The following Statement was made in the House of Commons on Wednesday 18 June.
“With permission, Mr Speaker, I shall make a Statement on HS2.
As a London councillor over 15 years ago, I remember hearing the then Labour Government’s bold plans for high-speed rail to link our major cities, address the capacity needs of the future and, in the words of then Prime Minister, Gordon Brown, to join
‘the high-speed revolution sweeping the world’.
It was a vision of a confident nation and a clear signal: our great towns and cities in the Midlands and the north, with potential that had been untapped at best and ignored at worst, could be places of opportunity and aspiration again. That was the promise of HS2.
But after a decade and a half of Tory timelines planned then delayed, routes drawn up then cancelled, budgets calculated then blown and promises made then broken, we inherited a project that had lost the trust of the public, that created an image of a Britain woefully unable to deliver big infrastructure projects and that had been axed from swathes of the country it was originally meant to serve. Phase 1 could end up becoming one of the most expensive railway lines in the world, with projected costs soaring by £37 billion under previous Conservative Governments, and £2 billion of taxpayers’ money was sunk into phase 2 work before it was cancelled by the previous Government.
There was also clear evidence of poor management. Despite the 2020 Oakervee review advising that Government halt construction contracts pending improvements in price and simpler engineering, they pressed ahead regardless. It has been no less than a litany of failure and today I am drawing a line in the sand, calling time on years of mismanagement, flawed reporting and ineffective oversight. It means this Government will get the job done between Birmingham and London. We will not reinstate cancelled sections we cannot afford, but we will do the hard but necessary work to rebuild public trust, and we have not wasted any time.
Since July we have appointed new leadership of HS2 Ltd to turn this project around. We have made it clear to the new chief executive, Mark Wild, that the priority is building the rest of the railway safely at the lowest reasonable cost, even if this takes longer. We have started the year-long task of fundamentally resetting the project, including commissioning infrastructure expert James Stewart to lead a review into governance and oversight. As part of that reset, we have reduced financial delegations to HS2 Ltd, placing a lid on spiralling costs until the reset is complete and we regain confidence, and we have supported Mark Wild’s review of the size and cost of HS2 as an organisation.
But today we are going further. I can confirm we have published the landmark James Stewart review and the department’s response. The review, commissioned in October last year by my predecessor, was a tough, independent look at how the Department for Transport and government deliver major projects. The Government not only welcome the review but have accepted all the recommendations, and my department is already delivering on these, specifically across five key areas.
First, on the lack of oversight and scrutiny, quite simply there have been too many dark corners for failure to hide in. The ministerial task force set up to provide oversight of HS2 had inconsistent attendance from key Ministers, including the then Transport Secretary and the then Chief Secretary to the Treasury. The Government have re-established the task force with full senior attendance per the review’s recommendations. A new performance programme and shareholder boards will offer much-needed oversight and accountability.
Secondly, the report highlights that HS2 could cost the taxpayer millions more than planned. We will stop this spiralling any further by delivering all the recommendations on cost control. That starts with HS2 fundamentally changing its approach to estimating costs. It includes certainty over funding, which the spending review has given. It also means HS2 working with suppliers so that their contracts incentivise saving costs for taxpayers; as far as I am concerned, suppliers should make a better return the more taxpayer money they save.
Thirdly, the review identified a deficit in capability and skills, with a fundamental lack of trust between my department and HS2 Ltd. I am clear that both capability and cultural issues within HS2 must be addressed. The new chief executive is already strengthening the organisation, including by filling critical gaps in areas such as commercial expertise, and he will be backed by Mike Brown, announced today as the new chair. This is a new era of leadership that the project desperately needs, with Mike bringing significant experience as a former Transport for London commissioner. Mark and Mike were part of the team, with me, that turned Crossrail into the Elizabeth line; we have done it before and we will do it again.
Fourthly, between 2019 and 2023 HS2 Ltd provided initial designs for Euston station coming in almost £2 billion over budget. When asked for a more affordable option, it offered one costing £400 million more than the first attempt. The word ‘affordable’ was clearly not part of the HS2 lexicon. The combined cost for those two failed designs, which has now been written off, was more than a quarter of a billion pounds.
What is more, the previous Government announced a Euston ministerial task force. Unbelievably, the task force never met. This Government recognise Euston’s huge potential. We have already committed funding to start the tunnelling from Old Oak Common to Euston, and we will set out more details in our 10-year infrastructure strategy.
We will use James Stewart’s findings to transform infrastructure delivery across government. Implementing real change in how we deliver infrastructure is not just for the Department for Transport. This Government are committed to implementing these recommendations and adopting a new approach to delivering infrastructure, as will be set out in our upcoming 10-year infrastructure strategy. In that spirit, the Prime Minister has also asked the Cabinet Secretary to consider the implications for the Civil Service and the wider public sector of the issues raised in the report, including whether further action or investigation is warranted.
We are wasting no time in delivering on this review. I will update Parliament on our progress through my six-monthly reports, even if the information is uncomfortable, because for a Government who last week pledged billions in capital investment for new major projects, and who believe in the power of transport infrastructure to improve lives and deliver on our plan for change, that level of failure cannot stand. We will learn the lessons of the past 15 years and restore our reputation for delivering world-class infrastructure projects.
I have spoken about our inheritance and James Stewart’s review, so let me finally turn to Mark Wild’s initial assessment, which lays bare the shocking mismanagement of the project under previous Governments—I will place a copy of his interim findings in the Library. He stated, in no uncertain terms, that the overall project, with respect to cost, schedule and scope, is unsustainable. Based on his advice, I see no route by which trains can be running by 2033 as planned. He reveals that costs will continue to increase if not taken in hand, further outstripping the budget set by the previous Government, and he cannot be certain that all cost pressures have yet been identified.
It gives me no pleasure to deliver news like this. Billions of pounds of taxpayers’ money has been wasted by constant scope changes, ineffective contracts and bad management. There are also allegations that parts of the supply chain have been defrauding taxpayers, and I have been clear that those need to be investigated rapidly and rigorously. If fraud is proven, the consequences will be felt by all involved.