Public Accounts Committee

Monday 14th September 2026

(began 1 week, 6 days ago)

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15:33
Sarah Olney Portrait Sarah Olney
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Welcome to the Public Accounts Committee on Monday the 14th of September 2026. I'm Sarah Olney MP. I am chairing today's session in the absence of Sir Geoffrey and Clive Betts. Today's session is delivering HS2 and Euston a perennial. I would say for this committee. The HS2 programme aims to deliver a high speed railway between London and Birmingham, but the project has been plagued by a multitude of issues since its inception, including significant cost increases and delays.

In May of this year, the Secretary of State announced that the expected cost of completing HS2 now stands between £87.7 billion and £102.7 billion. 46.8 billion has already been spent on the project. Delivery of the programme has also been significantly delayed, with full service is now expected to be introduced between May 2014 and December 2043, between 3 and 13 years later than previous estimates. As we expressed in our last report on this subject, HS2 has become a casebook example of how not to run a major project.

Today, we will be looking to challenge the Department for transport and HS2 limited on their latest cost and schedule estimates, and the trade offs being made to reach these other lines of questioning will include Dft's and Hs2's approach to revising their contracts, improvements in governance and organisational capability, the development of the Euston project and the issue of land and property disposal. So I'm going to start by asking our witnesses to introduce themselves and their roles.

I'm going to start with Mr. Creamer on my left, and.
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None Portrait Speaker 3
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In December 24th, the situation was the programme was uncoordinated. I was here on December 2024 to now and it helped answer your question. So there was no clear way to actually complete the project. We didn't really understand where we were physically with the work complete. And crucially, crucially to your point, no figures, numbers could be relied upon and there was clearly a misalignment between the department, the company and its supply chain.

So that was December 24th. It was clear a fundamental reset was required. It was also clear that we have the minute 3000 brilliant colleagues working every single day, 24 over seven. And before I start, I'd just like to acknowledge the hard work of the construction industry who really haven't missed a beat in my two years or so in this job. So in resetting the programme, we've taken a five step approach. At its core is to answer your question of why would this be different? It's a similar process that we used in Crossrail.

But this is a much more bigger, more complicated problem happening much earlier in the programme. Firstly, we worked out what had gone gone wrong. We went through this programme with a fine tooth comb, found three systemic problems that had to be addressed. And I think this is fundamentally answering your question. Firstly, we underestimated the effort of this programme by simply starting too early. We started without the right design, which meant we greatly underestimated the risk ahead of us.

So it was a huge underestimation of effort. Secondly, the contracts we entered into, particularly the main work civils, transferred all of the risk back to the employer, HS2 limited and thirdly, HS2 limited didn't manage the situation well enough. So despite the hard work of a really very, very hard working, dedicated group of people, those underlying causes were what we found. So in stages two and three, we put the programme back in the right sequence, module by module, found all of the scope that was missing, resolved all of the interfaces, all the activities are in the right sequence.

We produced what we have called the reference case. What the Secretary of State in her statement called the challenging ambition. Now, this is important that HS2 limited previously, I believe, made a bad mistake of trying to have a overly optimistic route forward, what we call the reference case. The challenging ambition is forward leaning but has got two feet. In reality, it's the version of the future that will get this railway open at the right quality, at the lowest cost, but it's not a fantasy.

So that's the first thing I would say about why this is different. And we also identified ranges of uncertainty. You've said what they are. You know the first stage of this railway between Old Oak Common and Birmingham Curzon Street, 2036 to 39. You've mentioned the large range of financial uncertainty. Again, that would be another indicator why this approach is very, very different. We have a large range of uncertainty ahead of us, and the Nao have commented that we're taking a considered approach, which I, I agree with the Secretary of State asked me in those large ranges to try to get to the earliest good quality railway that we can.

And to do that, we've adjusted some of the specification of the railway. We've reduced its speed. We've taken some of the complex technology out, all pursuant not to change the bookends of the ranges, but to get the earliest good quality railway that we can where we are at the moment. We are concluding the reset with two very important steps. Firstly, we are forming something called baseline 8.0, which will supersede the current discredited baseline of 7.1.

8.0 is the chassis of the framework that we will report against, and we aim to have that in place by Christmas if the quality is not right. And as you would imagine, we have extensive external assurance, we will keep going until it is, and I'm very confident that we will have baseline 8.0 by April next year. This is crucial because it forms the framework which will keep the alignment between the department, the the company and its supply chain.

Another. The third area. I think you should be confident that when this baseline is struck, you will be able to see a clean line of sight from this committee into the Department, right down to the person in orange on the on the front line. The final bit of the reset is what we call 8.1, which is really all the residual matters bound up, including backing off the supply chain as much as we can. I'm sure we'll come to the topic.
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None Portrait Speaker 3
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Yeah. So to get to the you know, again, learning from projects like Crossrail, we do not want to be on the bleeding edge of technology. Equally, we don't want to create a situation where there's a, a cul de sac that people can't evolve the railway. So the first thing I would say is that this railway specification will deliver the ten trains an hour specification for the very end of the of this particular phase, and it.

Future proofs, 16 trains an hour. So it's it doesn't create a technological cul de sac. The reduction is in two areas. Firstly, the reduction in speed 303 20 is exactly what the French, the Japanese, the Spanish, the Italians will build. So by going to 303 20, we have the ability to use the same technology, the same testing scripts. And you know, it's convergence with with high speed one in the UK.

And this greatly de-risks the testing effort at the end of the job and as permanent secretary said, doesn't really damage the benefits in that regard. So the reduction in speed is, is a very straightforward, I wouldn't say it's a no brainer, but it's an obvious thing to do. There is one railway in the world in China that operates quite frequently at 350, not all the time. And the Chinese struggle to get from 350 to 360 after a very large and extensive.

And there are many, many pilot programs in Europe to get to 360. But none of them have achieved it. We don't want to be in the club trying to strive for that. The other thing we've done is take the automatic train operation out. Automatic train operation is what you'd experience on the Elizabeth line or the Victoria line, the driver basically attending the train and opening and closing the doors, but the running being run by automatic computers on the train.

Now there is automatic train operation over what's called the European train control system. Thameslink runs like this at the moment, but not at the quality standard and the specification we would need for a high speed rail. So automatic train running for high speed at the latest standards of European train control doesn't exist. It does in local areas, but not enough for us for for this railway. So we took that out.

So the railway becomes a manually driven railway, exactly the same as high speed one or all of the railways in France. Now that takes a huge amount of testing effort out. 360 and automatic train operation were very, very risky, difficult things that would need to be tested in the future. Now automatic train operation could be put back in, and somebody in the far future could go back to 360. But for now, in the foreseeable future, the coming decades, these changes really do de-risk this project and enable us to strive towards the front end of of the ranges.
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Rupert Lowe Portrait Rupert Lowe
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Chairperson, Thank you very much. So, yes, first of all, I'm relatively new on this committee. I think I've done nearly a year and I've brought myself up to speed with HS2. So forgive me if I ask questions that appear to be stupid, but I'd like to thank both of you. Whatever questions I ask are not being critical of you, by the way, because I blame both politicians and civil servants who made what I consider to be appalling decisions.

In the past, they have displayed to me that their decision making is flawed and their ability to actually carry out contracts. And you've confirmed it just now, Mark. Like this is just not there. And I think you've done a great job tidying up Crossrail. And I think HS2 is very lucky to have you, but we've spent now well 87.7 to 102 billion. We're going to end up with a line between Birmingham and London by 2043 for it's complete probably.

And ultimately we were sold this project that it would get you to Birmingham quicker. It quite what the economic benefit of that is. I'm not sure. It would also open up the North. It would basically equalize between the wealth in the South and opportunity in the north. You could argue it actually just simply focuses opportunity in the South, because it makes it quicker to get to the south from the north.

However, my question I think, is to you, Joe, initially, you know, with technology, if you like, reducing the need for travel, arguably both, you know, the advance in communications AI is going to change the way we all live our lives is going to change the number of people employed. It's going to change the necessity for people to travel. So my first question to you is, can you tell us what you think the benefits of this line are going to be, and how you're going to maximize those benefits for the beleaguered taxpayer, who's very much out of pocket.
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None Portrait Speaker 2
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Of course, and Dean might continue on our sort of benefits strategy if that's all right. So the case here and the reason, you know, ministers have made a clear decision to continue with the programme is, you know, despite the name of the company, despite the name of the programme, this is about capacity and connectivity on the West Coast main line. It comes back to the hearing the committee had earlier in the year on Northern Powerhouse Rail and, you know, quite strong support from a number of members of the committee for the commitment to build north from Birmingham to Manchester.

You know, we see today that the West Coast Main Line is one of our most constrained rail corridors. What HS2 will do is transfer those long distance services to Birmingham and north beyond Birmingham to a dedicated line, freeing up capacity for those commuter services, improving reliability. The sort of standard of performance in the rail industry is what we call T minus three, so trains arriving within three minutes of their scheduled time for Avanti in 2526, that was 57% of services, against an industry average of 85%.

In July 2025, the office for Road and Rail rejected three applications for new services open access services on the West Coast Main Line. Because there's a lack of capacity to build new paths. So when constructed, HS2 will more than double the peak long distance capacity from London to Birmingham. So from fewer than 800 seats an hour to over 4000 seats an hour and over 45% increase on all of those peak services, because the benefit will be as much.

All of those people and our freight customers who travel today on the existing West Coast Main Line and suffer the problems of such a congested rail corridor. But Dean, do you want to talk a bit about the benefits strategy overall?
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None Portrait Speaker 4
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Okay. Thank you Ruth.
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None Portrait Speaker 3
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Yeah, I would say it is. It is fair. Yeah. The a root cause of the problem that needs to be learned for future projects is commencing work with great design and maturity and asking the supply chain to, you know, fix their price. Now, clearly, the contractors we've used are some of the biggest in the world. You know, we've got the largest European contractors and the best of British. The fact is that the notice to proceed, there simply wasn't enough certainty for contractors to to risk.

They were never going to risk their their companies. You could imagine why the situation, which meant that the risk flowed back to the client. The client then should have made an appropriate risk assessment, which would have been with hindsight, much bigger than was actually allowed for. I wasn't there at the time. All I know is that the process we use now for risk and uncertainty will will capture that. But at the time, the only way to get the job going and mobilise the supply chain was for the HS2 limited to take the risk back in.

It's a bit graduated Rupert from the men work civils are certainly the most difficult. Actually, the station's contracts are not. You know, they've had a great increase in cost, but that balance of risk hasn't been distorted as much. They've suffered from optimism bias in the estimating. But the contracts themselves don't require radical change. But the target cost needs to be readjusted. What we've done with the men work civils, the form men work civils, which I'm very pleased about.

For the two that we have signed up and align, we've done three things which I think are interesting for the committee. Firstly, we've settled the past so we don't have historical claims and a lot of people, you know, discussing and what less energy you might want to say about the past. We've settled the past on public money principles. Then for the future with two of these contracts, we fixed the fee. What do we mean by that? So instead of having the the, the inherent problem of contractors earning a percentage on every pound that leaves the door.

We've agreed with ex-FBI and align and more tension in the system. They've got some skin in the game. It's not a panacea. It's certainly not, you know, not not the most optimum if you start from scratch. But it's very, very good in creating a downward pressure for the first time that we are jointly incentivised to minimise expenditure. And thirdly, we've agreed some good incentives that incentivize early delivery because at the end of the day, we want the civil engineering completed in 2029, and I want to start laying the track in March 2030, which means the civil engineers need to complete their work to the right quality and kind of allow the systems to mobilise.

And we aim to have similar deals with SCS and Bbv. So I think from my point of view, we've done the best we can to reintroduce some commercial tension for the benefit of everybody. I would say in my 18 months or so here, I've been very pleased with the quality of work in the supply chain. The contractors productivity has been very good. We've had good safety can always be better, of course. So generally I've had no instance where I haven't been really pleased with the quality of the work.
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None Portrait Speaker 3
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would say two perspectives. Firstly, these contracts are certainly not the panacea of people fixing their costs to the end. That £2 billion is really an avoidance of risk in the future. So you're right, there remains uncertainty. Exactly why we must be very careful not moving away from these bookends until we get a bit further into the civil engineering. On the other side of the coin, Rupert, what I would say is, in my experience with these contractors, they all want to work for UK plc.

They all work on the biggest projects for the government. They don't want to stay too long on HS2, they want to get on and do other jobs, so I. I really believe that certainly the CEOs I speak to, and you look at the evidence on the ground where we've had our most productive two years, I believe there is a positive spirit not to stay in this job. And the reset creates the conditions where we create more tension to positively get off the job.

But what we're not doing is hopefully it's clear these resets aren't a panacea of people fixing their costs and transferring all the risk back. I'll give you one example, though, in the reset that we have done in the e k, f, b reset, there are a number of exclusions to the contract were several hundred. Now it's less than 20. So I think there's been a seismic shift there. But it's not a panacea. But certainly in EKFB, for example, take EKFB.

This year we were meant to move 16,000,000m³ of earth this year. This financial year, as of last week, we'd moved 15. Now to me, I know the weather helps and I know we've done a better job with getting the design ready, but I think you can see the tension of the reset working where the contractor is incentivized to get the job done as fast as possible, but not a panacea.
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None Portrait Speaker 3
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Which comes.
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None Portrait Speaker 3
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I also think the. One
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None Portrait Speaker 4
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more.
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None Portrait Speaker 4
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Thank you. Ruth.
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None Portrait Speaker 1
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Thank you. And just to say on that the it is true if if we had no mitigation, shorter trains would give us less capacity. That is absolutely true. But that's that's not where we're planning to end up. So there's a there's a couple of guiding principles, I think it's worth saying in terms of the wider East and the work we're doing, which which is the lens that we look at all key decisions.

So one is that we can deliver on the Secretary of State's requirement to deliver the as soon as we can, at the lowest reasonable cost. The second is that we create a piece of infrastructure that properly integrates into the wider network. And I think that's that's absolutely essential. But the the third bit is also to make sure that we don't block off the ability to expand the network and to have future trains in the future.

So those two things are kind of guiding principle, and that requires us to have rolling stock that that can manage all of those things and work on the captive network between eventually Euston and Birmingham, but also then to go beyond beyond Birmingham. We are in contract with a supplier at the moment. So one of the things we can't do is give a running commentary on how those are going. But but what I can say is that we are working with the train supplier to, to get through, to find a way through all of those challenges to, to, to meet those concerns.

The other thing I should say is we are not doing this alone. So Mark and I meet regularly with Network Rail and with DFT and Alex Irons. And what we try to make sure we've got is for all these big strategic decisions on the programme. Now we have got an industry view and we come to a shared view on how how is the operator going to manage this as an effective railway in the longer term? And so what I can say is that we want to hopefully get a decision this in the next year on the rolling stock, and that will fit into the wider rolling stock strategy for a future West Coast mainline in due course.

But it will be joined up. But I can't give you an exact , exact timeline because we are having those conversations right now. Is that fair, Mark?
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None Portrait Speaker 1
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And if I may, I would say just to give you an example. So you want to take the right decisions in the right places at the right time. Okay. And so your point is, I think is well made. So, so the, the kind of ministerial task force makes sure we make those strategic decisions. And we've met a number of times now, I think 3 or 4 times already this year.

And so things like speed rolling stock, those big decisions will be taken there. The shareholder board makes sure that that Mark and I are stay honest and and that we're delivering as expected. Mark and I also then have a performance board that where we sit and we look at progress every month on the programme in a formal way and make sure that we've got a really clear view on both the programme for the year ahead and our progress towards that.

And that's different in reset as it to what it will be afterwards, because there is a new regime we will put in place once we exit reset. But for now, Mark and I have a programme of work that we assess, as I say, month on month through the course of the year. I think Mark would like probably less meetings than he does. But but our teams meet every week, so we don't just meet at those formal meetings. I think one of the really important lessons that somebody like David Goldstone, who has done lots of these big programmes for, would tell you, is you need to get the senior teams together to work through tactically the issues, not just the big strategic ones at formal meetings, but you need to get through, get your teams together to manage those issues and challenges.

And so Mark's senior team and mine meet every week to work those through. So we we work the governance at lots of levels to make sure that we stay on track. And then we've got the ability to escalate. So things that I don't feel I can manage on my own, I can escalate up to the shareholder board or indeed to the ministerial task force as necessary. But I also know I've got to go there and, and justify that we are making good, sensible decisions.
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None Portrait Speaker 4
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. Able
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None Portrait Speaker 3
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Estimation on the scope and cost estimate for this program? If I start because we've, as part of the reset, taken. responsibility for Houston directly. So Dean. oversees the Houston element of the program. And thank you to all the committee members who took the time to come and visit the site earlier in the year. And again, you know, looking back at previous committee reports and what was observed about the lack of cooperative working between partners, we were really pleased that both on that visit, but also the Nao and the field work saw the step change in what is now happening at Houston.

And again, the proof in the pudding that we now have an agreed spatial plan. We now have the Houston delivery. company up and running to act as that single guiding mine and guardian of time and cost, and it addresses a lot of the committee's previous recommendations. We are very clear that cost. estimates for Houston are less mature. So what you see in the reset, and also represented in the Nao report are orders of.

magnitude in the reset. For what we expect the cost of the program at Houston to be. We have a commitment to secure private finance and a number of forms which D might be able to talk about further, but we have sort of orders of magnitude. Again, we want to make sure we are learning the lessons of both HS2 overall. But the James Stewart work. So we have you know, we will not refine further those numbers until we have that.

detailed concept design, the work that is starting now with all of our partners to make sure we have an assured basis to go forward. This program has failed twice. We can't . And
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None Portrait Speaker 1
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You've got. integration and that's absolutely essential in these big programmes. And what we I think what we've proven is you can't try and do. You can't pick and choose, have a pick a mix of each of those of those stations. You know, the underground station, the conventional station, HS2, you've got it because they are so close together on such a small site. They've got to be managed together. It is it is complex and it's hard work, but it's got to be done together.

The next thing is about having a plan. And James Stewart was clear about what is your plan for Euston? The permanent secretary talked about having a spatial plan. That's just the first stage of that. There is a long way to go. The next step is to get a is to get into concept design and that. And that basically gets. everybody in the tent broadly with what are their red lines? You've got three duty holders in TfL, in Network Rail and HS2 that have real safety responsibilities.

They need to be worked through very carefully. Have you got those red lines? Understood. Have you got an operator? Have you got a if you like, an early design of how you will operate the station? And so you've got your red lines, but can you bring it all together as well? What is the early plan for that? And then you need the rules of the game. So the EDC then need to understand how they're going to manage that all together.

So that's as we go into concept design. The plan is that the strategic board will sign off that package, and then that gives you the ability and the confidence to move into scheme design further down, down the line probably next year. So you've got your model, you've got your governance, you've got the right plan, and then we get to the funding. And this is a bit I know everybody gets a bit kind of excited about why isn't the funding in place? Where on earth is it? The funding needs to follow the plan.

One of the things that we've got on Euston is there is a lot of anxiety and nervousness. We fail twice. If you're in the Treasury, we need to be able to demonstrate we've got the right plan with people bought into it before we're going to get the funding set. So even before we get to the kind of David Goldstone element of of you, when do you get your kind of your full envelope? First of all, have you got a plan that we think is feasible and deliverable? Our plan is that that will come together as part, probably as part of the spending review in the course of the next year.

But but we will put the funding in place, and we have to do a number of things to get to the bottom of. So there will be some public funding we expect, but we're also pursuing private funding and a range of private funding which needs to be worked through. So one of which we've talked about, the potential for a p p p for the HS2 element of the station. That's one element. The second element is the potential land receipts for a developer.

So we have lend lease on board with Crown Estate that will help us develop and frame the vision for Euston more broadly. And then we're also looking at the possibility for tax increment financing. So the capture of land. value because of the improvements we're making, all of those things need to be properly bottomed out and worked through. And then there'll be a balancing figure that will need to be taxpayer funded directly from the Exchequer. But but that is that is a lot of work to get through over the next few few years.

The final thing I'll say is, and also James talked about. capability for the sponsor, which is me and my team and we in the department are undertaking a review of, if you like, the capability we think we need for the next stage of delivery, there's about 4 or 5 years of planning now ahead of getting into, if you like, spades in the ground on the on the station itself. And so we are working through over.

And we as part of reset, as we come out of reset, we as HS2 need to take our medicines have. We've got the right capability in the. organisation . To,
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None Portrait Speaker 1
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plan in place .
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None Portrait Speaker 1
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Incumbent on the state to put it right as quickly as possible. Yes, please. Okay. So there are there are four, if you like, areas where we've got properties. So there is phase one where we are closing out if you like, existing property. And that's something Mark and his team are doing. And we continue to monitor them. On their ability to close out properties. At phase one, there is phase phase two, A, if you like, between Birmingham and Manchester, where we hold permanent some permanent land and some temporary land, there is the properties, the small amount of properties, about 200 properties that will be needed for NPR.

And then there is the land on the east, which is the Leeds leg, which I think is what you are talking about, which is about 500 properties that are no longer needed. And we have got a an agent that will now take forward a strategy to dispose of those properties. The the it has taken a while because we've needed to work out what we are, you know, what is the government's plan for for that area? We also needed to work through, as you say, that we needed a strategy.

So 500 properties, but only 300 of those will have the critical down rules applied to them. So the other 200 were, were, were done, were bought by the department. Sometimes because the seller wanted to sell it to us, they weren't necessarily compulsorily purchased. So the next steps are there is a agent that will provide us with the strategy in the autumn. So we're expecting by October they're going to be testing and piloting that strategy over the next few weeks with vacant properties.

We will then in the new year, move into, and I hope that we'll have some properties on the market this year. The challenge we will have and the balance, the balance judgment we've got to make is, on the one hand, we want to get properties disposed of, but we don't want to flood the market and and either undermine the local housing markets for for local residents. But we also want to protect the taxpayer as well. So there
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None Portrait Speaker 3
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In . My
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