HS2 budget review is... to be reviewed

Concerns multiply over the increasing costs of the high-speed London to Birmingham rail link

Fears over the £33bn budget for the hugely controversial High Speed Two (HS2) rail link are escalating as the team behind the project has launched yet another cost-cutting review.

The Independent on Sunday can reveal that HS2 Ltd, which is owned by the Department for Transport (DfT), is trying to find further savings so that it can stick to its original budget, having only just finished its first review.

HS2 is struggling with costs 13 years before the first passengers buy tickets for the super-fast trains that will cut the 84-minute London to Birmingham journey time to 49 minutes. Any cost overruns would badly damage the financial arguments for HS2, which include creating more than 100,000 jobs and generating around £60bn for businesses and the wider economy.

Alison Munro, HS2's chief executive, has already admitted that there are problems with higher than expected construction costs, while professional services fees, such as those for engineers designing parts of the route, are rising. Some rail experts believe the final bill for HS2 could be as much as 20 to 30 per cent higher than the £32.7bn estimate – or that the Government will have to scale back its proposals drastically.

HS2's first cost-cutting exercise, known as Baseline 2, highlighted concerns over issues such as professional fees and VAT. In recent weeks, Baseline 3 has started, which is said to probe the more detailed design work and examine technical details that could be altered to help get costs under control.

Last month, the National Audit Office identified a £3.3bn funding gap between 2017 and 2021, which are the key years for constructing the first phase of a rail link that will ultimately run to Manchester, Leeds and Edinburgh.

Opponents of HS2, including environmentalists angered by the potential blight on the countryside and the disruption to ancient woodland, seized on the latest evidence of a cash crisis. Joe Rukin, campaign manager at Stop HS2, said: "They've reviewed the costs and immediately started a review of the review of the costs. HS2 Ltd hasn't been able to get a single figure right; there's not a single figure that we trust.

"What really worries people is that in the end it won't be construction costs that get squeezed but mitigation and compensation [for homeowners and businesses that are forced to move]."

Stop HS2 is holding a convention in Staffordshire at the end of this month, when around 600 protesters will be given what Mr Rukin described as a "crash course" in campaigning against the project. They will also be able to top up campaign funds if they splash out £28.50 on hooded tops, or snap up 35inx24in flags with the "Stop HS2" logo.

An HS2 spokesman said: "We're always working to manage the cost of HS2 and part of that is an ongoing efficiency challenge group. It's an ongoing programme."

There have already been some major changes to HS2's ambitious vision. The demolition and rebuilding of Britain's sixth busiest railway station, Euston, was scrapped after officials realised they had underestimated the cost by 30 to 40 per cent.

It is also believed that a row is brewing over how HS2 should be built. It had been thought that a large private sector organisation or consortium would be brought in to oversee construction, which is what happened at the London 2012 Olympics after it was discovered that the original budget was a wild underestimate of the real cost.

Instead, it appears that the DfT wants to keep control of the project itself. Last month Andrew McNaughton, technical director of HS2, said that the UK had become over-reliant on the type of multinational engineers that manage some of the country's biggest projects.

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