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HS2 is steaming towards budgetary disaster

17 July 2017

2:15 PM

17 July 2017

2:15 PM

Byng was the name of the unfortunate admiral executed in 1757, in the words of Voltaire, “pour encourager les autres” after the fall of Minorca. I fear that poor old Michael Byng might be about to go the same way. Having put out a report estimating that the first phase of HS2 could cost £48 billion and the full scheme £104 billion, twice official estimates – will have woken up this morning to hear transport secretary Chris Grayling rubbishing his work, saying that he couldn’t possibly know about HS2 because he hasn’t been working on it. He did, however, devise the system which Network Rail use for estimating costs, which one might think was a pretty useful qualification.

I am not a quantity surveyor. I couldn’t even tell you the wholesale price of a metre of steel rail, still less what the going rate is for a latterday navvy’s overtime on a Saturday night, so I won’t be wading into the debate of detailed costings. But having seen the costs of HS1 – the Channel Tunnel Rail Link – accelerating faster than the trains themselves and having seen the same happen to the re-signalling of the West Coast Main Line and various electrification projects I would be extremely loathe to bet against Michael Byng’s estimate. If I was going to have a flutter – a variation on guess the weight of the cake – I would rather be minded to double Byng’s estimate and add a few billion for luck.

It does not boost confidence in the project that some of the contracts just awarded for the first phase of the project have gone to Carrillion, a company in which I am a very minor and very foolish investor. Last week, its value plummeted by 70 per cent after a profits warnings – it having been caught out by contracts which it won by wafer-thin margins and which then suffered cost over-runs. Balfour Beatty, which also won some of the contracts, has also had a torrid recent past after losing money on some of its contracts.

And if they have their sums wrong on HS2 as well? There are no prizes for guessing who will be picking up the tab in the event of us finding ourselves with a half-built railway on our hands. I don’t suspect the Chilterns will be left with half-built embankments for future tourists to ponder like the Bridge of Avignon. It will be finished thanks to a further hefty injection of public funds.

The trouble is that HS2 is a hugely over-engineered project – 150 mph rather than 225 mph would be plenty in a compact country like Britain – in an industry where cost estimates and cost-benefit analyses have a history of going laughably wrong. On some estimates, only two high speed rail lines in the modern era have ever returned a profit: the bullet train from Tokyo to Osaka and the original, Paris-Lyon TGV line. It is a dead cert that HS2, which even on the Department for Transport’s costings will cost per mile several times what recent TGV lines have done, will not be adding to that list.

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