Ministers ‘told HS2 was over-budget three years ago’

Ministers knew HS2 was over-budget at least three years ago, it has been reported.

The warning was given in May 2016, two months after legislation for the first stretch of the line was approved by MPs, according to the BBC.

A Department for Transport (DfT) spokesman said HS2 is Europe’s biggest construction programme and “like all major, complex projects, delivery plans evolve over time”.

Last week, a Government-commissioned review into whether the scheme should continue was launched amid growing fears it cannot be built to its current specification within the £55.7 billion budget.

This is being led by Douglas Oakervee, a former chairman of HS2 Ltd – the taxpayer-funded firm building the railway – with Lord Berkeley acting as his deputy.

The BBC reported it has seen a May 2016 letter written by then-transport secretary Patrick McLoughlin to George Osborne – chancellor at the time stating that the first phase of HS2 was £1 billion over budget.

Phase 1 of the railway between London and Birmingham was initially due to cost £24 billion.

The BBC reported it also obtained a December 2016 DfT briefing note labelled “confidential” which states that “a significant gap to target price will remain” for HS2 even with planned savings.

Concern over how much the project could cost has risen since the documents were produced, with a recent Financial Times report stating that HS2 Ltd chairman Allan Cook wrote to the DfT, warning the final bill could reach as much as £85 billion.

Despite this, Transport Minister Nusrat Ghani told the Commons last month that “there is only one budget for HS2, and it is £55.7 billion”.

The feared price hike is believed to be due to various factors including engineering costs, poor ground conditions, under-estimating the cost to purchase land and property, and the expense of running trains at up to 225mph, which is faster than comparable projects.

In November last year, HS2 Ltd’s chief executive Mark Thurston denied the project was over budget but acknowledged officials were “in talks” with contractors about reducing costs.

Whitehall spending watchdog the National Audit Office (NAO) revealed in June 2016 that the DfT asked the firm to assess the impact of delaying the opening of the railway.

An HS2 Ltd spokesman said “regular updates” have been provided on the scheme, and it has come under “extensive scrutiny” including studies and reviews by the NAO and parliamentary committees.

He went on: “Since 2016, we have moved a long way as a project and organisation. We have now appointed a set of world-leading civil engineering contractors which enables us to have greater confidence about cost and construction schedules, as well as making significant changes to our management team.

“Our CEO has spoken publicly for some time about the cost pressures facing the project and we are working closely with our contractors to bear down on cost before major works commence.”

Phase 1 of HS2 is planned to run between London and Birmingham from December 2026, while a second Y-shaped phase will launch in two stages.

Phase 2a from the West Midlands to Crewe is due to open in 2027, followed by Phase 2b from Crewe to Manchester, and Birmingham to Leeds, in 2033.

HS2 trains will also serve destinations on conventional lines beyond the new high-speed network, including York, Newcastle, Liverpool, Glasgow and Edinburgh.