The HS2 high-speed rail project has an estimated £3.3 billion funding gap which the Government has yet to decide how to fill, a report from a spending watchdog has revealed today.
The National Audit Office (NAO) also said it was not clear how HS2 - which would run through parts of rural Northamptonshire and has been strongly opposed by campaigners - would deliver and rebalance economic growth.
Phase one of the project from London to Birmingham is due to start in 2016/17 but the NAO said that was challenging tiemtable “makes delivering this work difficult and increases the risk that the programme will have a weak foundation for securing and demonstrating success in the future”.
Expressing “reservations” about the business case for HS2, the NAO said the Department for Transport’s (DfT) methodology for appraising the project put a high emphasis on journey-time savings, from faster and more reliable journeys.
But the report added that the relationship between these savings and the strategic reasons for doing the project, such as rebalancing regional economies, was unclear.
The NAO said it was also unclear whether the business case covered just phase one or the full route including phase two - the Y-shaped network from Birmingham to Manchester and Leeds due to open in 2032/33.
The report said phase two had a strong economic case but that this was much less certain as route designs were less well-developed.
Saying there were “risks to affordablity”, the NAO went on: “The NAO estimates that there is a £3.3 billion funding gap over four years (2017-18 to 2020-21) which the government has yet to decide how to fill.”
The report said this “gap in affordability” coincided with the “peak spending years for phase one”.
The NAO went on: “The department capital forecast for these four years is £33.7 billion but its capital budget if kept constant at 2014-15 levels would be only £30.4 billion.”
The NAO said the benefit-cost ratio - the cost of the project set against the likely benefits it will bring - had twice contained errors and that the current estimate of £1.4 in benefit to every £1.0 spent was “likely to change”.
It added that between March 2010 and February 2011 benefits from HS2 reduced by £12 billion, with nearly two-thirds of this reduction due to errors in the way passenger demand was modelled.
The report said that the DfT estimated the line would support 100,000 jobs through development around stations in constructing and operating the line.
The report went on: “It (the DfT) does not know how many jobs would be created without this investment.”