The team behind High Speed 2 wants statutory powers to borrow money in the debt markets and hedge against volatile commodity costs to keep the rail network under its increased £43bn budget.
In last week’s Comprehensive Spending Review, the Government added £10bn to the maximum budget of a project designed to create more than 100,000 jobs and trim journey times from London to Birmingham to 49 minutes. The increase further angered opposition campaigns that have argued the project is of negligible economic benefit and will blight the countryside.
In HS2 Ltd’s first interview since the review, commercial director Beth West told The Independent on Sunday that she is in discussions with ministers about legislation that would allow the company to control spiralling building material costs through hedging.
This newspaper revealed in March that HS2 was struggling to meet the initial budget estimate of £32.7bn, which its chief executive, Alison Munro, said was because “construction here is more expensive than in other countries”.
Ms West, who claimed to have saved the taxpayer £1bn-£2bn when she was head of commercial procurement at Transport for London, said that commodity prices are “always a scary thing”. An industry source said this comment proved that the Government viewed items such as steel costs as “a material risk”.
HS2 could be helped by being allowed to borrow money rather than just relying on the Government, according to Ms West, as this would “bring in [financial] discipline” to meet the terms that any lenders would demand. It would also allow the Government to privatise the network, should it want to, once the second, Y-shaped Manchester and Leeds phase is built 20 years from now.
Ms West blamed some of the initial cost problems on an “unprec edented” consultation process that has tried to involve as many people as possible who are affected by the scheme.
She said the team was “incentivised” to keep the cost of the project within its new budget, which is set at 2011 prices, to protect their individual reputations. She argued: “If HS2 gets to be a ridiculous number, then it won’t happen, will it? Fundamentally this is a very big project of very long duration, which creates both risks and opportunities.”