2 from London to Birmingham and Classic track Birmingham to Liverpool. Trains to Leeds can be on the ECML (170 miles) with bottlenecks removed. Again ►much quicker◄ than part using HS2 from London to Birmingham and classic from Birmingham to Leeds. It raises the question again, is this all needed? Before the inevitable stock pro HS2 answer arrives shouting `capacity`. Local and regional can be on new and reopened lines. Surprisingly the closed line went from places to places where people want to go.

Joel   05/04/2017 at 14:10

Cost over-runs are a dangerous concept. The original London DLR exceeded its budget but by accounting standards was on target financially. HS1 was well-over budget but that vanished for political reasons, with over-spends decanted to other budgets. The UK also knowingly and corruptly abuses cost:benefit analysis to get a project past its 1.3 return ratio. If we took a broader view of transport's contribution to the environment, employment and social condition, big projects become positive returns. But as long as 'profits' are allowed to skew the sums (and we have to allow for them otherwise a lot of things will not happen) disproportionately, this issue of abused values will not lay down.

Mark Hare   06/04/2017 at 14:07

@John Burns - 'have trains running at 140mph' - how exactly do you propose to achieve that? After years of disruption and a £9bn upgrade the WCML is only fit for 125mph running. Maybe another few years of line closures for track realignment and resignalling?

Melvyn   06/04/2017 at 19:13

@ John Burns the reality is despite the billion spent on the WCML upgrade the line is still basically a 100 mph railway its only because Pendolinos can tilt that allows them to run above the speed. It's worth remembering that Crossrail is fast reaching completion and it's still on time and on budget . Yet more desperate talk from Antis who can't accept they have lost the argument and the cost of stage 1 of HS2 without contingency is about £ 20 billion so a breakdown of this £48 billion figure needs to be produced !

J Wills   06/04/2017 at 19:36

HS2 is a political project and always has been . It is about people making money , the the so called " conflict of interest" on phase 2 highlights what a grubby project this is.The people on the route are politically insignificant so can be treated like dirt. Compare this to the expansion of Heathrow, where MPs seats are at stake...heaven forbid an MP should be out of a job! LOL. HS2 will be built to Birmingham at an astronomical cost and Phase will be scaled back by using HS2 stock on normal track. The "Northern Powerhouse" is a clever Conseravative tactic to deprive Labour of votes. It will fail due to poor education standards in the North. Still lots of people will make a lot of money and towns like Birmingham will become London commuter towns.

Andrew Gwilt   06/04/2017 at 21:14

So Phase 1 of the HS2 scheme has soared to £48billion with Phase 2 also to increase its costs that could cost millions or billions of £'s. I still think that HS2 Phase 1 will get underway despite the cost has soared to £48bn.

John Burns   07/04/2017 at 09:30

@Joel "The UK also knowingly and corruptly abuses cost:benefit analysis to get a project past its 1.3 return ratio." The cost/benefit calculation was changed mainly to ensure the south east get in projects that otherwise they would not. Many economist have openly criticised the method used.

John Burns   07/04/2017 at 09:39

@Mark Hare The Pendolinos were designed to to run at 140mph. They would go that fast if the in-cab signalling was fitted. The upgrade to the WCML did not go north of Crewe. The APT was designed to run at 155mph on "existing tracks" 35 years ago. The problem with high-speed rail is that train technology has overtaken it. Take out the bottlenecks on the ECML and non-titling trains can reach 170mph on some stretches. The eastern section of HS2 "Y" is not needed at all, neither is any high-speed track north of Crewe

John Burns   07/04/2017 at 09:46

@Melvyn "the cost of stage 1 of HS2 without contingency is about £20 billion". Economists and accountants think £48bn when finished. I have never come across a project that has had generated so much public angst.

John Burns   07/04/2017 at 10:02

@J Wills. "HS2 will be built to Birmingham at an astronomical cost and Phase will be scaled back by using HS2 stock on normal track." The problem with this is that the HS2 `compatible` trains will not go more than 110 mph on classic track, when Pendolinos can reach 140mph when in-cab signalling is fitted. That is why the Proposed HS2 time is so poor from London to Liverpool. The train will run up to 250mph on HS2 track and then trundle on classic track to Liverpool. Over half of the journey time the train will be on classic track. A joke. If the `compatible` train were tilting, 15 minutes could be knocked of the proposed HS2 times. This means the same train can be used to Manchester from Crewe and the HS2 track from Crewe to Manchester dropped. All the HS2 track will do is give an increase of 12-15 minutes to Manchester. A times saving that is just not worth it. `It will fail due to poor education standards in the North.` A rather disparaging comment on the people of the North of England. I think the south is no better. If HS3 (NPR), is built and is `fast`, it will act as a linear hub as it crosses the ECML, WCML and MML. Keep HS2 only to Birmingham uprated the three mainlines, use `tilting` trains on some sections, and times to all cities will be excellent. A few tunnels will need to be bored in the Lakes and maybe a full HSR track in Scotland to give a mix of track giving excellent times to the two big Scots cities.

John Burns   07/04/2017 at 10:58

@J Willis London is unfairly favoured over the rest of the country Economist Fred Harrison highlights the bias towards London to the point that it is a black hole for investment at the expense of the rest of the country. "we see that public expenditure on a per capita basis is more than twice invested in London than other regions in the transport and housing sectors." "thanks to the tax system - that there is an automatic bias in directing investment towards London." Transport infrastructure projects are assessed on a DfT "good value for money" calculation. Value for money category - Benefit to Cost Ratio - Prospects For the Projects • Poor • less than 1 • None • Low • Between 1 and 1.5 • None • Medium • Between 1.5 and 2 • Some but by no means at all • High • Over 2 • Most if not all Even a 1 to 1.5 would be considered for London. Merseytram was 1.5 and was cancelled. "[London] in the growth years, makes a net contribution to the public coffers between 2 billion and £9 billion. This is disingenuous. The calculation ignores the capital gains that flow from public spending. Public money invested in London yields huge gains in the private sector - in the appreciation in capital assets - that far exceed the financial subsidies that are transferred to the regions." "Per capita London is 30% more productive on average - 17% per employee. When taking transport and housing into account that is 30% of more taxes raised is taken into the equation." London is more productive because of higher investment in schools and transport. So, the automatic bias towards London is a treadmill of London investment. "The productivity gap in increasing rather than narrowing." "If the London property market is overheating, the chancellor may put up the national interest rate, yet property is not overheating in the north east and they suffer because of the raised interest rate." "The boost to London's infrastructure out of the public purse overspills to higher land values, which translates to easier financing arrangements for entrepreneurs who secure an advantage to their competitors in the regions."

John Burns   07/04/2017 at 12:20

@J Willis When the value for money calculations were introduced in 2004, the SLA's head Richard Bowker stated that all outside the M25 will get little. Boy he was right.

John Burns   07/04/2017 at 13:39

@J Willis It is staggering of the extent of disparities in transport spending between London and the South East and the regions. These are figures from 3 years ago. The North East got £5 per capita spent on transport, whilst people in the South East are worth £729 per capita and London a whopping £2,700 per capita of expenditure! Disgusting is an understatement. TRANSPORT SPENDING PER HEAD London - £2,731 South East of England - £792 East Midlands - £311 West Midlands - £269 Yorkshire and Humberside - £201 North West of England - £134 Eastern England - £43 South West of England - £19 North East of England - £5 Roughly, the further put from the economic centre (London) the less it gets.

David Vick   07/04/2017 at 18:51

When will we all wake up to the monumental waste of money this Government is embarking on with HS2 (High Speed 2). Current government estimates are costs in excess of £54 BILLION and rising, and this is just one of the idiotic Westminster follies. All the time I read of cuts to social services, cuts to front line care in the community, cuts to the NHS, closure of A&E departments, closure of hospitals, cuts to local council budgets; the list goes on and on. Yet at the same time as we have this wanton destruction of public services, we also have failure to tax large business, privatisation of services, diversion of profits out of the UK tax system, spending of public money on crazy vanity projects like HS2 etc. Pro HS2 ? = vested interest, or lack of knowledge. Perhaps the public should ask their MP why they see fit to waste £54 billion on HS2. Do your homework, visit the 'Stop HS2, web site. Then get to your MP via 'write to them' web site. Make your views known.

GB   08/04/2017 at 16:31

Well said David! I'm sure thousands more support this view. I live in hopes that the Govt., will postpone (indefinitely) this project and eventually quietly drop it. If not the result may well be felt at the ballot box. Personally, I feel our main line trains are quite fast enough and any extra investment should be devoted to providing extra capacity by re-opening closed lines and developing local services once more.

John Burns   10/04/2017 at 16:40

The GreenGuage Lobby got HS2 in. Sir Rod Eddington’s report was published in 2006, was emphatic that Britain’s transport network was basically sound. He said the problem as far as trains were concerned, was a need for more capacity. However he pinned it down to overcrowded commuter lines around big cities such as London, Liverpool, Bristol and Manchester. He suggested upgraded track, longer trains and aggressive pricing to spread rail demand and constrain congestion. He took a poke at the GreeGuage lobby with Eddington saying that the “ambitions and dreams of extensive new networks – that will only ever make marginal improvements to connectivity in the UK – are not a priority”. He added that transport policy, “needs to avoid wasting time and money pursuing alluring new super high-speed motorway or rail networks or pursuing grands projects with speculative returns”. Christian Wolmar in The Guardian said we should concentrate on expanding local & regional rail by opening old lines, extending existing and building new lines where the need is. This take the load off the existing mainlines, which need the bottlenecks removing with tilting train running at speed to to 160mph. The alternatives which Eddington and Wolmar highlighted have never been looked into costed. If they had and work had been started, many services would be vastly improved and in use by now. Also since these Eddington and Wolmar wrote their pieces Mark Carne of Network Rail is leaning heavily towards battery trains to solve many problems and saving money. It is not too late to pull the plug on HS2. Now HS3 is NEEDED. The speed issue has been trashed by many as times approaching HS2 can be obtained on the exiting mainlines without spending a fortune.

John Burns   10/04/2017 at 16:58

Eddington warned against the use of very crude finger-in-the-air capacity forecasts which were being used to lobby for new rail investment. He suggested that they might be “difficult and unpopular to stop, even where the benefit-cost equation does not stack up”. Eddington mentioned the speed cult, highlighting that above 150mph, energy use soared and rates of return dropped through the floor. If the top speed is dropped from 250mph to 180mph to reduce energy use, we are then in a position that new trains on existing mainline with some, or all, bottlenecks removed, will approximately the same as HS2. London to Leeds via an uprated ECML would beat HS2 times at 180mph max speed if HS2 only gets to Birmingham and shelved. Darling of the Labour Party, who were then in government welcomed Eddington’s report viewing it as positive, as did the DfT and shelved the project. When Cameron's Tories got in they pushed this project through in the face of overwhelming logic stating the opposite.

Chrism   02/08/2017 at 22:09

I wonder, does Lord Berkeley and Michael Byng still stand by their statements about HS2 phase 1 costing £48 or even £54 billion? The signing of the seven construction contracts worth 'only' £6.6 billion yesterday expose those statements as ridiculous hyperbole with no relation to reality!

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