A NEW REPORT from the National Audit Office published today has criticised the Department for Transport for failing to prepare an adequate business case for building HS2, but the transport secretary Patrick McLoughlin said he did not accept the report's core conclusion and insisted that the case in favour of the project was clear.
The report is the first from the National Audit Office about HS2, and it says there are a number of flaws.
Among the problems mentioned are 'the Department’s strategic reasons for developing High Speed 2 are not presented well in the business case, it is not clear how High Speed 2 will deliver the Department’s strategic objective of delivering and rebalancing economic growth, the benefit-cost ratio calculated for phase one has been wrong twice, and the Department’s management and oversight of the programme needs further improvement'.
There is also mention of a £3.3 billion 'funding gap', which the NAO says will occur between 2017 and 2020. Further concerns are voiced about the development timetable, with the report branding the DfT's intention to promote the main Hybrid Bill before the end of this year as 'overambitious'.
The DfT has gone through considerable changes since the collapse of the West Coast franchise competition last October, and has since rewritten the franchising timetable, delaying most franchise renewals until after the next general election. The NAO comments that it is 'concerned about the Department’s capacity to undertake this programme to a challenging timetable alongside its other business and having experienced considerable organisational change'.
There also seems to be confusion about some of the Department's principal intentions. The NAO says it is 'unclear' whether the business case as calculated so far covers just Phase One, due to open in 2026, or the full Y-shaped network from Birmingham to Manchester and East Midlands/Sheffield/Leeds, which is due to open in 2032/33.
Amyas Morse, the head of the National Audit Office, said: "It's too early in the HS2 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 HS2 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."
Transport secretary Patrick McLoughlin responded that he "welcomed any examination of the HS2 programme", but did "not accept the NAO’s core conclusion. This is because it depends too much on out of date analysis and does not give due weight to the good progress that has been made since last year."
He continued: “This includes the appointment of an expert management team and the announcement of detailed plans for the line north of Birmingham. The case for HS2 is clear. Without it the key rail routes connecting London, the Midlands and the North will be overwhelmed. HS2 will provide the capacity needed in a way that will generate hundreds of thousands of jobs and billions of pounds worth of economic benefits.
“Economic modelling is just the start of the story – if we only relied on modelling we would not have built the M1, parts of the M25 or the Jubilee line extension to Canary Wharf.
“We are not building HS2 simply because the computer says 'Yes'. We are building it because it is the right thing to do to make Britain a stronger and more prosperous place.”
The NAO's conclusions have been greeted with caution in the regions. The chief executive of Birmingham Chamber of Commerce Group Jerry Blackett said: “We agree with the Department that the economic modelling is just the start of the story and urge the government to act speedily.
“In 2011 during the morning peak there were on average 4,000 people standing on arrival into London Euston and 5,000 people standing on arrival into Birmingham.
“This means there are already around 115 passengers for every 100 seats. We need to act now to increase capacity. Britain cannot afford to leave the economic future of great cities like Birmingham to an overcrowded railway that will also be 200 years old by the time HS2 opens. If we are to compete globally, Britain needs transport that matches the best, but we are way behind."
However, House of Commons Public Accounts Committee chairman Margaret Hodge commented: "The DfT has produced a business case that is clearly not up to scratch and shows no signs of having learnt the lessons from HS1, which the committee reported on last year. Some of their assumptions are just ludicrous. To take just one example, on the benefits to business travellers, the department continues to assume that business travellers do not work when on the train and to use data that is over 10 years old.
"HS1 ended up costing the taxpayer billions when it was supposed to pay for itself. An estimated £3 billion funding gap has been identified for HS2, already bringing into question the affordability of this project."
Labour shadow transport secretary Maria Eagle said: “Ministers must respond to this worrying wake-up call if HS2 is to remain on track. A new high speed line between north and south is vital to tackle the rapidly advancing capacity crunch on Britain’s railways, yet the NAO is damning about the Department for Transport’s ability to deliver it.
“It is deeply concerning that, just one week after the Queen’s Speech, the NAO believes the Government’s timetable for delivering the legislation necessary for HS2 is hopelessly unrealistic."
The report has been applauded by campaigners opposed to HS2. Joe Rukin of Stop HS2 said: "Just a couple of days after Patrick McLoughlin asked MPs to give him a blank cheque for HS2, the National Audit Office have produced a damning report into the project. The project is out of control because the politicians involved have been seduced by the words ‘high speed rail’ and have been complicit in fabricating a case for their vanity project.”
Meanwhile Chris Richards, who is transport policy adviser at the Institution of Engineering and Technology said: “In our response to the Department for Transport consultation we made it clear that there were potential flaws in the analysis, several assumptions were made in crucial areas and serious questions have been left unanswered.
“High Speed 2 is a project of major national significance. If we get this wrong, we will regret it for decades to come.”