HS2 designs at Euston may never have been affordable under original budget, MPs told

The proposed HS2 terminus at Euston may never have been affordable under its original budget, the boss of the high-speed rail project has told MPs.

A recent report from the National Audit Office revealed the anticipated cost of the station had hit £4.8bn, roughly 85% higher than the original £2.6bn budget.

It followed the mothballing of the site by transport secretary Mark Harper last month to get a handle on spiralling costs across the UK’s biggest infrastructure scheme. Harper admitted last week the move wouldn’t actually save any money in the long run.

Mark Thurston, chief executive of HS2, was asked by the public accounts committee yesterday (Monday) whether the station had ever been affordable within the budget allocated to it.

“That has proven not to be the case,” he said, adding it had always been known that early estimated costs would need to be reassessed due to the complexity of the project.

“We knew that we would probably have to reassess that at some point when the design was complete, when we understood the full extent of the oversite development that we would have to accommodate on the site and once we had brought a construction partner on the site,” he said.

Thurston added that it was always difficult to know how much large public projects will cost the taxpayer “until the marketplace has priced it”.

“Our job at HS2 is to select the right contractors with the right capability and then work with them to get to a point where you have a price you can live with,” he said.

“We were working towards being on the cusp [of a price at] Euston but of course now we have got a number that we cannot live with and we are thinking about what we do next.

“The pause that has been driven by the wider fiscal challenges does give us an opportunity to draw breath and think about what we do next.”

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Asked why the government was reporting just £400m worth of cost pressures on Euston until as recently as last October, Dame Bernadette Kelly, permanent secretary at the Department for Transport, said the department and HS2 “had no sight” of the inflated figures until the end of 2022.

The higher levels of cost pressures emerged when the station design process where HS2 Ltd and contractor Mace-Dragados conducted a bottom-up costing, looking at the price of materials required to the fulfil the latest specification.

Thurston said the £4.8bn related to the estimated cost of completing existing plans for Euston, rather than money actually spent.

“All the investment made in Euston today has all been what we would call ‘no regrets work’,” he said.

“We do not have an estimate that we can live with and endorse, so we have more work to do. But we have not spent £4.8bn, we have only spent £2bn and that is money we were always going to spend to acquire the land [and] prepare the site for construction.”