National Audit Office says HS2 has ballooned well over £55.7bn budget while first phase could open 12 months late

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The cost of HS2 has ballooned well over its £55.7bn budget while the company behind it is only 60% confident of delivering the first phase on time, according to the National Audit Office.

A report from the National Audit Office (NAO) into the progress of HS2 has revealed how the project is both over-budget and behind schedule.

It found that phase one of the high speed line, from London to Birmingham, is currently forecast to cost £27.4bn including rolling stock, exceeding available funding by £204m.

That forecast, itself over budget, assumes the development company HS2 Ltd, as well as the Department for Transport (DfT), will implement £1.5bn in planned cost cuts.

It added that while the cost estimates for phase 2 are at an earlier stage, some elements are unfunded, with the 2015 spending review showing that the estimated cost of phase 2 exceeded available funding by £7bn.

But since the Spending Review, the NAO found that work done by the DfT, HS2 Ltd and a review commissioned by the Cabinet Office has identified potential savings of £9bn, with £2bn of the figure secured.

The report also revealed that HS2 Ltd is only 60% confident that phase 1 will open as expected in December 2026, but that this had been raised from 53% in November 2015.

However, the NAO said “this is still low given that major procurements are about to begin”.

It also revealed that because the Hybrid Bill has taken “longer than expected” to develop, the start of main civil engineering works on phase one has been pushed back from early 2017 to mid-2018.

The report added that only 15% of ground investigation work has been completed against a target of 26%.

Meanwhile, the DfT has told HS2 Ltd to raise its confidence level for opening phase 1 on time from 60% to 80%, while making sure the project remains within the available funding.

It has also asked HS2 Ltd to develop plans for how delaying the opening of phase 1 by 12 months could reduce costs and increase deliverability.

Amyas Morse, head of the National Audit Office, said: “The unrealistic timetable set for HS2 Ltd by the Department (for Transport) means they are not as ready to deliver as they hoped to be at this point.

“The Department now needs to get the project working to a timescale that is achievable.”

Responding to the NAO report, HS2 chief executive Simon Kirby said: “The role of the NAO is to challenge projects such as HS2 and through that challenge improve the way they deliver for the taxpayer. This report does this and we accept that challenge. 

“It also, however, recognises the real progress we have made in taking the concept of HS2 and moving it nearer reality.  

“As the report says, HS2 remains a highly ambitious project, but as it also demonstrates there are real and substantial grounds why the public, government and parliament should have increased confidence in our ability to deliver the project. 

“Our job is to keep earning that confidence going forward.”