Transport Secretary announces urgent action to get a grip on spiralling HS2 costs

Action to control the cost of HS2 and bring the project back on track has been announced by the Transport Secretary after years of failed delivery.

Just months into the role, Louise Haigh has warned the extent of the challenge inherited on HS2 has become clear, with costs being allowed to spiral out of control and failure to deliver to budget.

Over the years, the cost of Phase One has soared, due to poor project management, inflation and poor performance from the supply chain, without sufficient explanation of what is to be done to deliver to budget.

In response, the Secretary of State has launched an independent review to ensure lessons are learned to support action and to ensure that the costs for HS2 are brought under control.

The Government has been clear it is not resurrecting Phase 2 of HS2, which was cancelled under the previous administration. The Government recognises concerns about connectivity between Birmingham and Manchester but its primary focus now is the safe delivery of HS2 between Birmingham and London at the lowest reasonable cost, and the Secretary of State has made this objective clear to HS2 Ltd.

To achieve this, the Government is also reinstating ministerial oversight of the project to ensure greater accountability. This will see regular meetings starting immediately, where both the Transport Secretary and Rail Minister, Lord Hendy, alongside the Chief Secretary to the Treasury, will challenge delivery and remove obstacles to securing the full benefits of the railway more cost effectively.   

Transport Secretary Louise Haigh said: "One of my first jobs as Transport Secretary has been to urgently review the position I have inherited on HS2.   

“It has long been clear that the costs of HS2 have been allowed to spiral out of control, but since becoming Transport Secretary I have seen up close the scale of failure in project delivery – and it’s dire. 

“Taxpayers have a right to expect HS2 is delivered efficiently and I won’t stand for anything less.   

“I have promised to work fast and fix things and that's exactly why I have announced urgent measures to get a grip on HS2’s costs and ensure taxpayers’ money is put to good use.  It's high time we make sure lessons are learnt and the mistakes of HS2 are never repeated again.”

The Major Transport Projects Governance and Assurance Review will be led by senior infrastructure delivery advisor, James Stewart, and will present recommendations back to the Government this winter.  

It will investigate the oversight of major transport infrastructure projects, including the effectiveness of forecasting and reporting of cost, schedule and benefits, as well as actions to deliver cost efficiencies. The review will primarily draw on experiences of HS2 to date to ensure recommendations and learnings are applied to its delivery as well as to future projects. 

Separately, the incentives of the main HS2 contractors are also being reviewed, which could lead to some contracts being renegotiated or amended.

The announcement, made on 20th October, comes as the Transport Secretary writes to the Chair of HS2 Ltd, recognising the collective responsibility in reaching the current position, stressing the need to focus immediately on action to turn things around and bring costs back under control.

As part of this effort to get a grip on costs, the management of HS2 Ltd will shortly be taken over by a new Chief Executive, Mark Wild, who has an extensive background in delivering transport projects and will be responsible for resetting the project.

On his arrival, the Transport Secretary will task him with assessing the current position on cost, schedule and culture, and providing an action plan to deliver the remaining work as cost effectively as possible, including at a realistic budget and schedule.

The Government will also continue to publish six-monthly reports on the progress of HS2, ensuring complete accountability and transparency on the project’s progress.   

The recent announcement marks the latest step in the Transport Secretary's mission to overhaul the railways, ensuring infrastructure works for the whole country.