DfT needs to learn from mistakes and not allow massive overspend on HS2

THE Department for Transport should learn from previous mistakes and improve value for money on the delivery of major projects such as high speed rail.

The Public Accounts Committee said failure to do so could lead to projects such as the £50bn rail scheme running massively over-budget.

In its new report into the rail infrastructure programme, the committee said it remained sceptical over the DfT’s ability to deliver the HS2 scheme to budget.

It stated in the report: “The Department told us that it is confident that it will deliver phase one of High Speed 2 within its available funding of £21.4bn. However, the Department has included a generous contingency within that amount to give it 95% certainty that it can deliver within the available funding.
 
“Value for money will depend not only on the programme coming in within its funding, but also on the use of contingency funds being properly controlled. The Department is less confident about current cost estimates for phase two of High Speed 2 because it is at an earlier stage of development.

“Nonetheless, it told us that it will complete the whole of High Speed 2 within the overall funding envelope of £50bn. This is despite the complexity of the programme, and uncertainty around, for example, future construction inflation.”

It said the DfT and Transport for London had used various means including a supplement to business rates in London to help pay for Crossrail. However, it added that even though regional economic growth was one of the objectives of HS2 – and one from which businesses would benefit – the DfT considered that measures to reduce the burden on the general taxpayer were not appropriate for the scheme.
 
“The Department should set out how it will control use of contingency on High Speed 2 and other projects, to provide assurance that generous contingency funds will not be used to hide cost overruns,” said the report.

The MPs said there was also a risk that industry did not have the capacity to deliver all current and proposed rail programmes. It said HS2 chair David Higgins had stated he was confident that Hs2 and the northern connection HS3 could be built at the same time.

However, it said the DfT had told the committee it would need to carry out further work to establish whether this was feasible.

“One of the challenges in delivering multiple programmes is whether there are the skills and capacity to do so both within government and industry. The Department is taking steps to increase its own capacity and capability to sponsor programmes, and it told us that the most acute skills shortage facing the rail industry is in signalling,” said the report.

The committee said the DfT should work with industry and with other departments responsible for major infrastructure programmes to understand gaps in industry capacity, and to put in place plans to manage any gaps in order to ensure all programmes could be delivered on schedule and within budget.

“The Department has a long way to go to prove that it is being more active in realising benefits from major programmes. There was insufficient planning for regeneration at Ebbsfleet in Kent, and the expected substantial economic benefits have not been delivered, despite High Speed 1 construction being completed seven years ago,” it added.

“The Government is only now putting in place an urban development corporation at Ebbsfleet to rectify this. The Department told us that it has learnt and is applying this lesson on High Speed 2, and that it has accepted 18 of the 19 recommendations of Lord Deighton’s Growth Task Force for High Speed 2. The Department sees it as the role of local authorities to use their existing powers and budgets to plan for development around proposed High Speed 2 stations, although it told us that it is looking into establishing an organisation to work with local areas on this. However, we remain concerned about the scale of action and resources the Department is dedicating to secure regeneration benefits from this £50bn programme.

“The Department should set out who is responsible for ensuring that benefits are realised, and how that work will be coordinated.”