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Report severely criticises government business case for HS2

The report states that the Department has not made clear the need for a transformation in rail capacity Photo:

The controversial high speed rail has been severely criticised in a report by the National Audit Office (NAO) over how HS2 will help generate regional economic growth and how a £3.3billion funding gap will be filled.

The NAO which scrutinises public spending on behalf of Parliament, highlighted concerns surrounding the business case drawn up by the Department for Transport (DfT), in particular its case for investment in the project.

The report states that the Department has not made clear the need for a transformation in rail capacity, how High Speed 2 will benefit the economy or generate jobs adding that it focuses too much on journey-time savings.

It is also unclear to the NAO whether the business case covers phase one (the route between London and the West Midlands) which is due to be completed in 2026, or phase two (the entire Y-shaped network with lines from Birmingham to Manchester and Leeds) which is due to open in 2032.

So what is the economic benefit of HS2? The report states the most recent figures (published in August 2012) calculate that for every £1 investment the return for the economy will yield £1.40.

Though the DfT says that is just phase one and the entire network will yield £2 for the economy for every £1 invested in HS2.

The report questions how a £3.3 billion funding gap will be filled Credit: HS2 Ltd

The report criticises the fact that calculations for phase one have twice contained errors and that the Department has been slow to carry out its own research to validate the figures. It goes on to advise the DfT and its advisers HS2 Ltd to update the data from which these calculations were drawn.

Amyas Morse, head of the National Audit Office, said today the case for HS2 should be clearer at this stage of development:

"It's too early in theHigh Speed 2 programme to conclude on the likelihood of its achieving value formoney. Our concern at this point is the lack of clarity around the Department'sobjectives.

"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 High Speed 2 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."

– Amyas Morse, head of the National Audit Office

One of the campaigners against HS2 says the findings of the report is proof that the project will not benefit the economy.

Joe Rukin a campaigner for Stop HS2 says the report is proof that the project will not benefit the economy

"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. They can't say it will be value for money, but do say there is a three billion pound black hole in the project, before 20% VAT, which has so far been missed by the incompetents running this project, is added."

"To put it simply, they say everything the Stop HS2 campaign has been saying for three years. The Government and MPs haven't wanted to listen to us, but the surely have a duty to listen to the National Audit Office."

– Stop HS2 campaigner Joe Rukin

Campaigner Joe Rukin added that the total cost of HS2 when including the £3.3 billion funding gap highlighted in the report, the cost of trains and VAT, comes to over £53 billion.

When ITV News put this to the DfT a spokesman said “we do not recognise the funding gap that the NAO quotes.”

With regards to the cost of manufacturing the actual HS2 trains the DfT spokesman said the Department has a separate budget for that:

“As is standard practice, we have a separate budget for rolling stock procurement and are still considering finance options around this, including the possibility of private sector investment. We first published the estimated costs for rolling stock in 2012.”

– Department for Transport Spokesperson
Transport Secretary Patrick McLoughlin has rejected the conclusions reached in the report Credit: PA

The Transport Secretary has rejected the NAO’s report findings saying the progress made since the last figures were released have not been taken into consideration. Transport Secretary Patrick McLoughlin said:

“I welcome any examination of the HS2 programme, but I do 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.

“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.”

Despite the damning report by the NAO, business leaders believe HS2 is needed to enable economic growth. The President of the Birmingham Chamber of Commerce says the high speed rail infrastructure is essential:

Birmingham Chamber of Commerce President, Steve Brittan

"Business needs infrastructure that allows high capacity interconnectivity between our major cities and regions, HS2 provides this.

"Furthermore, HS2 allows the current rail infrastructure to provide more local commuting capacity which has the additional benefit of reducing overcrowding on the motorway network, major and local roads.

"The movement of freight will also benefit from an increase in capacity on the motorway and road networks."

– Steve Brittan, President of Birmingham Chamber of Commerce