What went wrong for HS2 and how will the £36 billion saved be spent instead?

ITV News Economics Editor Joel Hills explains how the project's budget got so big and where the promised billions will go now

High Speed 2 (HS2) was supposed to drive economic growth and transform rail travel in the UK.

Trains were going to be hurtling between 18 cities at speeds of more than 200 mph, bringing two thirds of everyone living in Northern England within two hours of central London.

But delays mounted and costs spiralled from £32 billion in 2012 to approaching £100 billion according to some estimates.

The average household was set to pay £2,300 in tax each to build HS2 over the next 20 years.

On Wednesday, the prime minister finally officially announced the northern leg of HS2 would be scrapped.

Instead, Rishi Sunak promised the £36 billion, previously ring-fenced for a high speed rail line from London to Manchester, would instead be allocated to infrastructure projects to provide better transport links across the north of England.

So where exactly will that money go, and how did the project's budget get so big in the first place?

The construction site for the HS2 high-speed rail scheme in Euston, London Credit: Victoria Jones/PA

What went wrong with HS2? Mismanagement has been a problem - not least at the Euston station site.

There were delays in local planning consent.

In addition, the soil between London and Birmingham turned out to be softer than expected which held up tunneling.

And land was more expensive to buy than anticipated.

The pandemic and the war in Ukraine also inflated the price of labour and raw materials.

The original route of HS2 when parliament approved it in 2012 ran delivered the full "Y-shaped network", with stations London, Birmingham, Leeds, Manchester, Sheffield and the East Midlands.

It would be delivered in two phases, starting with Birmingham to London.

Boris Johnson ditched the section to Leeds two years ago.

Then on Wednesday, Mr Sunak announced he would be scrapping everything North of Birmingham, in favour of his “Network North”.

Some residents on the Phase 2b route have already voluntarily sold their homes to HS2 Ltd Credit: PA

What will the HS2 money be spent on instead?

Mr Sunak said £36 billion of HS2 money will instead be spent improving road, rail and bus connections in the North.

A further £12 billion is pledged to deliver “fast links” between Liverpool and Manchester.

The government has published hundreds of projects that read like a shopping list.

It’s not yet clear how many have permission to start, when they will be delivered or how many jobs they will create.

The thinking is: smaller is better.

"Spending money on small less risky projects can produce much better rates of benefits per pound spent than on one enormous project like HS2 that gobbles up a lot of money and has controversial benefits," Stephen Glaister from Imperial College told ITV News.

Prime Minister Rishi Sunak made the announcement at the Conservative Party Conference

HS2 is not dead just very diminished. The route here between London and Birmingham is being built. It has cost £30 billion so far.

That’s already £10bn over the original budget. And trains won’t start running for another six years at the earliest.

Back in 2012, the idea was that every pound the government spent on HS2 would deliver £2.30 of economic benefits.

Now the government says the returns could be as low as 80p.

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