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Audit office questions benefits of High Speed 2 and warns of £3.3bn shortfall

The National Audit Office has warned of a £3.3 billion funding gap on the proposed High Speed 2 (HS2) rail link and questioned claims it would boost regional growth

The NAO raised its concerns in a report into the Department for Transport’s (DfT) business case for the scheme which has an estimated construction price tag of up to £17.3billion for the first phase alone.

Published this morning, the NAO report said: ‘We estimate there is a £3.3 billion gap spread over four years (2017-18 to 2020-21) which the government will need to fill between the Department’s forecast capital expenditure in the peak construction years of phase one and its budgets if these were continued at 2014-15 levels.’

According to the AJ’s sister title Construction News, the report also found that the DfT had ‘poorly articulated the strategic need for a transformation in rail capacity and how High Speed 2 [would] help generate regional economic growth”.

It stated that the relationship between journey-time savings and the strategic reasons for committing to HS2 was ‘unclear’.

The report recommended the Y-shaped network between Birmingham and Manchester and Leeds as having a ‘stronger economic case’.

It noted that the estimated cost of phase one will change as costs become firmer.

Major changes have already been made to the scheme in recent months. HS2 Ltd announced last month that it had scrapped plans to demolish and rebuild Euston station after design engineering work found improvement to the existing station can be made instead.

Earlier this week it announced plans to tunnel under the M6 Bromford Viaduct near Birmingham in order to reduce land-take and avoid community facilities.

High speed rail minister Simon Burns hailed a decision by the High Court to reject a legal challenge to HS2 as a “major, landmark victory” for the £34 billion scheme in March.

House of Commons Public Accounts Committee chairwoman Margaret Hodge said: ‘The DfT has produced a business case that is clearly not up to scratch. Some of their (the DfT’s) assumptions are just ludicrous.”

She added: ‘There is virtually no evidence in this business case to support claims that HS2 will deliver regional economic growth, one of the key aims and justifications for this project.’

Amyas Morse, head of the National Audit Office, said: ‘It’s too early in the High Speed 2 programme to conclude on the likelihood of its achieving value for money. Our concern at this point is the lack of clarity around the Department’s objectives.

“The strategic case for the network should be better developed at this stage of the programme. It is intended to demonstrate the need for the line but so far presents limited evidence on forecast passenger demand and expected capacity shortages on existing lines. It is also unclear how High Speed 2 will transform regional economies by delivering jobs and growth.

“The Department is trying against a challenging timetable to strengthen its evidence and analysis, which at present provide a weak foundation for securing and demonstrating success in the programme in future.”

But transport secretary Patrick McLoughlin insisted that the case for HS2 was “clear”.

HS2 in numbers:

  • £15.4bn to £17.3bn

Estimate of the capital cost of constructing phase one.

  • 2026

Phase one, between London and the West Midlands, is due to open.

  • 1.4 to 1

The most recent transport benefit–cost ratio for phase one, published in August 2012.

  • 2.5 to 1

August 2012 benefit–cost ratio for the Y-shaped network, from London to the West Midlands, Manchester and Leeds, when wider economic impacts are also included.  For phase one this ratio is 1.7 to 1.

  • £3.3 billion

Amount to be found by government spread over the four peak years of construction of phase one (2017-18 to 2020-21) to cover the gap between the Department’s forecast capital spending and its capital budgets if these were kept at 2014-15 levels.

 

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