HS2 Ltd executive chairman Sir Jon Thompson told the Transport Select Committee the estimated cost of building the rail line between London and Birmingham could now cost as much as £66.6 billion.
At 2019 prices the estimated cost for phase 1 is between £49 billion and £56.6 billion, however adjusting the current prices involves “adding somewhere between eight and 10 billion pounds.”
Sir Jon said, “This is a systemic problem. It’s not just about HS2, it’s about large projects that the Government funds.
“The budget needs to be set early on in order for an outline business case to be approved by the Government, sometimes by Parliament.
“At that point, people think OK the original estimate for Phase 1 was £30 billion-something.
“That is based on very, very immature data. You don’t have a design, you haven’t procured anything, there is no detail on which you can cost anything.”
He added, “If you say to a builder, can you give me a quote for an extension, they walk around and say ‘it’s £50,000-something’.
“But then you get into the detailed design, you know exactly how big it is, what surfaces you want, how much concrete needs to be poured. Unsurprisingly you get a better number.
“That’s the situation here. The situation with HS2 in my opinion is the estimate was poor, the budget was set too early, and then when you get further into it, you get much better information.
“Then on that basis, you can cost it out with more accuracy and then you discover it’s higher.”
He was asked why official cost estimates are still being given at 2019 prices, Sir Jon said, “It is the Government’s long-standing policy that infrastructure estimates are only updated at Spending Review points, that’s my understanding of it.
“So that’s why we’re still working to 2019 prices and the whole conversation about 2019, which is to be frank with you an administrative burden of some significance in the organisation.
“All of the invoices we get we have to then deflate backwards to 2019 prices even though we’re paying them at 2024 prices.
“And then we have to adjust the accounts to account for that, so it is a significant administrative faff to be frank.”
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