This report examines whether DfT and HS2 Ltd have protected value for money so far in their stewardship of HS2.

Background to the report

The High Speed Two programme (the programme) aims to construct a new high‑speed, high-capacity railway between London, Leeds and Manchester, via the West Midlands. The new railway will join with the existing rail network to enable journeys to Liverpool, Newcastle, Edinburgh and Glasgow. It is the government’s largest infrastructure programme by value and many of its component parts, such as works at Euston station, construction of the railway infrastructure and purchase of land and property for the route, are large and complex projects in their own right.

In March 2019, HS2 Ltd formally advised the Department for Transport (the Department) that it would not be able to deliver Phase One of the programme on time or within available funding. Since then, HS2 Ltd has continued to develop cost and schedule estimates for the programme, which indicate that the programme will cost more than the available funding and be completed later than planned.

Content and scope of the report

We have reported three times on the programme. Each of our previous reports highlighted significant cost and schedule pressures; the potential effect of any increases in these on the scope and benefits of the programme to passengers, communities, businesses and the economy; and areas of risk going forward.

This fourth report examines whether the Department and HS2 Ltd have protected value for money in their stewardship of the programme so far, and the risks to value for money going forward. We assess:

the progress of the programme since we last reported in 2016;

why the schedule is delayed and forecast costs have increased; and

the risks that the Department and HS2 Ltd must manage.

Given it is still at an early stage, we do not seek to conclude on whether the programme is ultimately likely to be value for money. We focus our analysis on Phase One, because HS2 Ltd has made more progress on the cost and schedule estimate in advance of the Department’s plan to take the final investment decision on that phase.

Report conclusions

High Speed Two is an ambitious national programme, the construction of which will take decades. The Department, HS2 Ltd and government more widely underestimated the task, leading to optimistic estimates being used to set budgets and delivery dates. In not fully and openly recognising the programme’s risks from the outset, the Department and HS2 Ltd have not adequately managed the risks to value for money. If these risks had been recognised and managed earlier, then the significant activity in a pressured environment over the past year trying to understand and contain cost increases may not have been necessary. There are lessons to be learned from the experience of High Speed Two for other major infrastructure programmes.

We welcome the increased realism on the estimated cost and schedule for the programme. However, significant risks remain. While the estimated cost and schedule for Phase One are now on a stronger footing, the challenge of getting Phase One into construction, and of monitoring and managing the programme as it progresses, is considerable. Phase Two is at a far earlier stage of development with many important decisions to be made before HS2 Ltd and the Department can improve cost and schedule estimates. Completing High Speed Two will require sustained focus and support from the Department and across government to ensure the programme is re‑established on a sound basis, balancing cost, time and benefits, and delivered in a way that achieves long-term value for money.