Welcome to the Public Accounts Committee on Thursday 19 December 2024. A warm welcome to all our witnesses. Thank you for coming to the Committee so close to Christmas. The Public Accounts Committee has been scrutinising the delivery of High Speed 2 since 2013, in the early days of the programme. Last year, significant changes were announced to the HS2 programme, including the cancellation of phase 2 to Manchester and plans for a smaller station at London Euston. HS2 remains a large and complex programme, with significant risks for value for money. Questions remain about how the programme will be reset and put back on track following the changes. Today, we will question the Department for Transport and HS2 Ltd about how they will deliver value for money from HS2, how they are progressing with changes at Euston station, and their work to manage the cancellation of phase 2. A very warm welcome to our witnesses today. In front of me, we have Dame Bernadette Kelly DCB, permanent secretary at the Department for Transport, who probably knows more about this subject than she would care to admit. You are very welcome, Dame Bernadette. On her right and my left is Mark Wild. A warm welcome to you. Mark Wild is the new chief executive officer of HS2 Ltd, who I think was appointed on 2 December.

That’s right, Chair.

This is going to be a bit of a baptism by fire. A warm welcome. We met you in your other capacity with the Queen Elizabeth line. Further to my left is Alan Foster, chief financial officer and interim CEO. A particular warm welcome to him, as it is his first time on the Committee.

It is.

Well done. On the left is Alan Over, director general of the major rail projects group and senior responsible owner for the High Speed 2 programme. Thank you very much to all of you. We are particularly pleased this morning to welcome our guest Member for the session, Ruth Cadbury, Chair of the Transport Committee. Can I start with you, Dame Bernadette, and Mark Wild? Since 2013, this Committee has repeatedly raised questions about the cost of HS2. In response, HS2 Ltd and the DfT told the Committee that costs were under control when they were clearly not. Why should we be more assured by your promises this time around?

Let me start by updating the Committee on the current position on costs for the programme, which we have also set out in the parliamentary report published on Tuesday. We do not currently have an agreed cost estimate for phase 1 of HS2 Ltd. That is a clearly unacceptable position, which I want to acknowledge immediately. I last appeared before you about a year ago, shortly after the Government’s decisions on Network North. At that point, we had published two outturn estimates. One was the Department’s estimate of £45 billion to £54 billion. The other was the estimate that HS2 Ltd had provided of, from memory, £49 billion to £57 billion. Since then, we have been working to establish with HS2 what an accurate and robust cost range for this project now is. I am afraid that I have to report that we do not have such an estimate. Earlier this year, HS2 Ltd provided a further upwardly revised estimate—which again, for full transparency, we have reported in the parliamentary report—of £54 billion to £66 billion for phase 1. That is an unassured figure. We do not regard it as a reliable and agreed cost estimate. I say with great regret, sitting before the Committee, that that is the current situation. I am sure we will discuss at some length the reasons for this uncertainty and the drivers of these cost increases, and I am happy to talk about them. I am also keen to set out the steps that we are now taking, and that HS2 Ltd is now taking, to bring this project under control. I accept the clear criticism in your question; we have to break the cycle of cost escalation on this programme once and for all, and we will set out the steps we are intending to take to do that. I don’t know where you want me to go now, but I am happy to say more on any of those points. I know you will have many questions.

I think it will become clear from my colleagues’ questions where we are going to go. Before I ask them to come in, when will this situation be resolved?

It will take some time to arrive at a revised estimate. It is not just a cost estimate; we are currently embarked upon and working hard towards a whole-programme reset. We are asking Mark Wild, as the incoming CEO, to lead that work within the company, which we will then need to agree in Government and in the Department. It is extremely complex; it has many facets. We need to reach agreement on a cost estimation methodology, which we do not currently have; as part of that, we will need to agree how outstanding risks on the programme will be dealt with; we need to agree a revised range on cost and schedule; we need to agree the future funding profile for this programme in the next phase of the spending review because we will need to determine both what is most efficient and what is affordable within fiscal constraints; we will need to agree a plan to drive down cost and drive up productivity in every element of delivery, including renegotiating the main works contracts. Mark will need to ensure that the company has the right capability and culture to deliver, and we will have to ensure that governance is effective. I say that to ensure that the Committee understands why it will take time. Resolving this situation will not be quick; we anticipate this work taking well into 2025.

Thank you for the candour of your answer—for admitting that it is not acceptable, which it is not, that we do not have a full cost, or at least an envelope, and for telling us the work you need to do. This is a large amount of work. The question that immediately follows from what you have said is: is that work likely to be completed in time for the spending review in the spring? Presumably it will have to be.

It will not be fully completed in time for the spending review in spring. We think there is simply too much work to do. I will ask Mark Wild to speak to this a little more in a moment, if you don’t mind, because he has experience of exactly this sort of reset from Crossrail. I know this is very much on his mind already as he thinks about how to do this work. We will need a clear enough sense of the challenges and costs of the programme to agree in the spending review what the funding profile for it will be for the three years beyond ’25-26. We will have to reach agreement with the Treasury on that. As part of that, we will have to reach agreement on how we will deal with contingency, for example, and uncertainty. The spending review will be a really important input, but our current expectation is not that the work will be fully complete at that point.

I am going to bring in Mark Wild in a minute. There will be lots of questions about the disparity of the figures, but are you, in the Department, and Mark Wild, in HS2 Ltd, completely agreed on the figures that have been spent so far and what work has been completed so far, so that we are at least starting from a common base of fact?

Yes, I believe we are completely agreed on the spend to date, which is set out in the parliamentary report: £32.8 billion. I think we are also agreed on what work has been carried out. The areas of uncertainty are around the cost estimation for the work still to be done—the treatment of risk, for example—and the extent to which a rigorous plan for driving productivity and efficiency will enable the company and us to bring the costs of this programme under control. There are areas where we are fully aligned, but there is a lot of work to do to get us fully aligned now on the future of the programme.

Ministers need to take decisions on two small areas of scope—the former stubs linking to the former northern sections of the route—to provide the complete picture for Mark to do his analysis on. We are working through that with them at the moment.

We will come to all that in a minute too. Mark, before I bring my colleagues in, it is only fair to bring you in. It is a bit like déjà vu for you—you were in exactly this position with the Queen Elizabeth line, but you now have it on a slightly larger scale. Do you want to comment on all this?

Good morning to the Committee. I would like to set out how I think we stand as a programme and how I aim to go forward with the work, with the Department, and with my colleague Mr Foster. It is an honour to run this programme. A lot of people have said that it is a challenge, but certainly, it is a vital project. We are focused on phase 1, but of course even phase 1, in its singularity, is of great importance to the country. It is a strategic asset. I was happy to host the Transport Committee Chair and colleagues at Old Oak Common yesterday, and I am sure you would agree that it is an impressive facility. Although I have only been the role for three weeks, I have had quite a long period of waiting to come in. I managed to informally work with colleagues over the summer. I acknowledge how hard people are working on the project and the quality of the work—31,000 people working on extraordinary achievements. Let us record our thanks to those people for all their hard work. It is clear, though, that we are in a completely unacceptable position. It is a little bit like Crossrail, but it has occurred much closer to the beginning of the project. That, in itself, is a concern, but maybe it is an opportunity as well. It is clear to me that we have to acknowledge that HS2, in its core mission to control costs, to deliver it for the lowest feasible cost, has failed. I need to start from the position that I really do respect and honour all the work done by HS2 people and our supply chain, but we have to acknowledge that HS2 has failed in its mission to control costs. As Dame Bernadette said, we must break the cycle, which has been completely unacceptable. I have thought deeply about it. The positive news is, I think, that we are aligned with the Department on the core reasons for it. I would like, in a moment, to set out what I think the enduring systemic problems are. There have been one or two serious exogenous events, which I don’t think any programme could have predicted—the war in Ukraine and the effects of covid. However, there are three things that are systemic and enduring. They go back to the origins of the project, to the notice to proceed. They are, in my view—and I am sure we are aligned on this side of the table on these things—first, that construction started much too early on this project. The rush to start before there was mature design consent was really, in retrospect, a mistake. So the first thing was that construction started far too early on the project in certain areas. Secondly, the contracts intrinsically moved the risk to HS2 Ltd to manage. It was a conscious and intrinsic decision, reviewed quite expertly at the time by the National Audit Office. At the time, the NAO commented that HS2 Ltd must be prepared to manage the change of risk profile. I believe HS2 Ltd has not managed the risk profile in an optimal way. I don’t mean to criticise people—it must have been very challenging—but the fact is that the transmission of risk from the supply chain to HS2 has resulted in our contracts effectively being cost reimbursable. HS2 must, therefore, manage the risk profile. I don’t think that has been done in a coherent way, and we now get an opportunity to fix that. Thirdly, and very seriously, the programme now, since the baseline of 2019, is no longer viable. As you all know, every project, whether a small one or a mega-programme, needs a performance baseline. The last baseline was 2019. Now, in 2024, if you look at where we are, the activities are all out of synchronism, mostly because of lack of productivity. There are some effects, which I am sure Department colleagues will cover, to do with Network North and decisions on Euston. However, the fundamental issue is that the productivity assumptions at the beginning have not come to pass. So, we started too early, HS2 has not managed the risk profile in an optimal way, and we are in a position now where the actual activities bear no relation to the baseline. Those are very, very serious systemic issues. It is not my position to critique what has happened; my job, with Mr Foster, is to take it forward. Dame Bernadette said that we need a reset, and that we need to break the cycle. We must form a new baseline programme. It will take all of 2025 to set the activities into the right position, and then it may take a little bit of time after that to get what would be called an assured contractualised baseline. The reality is that it won’t be until mid-’26 that we will be sitting here with an assured baseline that can be properly measured against. That may seem an extraordinary amount of time, but, as the Chair will remember, I got this wrong at the beginning of Crossrail. We tried to set the baseline within six months, and it proved to be too optimistic. I would request that we are given the time and space to do this. Obviously, though, in that interim period we need to act in productivity today. We can’t simply go away and do our homework for 18 months. The second thing we need to do is re-contractualise and bear down on costs at the moment. I am sure there will be questions for Mr Foster. I am very pleased with the work of Mr Foster over the summer. It is entirely coherent with what I am suggesting. We have worked closely together, and I aim to take it on board. I am sure Mr Foster will be pleased to answer any questions about what we are doing already.

I will stop you there, Mr Wild. That is very helpful. The two of you have given us an awful lot to digest. For the minute, let’s try to concentrate on costs as far as we are able to. To help us with that, I will ask Sarah Green to come in.

We have disagreed; that is true, and, as I say, we have been explicit about that in the past. However, what we now all agree upon is that we need an agreed cost estimation methodology. Mr Over may wish to say more, but when the Department has seen the estimates from the company, we have been challenging on whether the cost estimation methodology underpinning those numbers is robust, whether the supply chain data and management information is sufficiently robust, and whether assumptions about future risk and so on are correct. There is a host of quite technical issues on which we have been challenging the company when we have seen the estimates. Both we and the company acknowledge that we must now align around a single set of figures. I hope Mr Foster will acknowledge that we all agree that we do not have a reliable estimate at the moment. One thing we are currently doing is getting some technical third party advice on cost estimation, which will then allow us to reach agreement on that fundamental underpinning for cost. There is then a whole host of other things that we will also need to agree upon, including, as I say, what the productivity and efficiency plan needs to do to deliver at lowest feasible cost. We have disagreed. There are quite technical things underpinning that disagreement, but we now have a pathway through and a plan to resolve that.

Do you mind if I briefly introduce myself first, Chair?

Of course, please do.

First of all, as stated, I am the chief financial officer of HS2 substantively. I joined in July 2022, so I have been with the programme for nearly two and a half years, and my role has expanded in that period. More recently, I have been interim CEO to bridge the gap between Sir Jon and Mark joining. I want to say how incredibly disappointed and frustrated I am that since I have joined, I have been in this cycle of reporting repeated updates in the cost. I release that it is unacceptable, but also, of course, it is important that we are transparent and clear about how we see our financial position. I will pause the intro there. Our position in sharing costs has been to use the best information that we have available to us as a company. In compiling the forecast that we have done, we have used that information. There are limitations in that information, though. We are very much dependent upon our supply chain to provide us with the information that we can use to form and assess those things. We are aware that that is not the basis of estimate that we would like to be producing, with the full reliability that the Committee and the Department would demand. The basis of our engagement with the Department has been that they observe the limitations we have in the data and are choosing judgments in some areas, which means we have a difference in cost range. But our cost range is based on the best information we have available to us and the most recent update. Ordinarily, and when we presented the formal estimate in autumn last year, that has been through a very thorough process of analysis, challenge assumptions, review and assurance, so that has an added layer of confidence. Through the first half of this year, we engaged more deeply with our supply chain and with getting new information and data. As we saw significant cost increases coming through in those projections, we felt it necessary to provide, in the order of transparency, a view that we were seeing these cost pressures again, and hence have, on an accelerated basis, shared that data. We accept that it is not as mature, challenged and reliable as we would want it to be, which is why we too agree that this needs to be an input into the reset. As Mark was describing, we now need to use that as a plan to get to a reliable position.

Sorry to interrupt, Ms Green, but, Mr Foster, cost escalations are one thing, and we know about all the extenuating circumstances—the pandemic, the war in Ukraine, inflation and so on—but to not even have a basic understanding of the methodology and how you are going to arrive at those costs seems to me absolutely incredible.

The size, scale and complexity of this project is extraordinary, as is the amount of time, risk and activities that are still in front of us. There are many different experts with many different methods for calculating and performing these bases. We do have a methodology and we have an estimate for doing those, but it does need to now be agreed more transparently with the Department.

In that transparent process, will it be in the public domain what the methodology is precisely?

We are working through the process of developing that. We—HS2 and the Department—are going through a process of working. We have also established an oversight group, with the HMT representative on the HS2 board participating as well, to make sure we are bringing forward agreed assumptions and bases for estimates going forward. We are doing that through that process.

That is a brilliant answer, but it did not answer my question. Will what it is be fully in the public domain?

That decision we have not discussed.

No, we haven’t. Obviously, given the intense interest in this, I expect that we will want to provide as much information as possible. We expect to do that through the parliamentary report. As we reset the programme, I think we will want to provide detail of the basis of that reset and what assumptions we have made—all sorts of things. We will certainly be providing further public information, but what that looks like is something we need to consider.

That is a helpful answer. As a supplementary to that question, there has been a pause in the six-monthly reporting to Parliament, which this Committee pushed for and succeeded in getting in the last Parliament. Is that going to be resumed?

I very much hope so. That is our expectation. I think the pause was largely driven by an election falling, and then new Ministers and a new Government, which interrupted the drumbeat of reports. It is my absolute intention that we now revert to six-monthly reports. I think they are very important for ensuring good parliamentary reporting on the project. I would expect another parliamentary report to be provided after the spending review.

That is really helpful. Ms Green, I am so sorry to have interrupted you.

We are in the process of doing it. This is a highly technical process—I might ask Mr Over to talk about it. It is deeply technical, and we are getting expert technical advice to support that. It is one element of a number that we are trying to resolve. For example—this goes to Mr Foster’s point—back in 2023, when we saw a lot of volatility in the numbers, I commissioned an internal audit. At that point, it concluded that there were weaknesses in the supply chain data that HS2 was receiving. That, in turn, meant that some of the figures that we were seeing were not reliable and could not be relied on. Those are the issues that we are trying to resolve. Mr Over, do you want to say more about the specifics of cost estimation methodology?

The first thing I want to say is that we are putting these differences behind us. It is no good to the public, Parliament or our Ministers to have different sets of figures in play. It was regrettable that we had to take that different position; it was based on different judgments about how much risk remained, the treatment of costs that had been taken out of scope, and how much productivity could be driven through management action. Some of those are judgments, and it is okay to have different judgments, but ultimately the job for Alan, Mark and me is to provide Ministers with advice on a range that can be delivered within. We want to get this right once so that the rest of the project is delivered in a way that Mark, the company and the 30,000 people working on it can live within. We have now set up a joint piece of work that, as Alan said, is sponsored by me, the Treasury and the company, to make sure we are embarking on this in a coherent way with full agreement. We have the technical advice on what needs to be changed and the methodologies, and Mark will want to have a view on that to make sure he is comfortable with it. He is part of that work already. I am confident that, in the coming two to three months, we will have unanimity on the methodology and will be well through the work to progress it. Mark is right that it is a lot of work, and it needs to be done in detail. There has to be some constructive tension. Mark, Alan, Bernadette and I do not have to agree on everything. Part of the purpose of getting to a good, robust answer, is to have that constructive challenge. The point is that it has to be constructive, and it has to lead to common advice at the end.

Well, you have to judge your level of confidence. I can quite understand why, based on where we are now, the confidence level is low. That is a very reasonable position to take. What I hope we can try to set out today is the steps we are now taking. I hope you will hear from me and Alan, and from Mark Wild and Alan Foster, that we have absolute common purpose now in resolving the situation. We will be able to bring to the Committee an agreed and reliable plan for how the rest of this programme will be delivered effectively.

I have looked at this in some detail over the passage of time, and the problem is rooted in the main works civils contract. These are some of the biggest contracts that have ever been let. As I said, I think HS2 Ltd, at the very beginning of the notice to proceed, did not activate these contracts correctly. In the year that has passed, a great deal of progress has been made and there is much more convergence. That does not quite answer your question; there is more to do. I want to get across the point that we need a fundamental reset of this programme. Although the methodology of how we account for the numbers is important—I think great work has been done and will continue to be done—the real work that needs to be done is to re-baseline the schedule and put everybody back into position. That is very important, because at the moment the problem is contained within the main works civils. The stations contracts are now starting to come to maturity, and we are just letting the systems contracts. This will continue to repeat until we reset the programme and improve the methodology. It doesn’t surprise me at all that it has taken us a year. I have seen better convergence, but there is a need for a fundamental reset.

That is very helpful, thank you.

Once you have agreed among yourselves what the new costs look like, you will have to go back to the Treasury, Dame Bernadette. What is your estimate of the timescale for getting a new agreement with the Treasury?

First, I would say that Treasury are very closely involved in this work, so it is not as if we’ll do lots of work and then—it is not a sequential thing. We are constantly engaging with the Treasury on this work. They are very much part of the joint endeavour to reset this programme. Obviously, this is a huge amount of money and they have a very strong interest in ensuring that we reach a better position on this. Of course, the Treasury has recently appointed a new non-executive representative on the committee, David Goldstone, who is also now very much part of the board of HS2 and supporting this work. So it is not that we do a lot of work and then go to the Treasury; the Treasury are sort of in the tent as we do all this work, and I think that is really important. We have a ministerial taskforce, of course, which the Secretary of State chairs, and the Chief Secretary to the Treasury is a part of that. A really important step in resetting the programme—a step, not the conclusion—will be the spending review phase 2. At that point, we will need to agree with the Treasury what the right funding profile is for the programme for the three—well, effectively for the remainder of this Parliament. In turn, that will be an important plank in determining what the outturn range and what the eventual cost of the programme will be. We are constantly in dialogue with the Treasury and working very closely with them. I just wanted to slightly correct, as it were, the sense that we go to them at the end.

Ms Olney, I am really sorry, and I am really sorry to all our witnesses and everyone else, but Luke Charters has a time deadline, so can we switch subjects, just for a second? We will come back to finances, for sure, but we switch for a second to Luke Charters and the vexed subject of a bat tunnel.

Thank you, Chair. My question is addressed to you, Mr Wild. Of course, we have had the infamous £100 million bat shed receiving a lot of media attention. Natural England did not require HS2 to build the tunnel and left it to you to decide. Spending £100 million on a bat cave is a shocking waste of taxpayer money. Will you apologise? Do you at least have some regrets about this?

I might invite Mr Foster to talk in detail about the actual engineering and the consenting process, which I think is worth—

Can we keep this fairly tight, because we have so much to cover?

I understand why it would raise public concern; it seems an extraordinary amount of money. However, I actually visited this structure myself in my first week, because it is of great concern to me to understand it. This is a considerable engineering structure. The trains on the railway will travel at over 200 mph, so the engineering of this whole system is quite considerable. Also, at the end of the day HS2 must comply with the law, and the law says that we must mitigate damage or harm to protected species. It is our job to mitigate it. You are quite right that Natural England does not tell us what to do. It is our job to mitigate harm. I think there were as many as 15 different options before us; one of them was even tunnelling underneath it. We simply have to comply with the law and the mitigation that has been arrived at by our contractors and experts in this field is the most appropriate in the context of the railway—

If I am correct, Mr Wild, you have no regrets about the £100 million-plus expenditure.

I sympathise with the view and I can understand why, from the outside, this seems an extraordinary amount of money. I have looked at this extensively; I have visited the site myself. At the end of the day, HS2 Ltd must comply with the law. The law says we must mitigate; we simply must do that in the law. Then we need to gain planning permission to get it. For legislative purposes and for parliamentarians, there is probably a lot to unpack about this. HS2 needs to get 8,500 consents. This is a complex matter. I cannot apologise for complying with the law. This structure is the most appropriate one. It is an extraordinary amount of money, but it is in the context of a scheme that is costing tens of billions and is built to last 120 years. It also needed to gain planning permission from Buckinghamshire Council, which was very protracted. There was at least a four-year delay, which eventually was resolved by the planning inspector. It is a complex issue and a sensitive area. I am sorry about how much this may seem from the outside to cost, but at the end of the day it is the most appropriate mitigation to comply with the law.

I think we will leave this here.

Can I just ask one quick question?

We have an awful lot to cover.

It is a very quick one, Chair. I have been looking at Halse Copse, where there was a significant amount of expenditure for great crested newts. Do you know how much you are spending on these mitigation schemes? Will you publish the amount of money that you are spending on protection? It is an important species, but for taxpayer transparency, will you publish how much you are spending on these schemes?

I do not immediately know the answer to that question, and I cannot commit that we will have the detail precisely on the great crested newts, but I can take that question away and look at how we can answer it.

May I make just one point?

Before you do, clearly there is a balance between the law on protecting species and the amount of money spent. I think that most people would say in this instance that that balance was not acceptable. You, as permanent secretary, or the Government will need to think about that balance. After all, how many doctors and nurses actually treating people who are in dire need would £100 million have bought you? A balance needs to be struck. There may be an issue in terms of the law that you need to look at.

I strongly agree, and I was going to come in on this point. As Mark Wild made clear, HS2 is building this structure because it must comply with the law. In this instance, the law is the Wildlife and Countryside Act 1981 and the Habitats and Species Regulations 2017. It must mitigate the damage or harm to these bats, which is why it has had to build this structure. We looked extremely closely at the cost of the structure, as did HS2 Ltd. As Mr Wild said, numerous options were looked at. When it became clear that the costs were as significant as they are, we in the Department and the Treasury robustly challenged the structure and the solution. We got Arup to look at the engineering construction to see whether it could be delivered more efficiently. We led work with DEFRA and Natural England to test whether legal compliance was really what this structure suggested it was. The unfortunate conclusion of all that challenge was that this structure was the most efficient remedy available to HS2 Ltd. The Prime Minister himself has pointed out that that has raised a wider question about how we balance environmental obligations and cost when delivering the infrastructure that the nation needs. Whether that balance is in the right place is ultimately a policy judgment for Ministers, but I strongly agree with the sentiment you express, Chair.

That is very helpful. I am going to leave it there, because we have so much to cover, but thank you for coming today.

Dame Bernadette, you said to me that an agreement is being reached between HS2 and the Department for Transport on what the new costs look like, and you are working very closely with the Treasury. Your answer seemed to imply that you think that once you have landed on that figure, which we know will be somewhere between £45 billion and £66 billion, it will just be a formality that the Treasury signs up.

No, it absolutely will not be. That is why the Treasury is involved every step of the way. It too will want to challenge HS2 Ltd, just as we do, on the cost estimates that it provides to us. The Treasury also provides that challenge. I do not expect this to be a formality at all, but a very close process of engagement, dialogue and debate.

To be clear, I mean that because you are saying that the Treasury is involved every step of the way, once you have reached agreement you expect it to be quite soon after that that Treasury will sign off on the budget.

I think that in practice these processes will run in parallel. We are proceeding with the second phase of the spending review, to conclude in the spring. As part of that, we will need to agree with the Treasury what the funding profile for HS2 phase 1 will be. This is a very large chunk of our total departmental capital. We will have to resolve that. We will have to decide what is affordable within a tight fiscal envelope, both for the Department and the Government, and what is efficient. The case we make, which the Treasury has been receptive to, in setting the budget for next year is that it is ultimately wasteful and poor value for money to slow down work artificially in order to reduce spend in the short term.

I was coming to that, because the Report makes it clear that the need to keep annual spending under a certain limit has actually increased overall cost. Will your case to the Treasury be that you need an overall spend limit rather than these annual limits?

Yes, totally. We definitely do need a long-term spending profile for this programme. Annual spending or annual financial agreements are really poor for long-term infrastructure delivery. We all know that. The Treasury knows that.

Not just for HS2, but for any project?

Not just for HS2, but for everything. But that is unfortunately the situation we have largely been in in recent years. The Treasury would absolutely acknowledge that’s a highly unsatisfactory way to deliver a programme of this sort. As I say, they are very, very conscious of this. Clearly, decisions have been taken in the past by the previous Government to defer aspects of HS2 on the basis of financial constraints. Sometimes those difficult decisions have to be taken. But it is well understood by us, by the company and by the Treasury that, sometimes, slowing spend down can significantly increase total cost at the end and reduce value for money, so that’s the debate we will be having.

Something else that the Committee finds unsatisfactory is the fact that the £45 billion to £66 billion spread is still being expressed in 2019 prices.

Yes, it is unsatisfactory. We expect, again, to agree with the Treasury, as part of the spending review, an adjustment so that we are dealing in current prices. That is a conversation we are having with the Treasury. They are very receptive to this. Obviously, the longer we use 2019 prices, the more detached from reality we are becoming and also the more inefficient it is for the company to try to work in two price bases. So I would expect us to adjust that in the spending review.

Can I pin you down on that? Do you think that when the spending review happens is when you will finally start to use 2025 numbers, as they will be then?

This is my expectation. We will need to decide whether it is the ’24 or ’25 cost base at that point, but that is my expectation. I think we have had positive conversations with the Treasury. They understand this needs to be done.

So, given that the £45 billion to £66 billion spread is in 2019 prices, we can expect to see that shift upwards, can we?

Yes, obviously, because that period of time has included a period of very high inflation and very high construction inflation. It is important, though, to understand—because I know the headlines this will inevitably attract when that shift is made—that this is a technical adjustment; it is not a cost overrun. It’s different.

It is still an increase.

It is an increase in cash terms, but it is a technical adjustment. It is different in nature from a cost overrun.

I completely understand the point that you are making, but it is an increase.

You have been very candid this morning, Dame Bernadette, but there will be people listening to this session and they will be immensely frustrated. I cannot put it better than Tony Travers, the renowned professor at the London School of Economics, did. I am going to quote in full what he said yesterday in the FT, to get your reaction, please. He said: “It is extraordinary—and not in a good way—that the project could knock down people’s homes and undermine local businesses, taking over the surrounding environment in the process, and almost a decade later still not have a clear plan or budget for such a crucially-located site in one of the world’s wealthiest cities.” This was in relation to Euston. It is a pretty poor state of affairs, isn’t it? The project has been going for 12 years. We have had the extraordinary events that I alluded to earlier, but it does not reflect well on this country, showing how to manage a major Government project, does it?

I have a great deal of sympathy with that critique. This is not where we would want this programme to be. When we talk about the drivers, though, some of the challenges that we are still dealing with now are ones that date from this project’s inception. We are now going back 15 years when we look at HS2, and it is possible to see a whole host of things that have caused challenges for the programme. Point 1 about any project delivery would be, “You should have a plan and stick to it.” That has not been the case for HS2. High speed, and therefore high cost, was embedded in this project from the very beginning, and I think we might now question whether those choices were the right choices. Building between densely populated city centres on old infrastructure is very expensive. The cost of planning and environmental obligations in the UK is very high. And I think our financial allocation processes, which we were just talking about, are not always well suited to effective delivery of infrastructure. So there is a whole host of things. There is a massive critique, I think, that we could make around the challenges that HS2 has faced and the light they shed—as it were—on our ability in this country to deliver infrastructure efficiently and well. There is then a second set of issues that we are looking at, on which we have been particularly focusing our efforts. We can’t change history and we can’t change decisions that were made 10 years ago; we have to deal now with the reality we have. What we have been focusing on in our work over the last year or two is the problems that have arisen since notice-to-proceed in 2020. These are nearer-term problems and these are the ones that we are addressing now. As Mark Wild has rightly said, many of those problems stem from the main works civils contracts. That is by far the largest driver of costs.

I was just coming on to that with Mark Wild—that was going to be my next question. I think basically this project was probably mis-sold at the beginning. If it had been sold not as a high-speed project but as a higher-capacity project, the whole thing might have been redesigned and we might be in a different place.

I personally strongly agree with that, but it is hindsight.

We are where we are, Dame Bernadette.

We are where we are.

So let’s deal with what we can do about it. I will pass quickly to you, Mark Wild. As I said earlier, this really is déjà vu for you, because many of the problems here are the same problems that were there with the Queen Elizabeth line. Let’s start with these contracts, because it seems to me that the contracts are going to be the major part of getting control of the costs. Let’s start with where we are on civils. You had exactly the same problem on the Queen Elizabeth line. How are you going to get control of the civils contracts? I will come on to the integration after that in a minute.

I will speak just for one minute then, and I might invite Mr Foster to speak about all the extensive work. HS2 has learned a lot of lessons from Crossrail, and a key lesson learned was to have fewer but larger projects. Crossrail had 37 individual projects; here we are going to end up with 10 or 12. I think the issue with the main works civils contracts is twofold. First, they are of a size and scale that literally has not been done since the Victorian era. We have not built an inter-city line from London to the north of England for well over 100 years. So they are of an extraordinary scale. Secondly, and very importantly, I think they started on completely the wrong foot. They started in an environment where the design, the consents and the enabling works should have been completed to a higher degree. I think these projects got off on the wrong start. With the benefit of hindsight, it was a mistake. I think that HS2 has to be accountable for that. In the contracts intrinsically is a transfer from the contractors to HS2 Ltd. These are legally binding contracts, which were well reviewed by everybody at the time, and the absolute facts are that HS2 Ltd started these contracts too early at too high a pace.

Can I just stop you there? We have had—if you like—the bloodletting session. We are now where we are. Can we not now go back over old ground? This is not a criticism of any of you as witnesses, but I just want to set the parameters of this hearing. I specifically want to ask about these civils contracts, and the NAO Report mentions criticism of how they were drawn up, including the incentives and so on. Prospectively, going forward, what is your idea of how you are going to manage these very big projects from now on? I see you deferring to Mr Foster. I am very happy if he wants to answer that.

I will speak about the contracts. We have been working over the last year on improving the main works civils contracts to make them more fit for purpose. There are four strands, as I would put it, to the work that we are doing on these contracts. The first is that we have commenced a renegotiation of the terms of those contracts. With the support of Government, we have a strategy to fix, control and reduce those, so that we can increase certainty on our costs, align the incentives better to drive more cost control and ensure that we are only paying for that which is necessary. As I talk about the renegotiation, though, we should be clear—

How feasible is that renegotiation? Given that you are locked into contracts at the moment, how feasible is it going to be to renegotiate these contracts?

We have to manage our expectations around these changes, but we are in partnerships and there is a recognition that we need to find a better alignment of incentives between the taxpayer and the delivery of the works. We are looking at how we can make variations to those incentive mechanisms and find a way that they can work better for both parties. We clearly have to reach a compromise there, but there are opportunities for improvement. We do see that as an intrinsic part of the reset. Personally, I have spoken to all the CEOs of the parent companies—we have 14 significant entities that sit above the JVs—and all expressed willingness to discuss and work through a renegotiation.

That is good to hear. Mark Wild, when you came into Crossrail, you had the construction contracts to deal with. You came in at the end of that process and you sorted that out, but what we found with that project was that the most difficult bit was the systems integrations. We do not want to get this line largely built and start to find that all the bits are not talking to each other, which is what we had with Crossrail. This is an area of your specific expertise. Can you give the Committee a flavour of the ideas of how we will not run into those problems again in this project?

On the main work civils, the work of Mr Foster and Alan in the Department has been very substantial, but that has to be in the context of a reset. To answer your question—what are the prospects of renegotiation—that will only really occur in a reset. That is important, Chair, in the question you have asked. The key thing to do, that Crossrail got completely wrong, is to make sure that the civil engineering is completed cleanly before the systems contractors start. The reason why we need a reset—it will break the cycle, as Dame Bernadette said, of this unacceptable continual drip feed of cost escalation—is that we can drive the civil engineers to exactly what the systems people want. The systems contracts are in the process of being let right now. It is a very good procurement; the proponents are the right proponents; the technology is the right technology—HS2, helpfully, has not taken any novel technology on board, which is a key lesson from Crossrail. The technology that is being procured is standard technology used on continental railways. The key is to get the civil engineers’ programmes reset, properly incentivised, and get them off the field of play as soon as we possibly can, and in parallel, to spend the next 18 months to two years designing the systems to come in. That is why the reset is of fundamental importance. If we have no reset, the Crossrail effect will occur—the system engineers end up in a muddle with the civil engineers—and we will be in big trouble. We are not going to let that happen. That is why the reset will have to occur.

I am sorry; I am asking too many questions today—colleagues, please bear with me, but I do know a great deal about the subject, having been on the hybrid Bill for well over a year. My question arising from everything that we have heard this morning: until you get all this reset done, what is happening in the meanwhile?

Three things. First, continuing the work of Mr Foster and Mr Over bearing down on the main work civils. There is plenty to do in productivity. I think we are seeing a situation now, with all the very positive work done in the past six months, such that we are at peak production, and the consenting and the design are getting more mature. There are many opportunities to bear down on cost, which we will do aggressively in the new year. Secondly, the intrinsic reset itself will produce efficiencies, and the ability to strike deals, I am sure. Thirdly, very importantly, the systems contracts and the stations need to continue with the design work. There is plenty to do—

I get all that; it is all part of the reset. But is work on the ground today continuing under the old system? How do you know that is providing value for money and will be integrated into the whole new reset?

Just to conclude, as I say, in terms of our bearing down on the main work civils contract, the renegotiation is just one strand. The other strands I would highlight there is that we are now getting the level of supply chain MI such that we can really see productivity, which allows the opportunity to have more progress in driving—importantly there, we are getting a much better understanding of all the exclusions and assumptions that were previously not available to us. In short, we have the chance now to drive performance.

I am grateful for those answers, but again they are not quite answers to my questions. Today, as we sit here, is work still progressing on the ground? How do you know that will be giving us value for money, and how do you know it will integrate into the whole reset?

Ideally, we would be managing against the outturn cost on the long-range plan, because that is the best way to allow HS2 Ltd and the supply chain to be efficient. Because we don’t have that certainty at the moment, we are necessarily operating on an annual basis. That doesn’t mean that money can’t move in the margins between the years, but essentially we have an annual budget and an annual work plan, and that is how we are measuring performance. We reset that year on year, and then we can measure how much of the schedule milestones have been achieved and what the cost performance has been against the plan. I think that is a necessary short-term intervention.

I get that, Mr Over. The short answer to a short question is that work is continuing in the round on the previous basis.

Yes.

Thank you. We are very pleased to have Ruth Cadbury, chair of the Transport Committee, with us.

Thank you, Sir Geoffrey. Thank you to HS2 for hosting the Committee yesterday at Old Oak Common. We saw the work going on to build that very large station. This meeting has very rightly focused on the cost issues of HS2 so far. I want to address the benefit side of the business case. Mark Wild has reminded us that this is a rail line for 120 years. I hope the purpose is still to address growth, regional imbalance and the expansion of capacity for passengers and freight that everybody accepts is so necessary on the west coast rail network in England. Are these wider and long-term benefits being fed into the benefit-cost ratio of the new business plan?

The short answer is yes. The business benefits case is built on capacity, but also the wider economic investment, growth, housing, jobs and so on that the programme is able to support. We will need to do a revised business plan as part of this reset and that will produce a revised business-cost ratio. I have spoken before at this Committee, and at the Transport Committee under a previous Chair, about how one of the challenges for us sometimes is how we capture and evaluate the full benefits of a really big transformational project like this. My Department’s appraisal methodology is often criticised for being too narrow—I think unfairly. It is actually much more complex and sophisticated than is generally understood, but we do know that we don’t always fully capture dynamic land use changes and the benefits that come from those things. We don’t do that, in part, because it is uncertain. You can’t predict those things with absolute certainty. One thing we are doing at the moment under our relatively new chief analyst Ian Mulheirn is to look at our appraisal methodology, not just in relation to HS2 but for everything we do on transport, to see whether there is more that we can do to capture what we call the level 3 benefits of programmes like HS2. It is particularly important that we do that, because otherwise we are missing out quite a critical element of what these sorts of investments are all about. If you look now at the Elizabeth line and the growth that is happening around stations on the Elizabeth line, for example, you see the enormous impact that this kind of investment can have. So, yes is the short answer. As part of this process of resetting the programme, we will also be re-evaluating and refreshing the business case.

Are you working with other stakeholders on these benefits, and if so, which other stakeholders? You talk about land value rises. Do you mean just contained within the envelope of stations and so on, or do you mean the wider regional impacts?

We will be looking at a range of different things with stakeholders—maybe Alan Foster will want to say more. I know that HS2 Ltd, for example, has recently done some research to better understand the investment that is now expected to happen in the West Midlands as a consequence of the two new stations there and the depot. That has produced some very positive indications of the housing, jobs and investment that it will support. Yes, we will be working with local stakeholders. We already work at Old Oak Common with local stakeholders there on the housing and investment that the station is expected to support. So, we will certainly want to work with colleagues both in London and in the West Midlands to evaluate the full benefits. Alan, do you want to say more about that?

It is a very important site to us, and as I say, we have tried to bring attention to that. We did a publication, “From trains to cranes”, on the West Midlands, and that shows that around £10 billion of added economic activity is being realised in the West Midlands. It also highlights 41,000 new homes in the West Midlands vicinity around those stations. Therefore, I think it is a really important area, and we are planning to do something similar around Old Oak Common.

I think, also, the West Midlands combined authority is looking at how that growth is achieved over a region, both with integrated transport delivery and the schemes around Curzon Street and Arden Cross at Solihull. If you put Euston, Arden Cross and Old Oak Common together, we are looking at something like 40,000 new homes just from the schemes around the stations. Camden itself has just published research suggesting that the Euston station, when we get there, will deliver £40 billion of benefits to the UK economy. Therefore, it very much has to be done in conjunction with our local partners—and that is just the direct benefits that we get around the stations; we have to work with them to realise the regional benefits, and do that together.

Do we have a timescale, Dame Bernadette, for the revised business case?

It will be part of the reset. Obviously, until I have a reliable cost range, it is difficult to provide a business case update, but I would expect it to be part of the conclusion of this work that we have been talking about.

Before we get on to Euston, it would logically fit, after that, for Sarah to come in on third parties.

Mr Wild, I just want to come back to your previous statements about renegotiating with the main contractors. I have also been reflecting on some of your introductory remarks about the necessity—within HS2 and within the DfT—for a reset on this programme. However, is it not the case that the third parties that you will be talking to will not necessarily share your view that the whole thing needs to be reset? Are you not going to be a bit on the back foot in some of these renegotiations? And will that not create a bit of an obstacle as to how much can really be achieved?

Well, these people are the same people that were involved in the Elizabeth line. They are really important people in the UK economy. They have—we have 31,000 jobs. They are very responsible shareholders. When we create the context—the reset of the programme—I think we will find the ability to have the appropriate commercial bargain and the transition of risk. I do not know whether Mr Foster has, but I have not found any resistance. The simple fact is that we have commercial contracts that are in a context where people are quite protective of their positions. A reset provides the opportunity for a fair allocation of risk, because we want our contractors to be safe and healthy. We want them to be profitable; we want them to be productive; we want them to provide value for money. These contractors are some of the most important in the UK; they are the people who will build Sizewell; they are the people who built the electrification of the national grid—long-term people. We need to provide the context for a fair bargain between HS2 and the supply chain, where we get value for money and we have productivity. The problem we have at the moment is that the contracts are unproductive—we are probably making suboptimal decisions because we do not have a properly co-ordinated programme. Equally, to manage expectations, we are in an existing environment and we haven’t got a blank sheet of paper; there is no prospect or intention to re-procure the whole of HS2. That wouldn’t really serve us well. But, I am hopeful. That is not to say that we should not bear down on costs. I think the work that Mr Foster has done to bear down on the existing costs must continue while we reset—we simply cannot take our foot off the gas—and that is what we are going to do.

That is right. We have to respect that we are in contract with counterparties, but we also have to re-evaluate the best way of completing the forward plan. As I say, I think that reformulation—the resequencing, the reset—gives us opportunities to find different ways of commercially incentivising the outcomes that we want, rather than the ones that we are getting at the moment.

I am going to express a bit of scepticism, if I may. If I was one of your commercial partners and I was listening to you today saying how you need to reset, how HS2, as an organisation, took on too many of the project risks at the beginning, and how you need to bear down on costs, I would be thinking, “Why should I? Why should I change the base terms that have already been agreed?” They are still committed to delivering. I am hearing your language about the reset. I genuinely find it encouraging, but I am just not seeing how the opportunity for re-baselining already agreed contracts is really going to deliver significant cost savings. I am sure there are opportunities at the margins. There are opportunities in future procurement. But you have talked a lot about renegotiating what is already there, and I am just not seeing the opportunity.

It is a very good question; there are two things, which are quite important. First, the longer this continues, the supply chains themselves have an elevated risk profile. The longer we end up in a situation where people are scrutinising costs, you get into an adversarial contractual position that will not serve any of us, so it is in the interests of the counterparties to have good contracts that are productive, coherent and lower risk. At the moment, although the risk balance is with HS2, if this continues and goes into a contractual situation, which has happened many times in my career around the world, nobody wants to be there. So, everybody is incentivised to make this coherent. Secondly, these are the supply chain partners who want at some future date to build Euston. If the railway was ever exploited in the north, they want to do that. They are genuinely committed to the productivity of HS2 and UK plc. I speak as somebody who used to run one of these companies. Two things: de-risking fundamentally for their shareholders, and I really believe there are partners who want to make HS2 phase 1 a success.

Given the width, still, of this funding envelope, there is £49 billion to £66 billion in 2019 prices. Again, if I was one of the commercial partners, I would be looking at that and thinking that that creates an opportunity. I think that remains a risk to this project and a risk to your very best efforts, which I do not doubt, to try and renegotiate some of these costs.

On the Elizabeth line, where this exact thing happened, I found the exact opposite. When the opportunity was created for people to be coherent, lower risk and productive, people really came to the party. We will, though, really strengthen HS2’s commercial management. We would acknowledge that we need to continue to improve the strength of our commercial management, and that is going to be a top priority for myself and Mr Foster, in parallel with the reset, just in case what you are suggesting comes to pass—a twin-pronged attack.

Thank you for that excellent question, Ms Olney. On the point about rapidly renegotiating these contracts, there has been an impression among various people connected with this project that HS2, a huge organisation, has wielded a big stick over local authorities and individual communities. I am a little bit concerned about these contracts. You will be talking to the big lead contractors, but they are backed up by a lot of really small businesses that I suspect are in deep financial trouble, the longer this goes on. When you renegotiate these contracts, can we have a little bit of sympathy and consideration for how the lead contractors are going to treat their sub-suppliers?

Yes; there are 2,400 small and medium-sized enterprises supporting HS2. It is a well-made point, Chair. I am absolutely convinced that the renegotiation and the commercial management must take on board a holistic view of the supply chain. Do you want to comment on that?

Absolutely. I recognise the pressure. It is something that we monitor. We look at the different levels within our supply chain, and our payment practices and processes are intended to make sure that there is money there to flow down and support. But it is a careful balance. We need to drive value for money on the overall programme. We will be looking for better terms and improved incentives that align better. We will need to see more innovation as well in the practices that are played. But we absolutely take that point on board and it is incorporated.

Now, Dame Bernadette, we turn to the subject of Euston. Can we first of all, on a point of clarification, be absolutely certain that this line is going to run from Old Oak Common to Euston?

The Government have indicated that that is their intention. They have committed to publicly fund the tunnelling from Old Oak Common to Euston, and that is an important commitment in this regard; it signals clear intent. I will ask Mr Over to talk in detail about this, but we are actively working on a plan to ensure a high-speed station at Euston, and we wish to see that privately funded. That is absolutely the intention.

We will hand over to Mr Over. In handing over, I will say that one of the key aspects of Euston is how much money you are going to get in from the private sector. I understand that you expect, in your current estimates, that it will be £6 billion. As a property man—I declare my interest as a chartered surveyor—I would have thought that £6 billion is a very tough target to reach.

I recognise your point, and the point made by Professor Travers, that we need to get Euston sorted, and we think that we are making substantial progress in doing so. The commitment to publicly fund the tunnelling is welcome and is a signal of intent, but we need the right station at the end of it for HS2, and we also need to look at the site holistically. There are four elements that we need to bring together. Obviously there is the delivery of the HS2 station. There is the redevelopment of the existing station, which is having operational challenges and is a time-expired asset. There is also getting the underground station working in a way that can improve its performance and handle the increased capacity. Crucially, there are also the commercial and housing developments both around the station with oversight and adjacent site development and, importantly, around the site at Camden, with the work that MHCLG is doing. The Euston endeavour is partly about solving HS2, but it is also about solving that problem holistically. Our problems in the past have been to try to solve each part separately and hope that they fit together. That has not been effective. We now have an approach in which we are building a consensus and a unified delivery by trying to ensure that we look at all that together. We have an integrated spatial design and an integrated delivery company to sit over contracts that will deliver each element of that, and it will do so in a way that allows effective construction and maintenance of the operation of the underground station and the conventional station while this is built. Lord Hendy spoke to that. We saw the tunnel-boring machines going in at Old Oak Common, so there is tangible progress, but there is still a lot of work to do in setting up those delivery arrangements and ensuring that they deliver effectively. In the time that it takes to do that, we are very conscious of the impact that this has on the local community and local residents, who have already had many years of disruption. They want to see a clear plan as to how we resolve this. At the moment, we are providing advice to Ministers and to the Treasury about how we deliver this in terms of the structures that I have set; how we ensure it is integrated with Camden and delivered in partnership with them; how we ensure that that wider economic benefit through housing and commercial development is secured; and, crucially, how the funding comes together. In my view, the funding will have four components. I don’t know that it will be £6 billion from the private sector; it will be a mix. I can say that the components of that mix will have potential private financing of the HS2 station, which we are looking at very actively with the Treasury. We have done some early market testing, and we think that that is viable. It requires us to have a clean scope and to make it investable, which will require work. We think that there will be development receipts from the work we are doing with Lendlease and potentially with Camden around the site in terms of the commercial exploitation of the land owned by the Secretary of State and Network Rail. There is potential for tax increment finance or local contributions—we have to be measured about how much they would be, but Camden or the GLA are willing to contemplate that. There would be residual public funding as well. In ensuring that that integrated delivery approach comes together, I want us to do the financial engineering that allows us to optimise across those four different funding sources. What I cannot tell you at the moment is the exact mix that will come out from that.

When you get to this reset, you will have to work out how much money you will get in from those four different sources to know how much public money will be put in. The amount of public money that will be put in obviously determines the private return, because the more infrastructure you put in, the bigger return you will get from the private sector. How will you resolve that conundrum?

We have a starting assumption. We know what we are thinking in terms of the high-level estimated cost of the station components. We have also market-tested the potential for private financing and we have been working with Lendlease on the potential for the commercial returns. There are reasonable estimates around how we can bring those together. What we need to do is take the decisions on the delivery model and spatial allocation and get into the detailed design of the station components. Then we can go to the market and say, “What space does that leave the commercial development? What scope does that leave for private financing to cost?” Then you begin the financial engineering. There will be some iteration in that.

That is very helpful. Ms Kelly, I am going to break a parameter I gave myself. Part of the problem with the lack of accountability with HS2 in the initial stages was the HS2 board and your representatives on it. The board was not scrutinising the finances properly; it was not even being given the finances properly by HS2 Ltd. I say that not to go over old ground, but because every new organisation you set up has to have a governance organisation in it. The more organisations you set up, the more boundaries you will have and the more complex it becomes. A question for either you or Mr Over is: why are you contemplating setting up even more organisations? For example, why are we going to have a new body for delivering an HS2 station? Why can HS2 not deliver its own station?

The decision to remove Euston from the scope of HS2 Ltd’s work was taken in the wake of receiving two unaffordable estimates for the design of the station. That forced a rethink for how we were going to address Euston. I support your point that setting up new organisations is hard. It is far more complex and difficult than is often thought. We need to pause quite carefully before rushing into that as a solution in general. Our experience with HS2 Ltd demonstrates that it is difficult to set up high-functioning new organisations delivering extremely complex infrastructure. In this instance, though, there is a quite a strong argument for needing something different from HS2 Ltd. As Mr Over was explaining, we have a high-speed station, a conventional station, an underground, and an enormous housing and investment opportunity. Euston is quite a different proposition from what HS2 Ltd is currently doing, namely building a railway. We are looking at something more complex, with more moving parts and different opportunities within it. In that context, and given that we need the GLA, Camden, Network Rail and TfL to be part of the strategic partnership for delivering a Euston solution, a different delivery model makes sense. As Mr Over has just explained, this is also about attracting private investment, which is a different skill set and a different set of technical challenges.

May I add to that? I am completely with you that we should not casually set up new organisations, nor casually expect them to be well-performing and well-governed unless carefully structured. We are very much focusing on that. Dame Bernadette is right that some of the discipline for getting to an investable place for private sector partners will require us to do that. But we need the right governance structures that can deal with those trade-offs, which we have tried to solve by setting up an organisation. It is no good if those trade-offs are then not resolved within that organisation, so I am looking carefully at how we set up the board and constitution of a new delivery company, what the financial participation is and what shareholding would be in effect between the different bodies that Bernadette has set up. We need to get the financial incentives right so that people look at their own interests, but also at the collective interest. That is what we have been missing. Having that in one entity, rather than dispersed across four, gives us a better chance at a coherent solution and effective and efficient delivery.

Can we examine the timetable? When are we going to get some financial certainty on this? Euston is incredibly complex—it is probably one of the most complex, if not the most complex, bit of the whole HS2 project. Is this going on in parallel with the reset and will the timetable be the same as the reset, or are we expecting this work to go beyond the reset? In other words, how are we going to get a total cost envelope, and is this going to delay consideration of the total cost envelope?

The work is going to go on in parallel. The interaction is limited. HS2 Ltd will remain responsible for putting in the systems and operating the station, but the construction of the station will be separated from its budget and its estimate; at the moment, that responsibility comes back to the Department for Transport. We expect to progress the delivery model and the financial assumptions over the next year. In terms of timescales, they will probably come together at the same time, but they are not intimately intertwined in a way that will hold the wider work, which Mark described, up.

My biggest fear is that the future station, or three stations in one, will not be big enough for the passenger throughput that there could be if the envelope of it is reduced and the external funding is not available. How are you going to address the risk that there could be pressures to reduce the scope of the station if the external funding is not coming in to build a big enough station, given how overcrowded Euston is at the moment?

That is very much first and foremost in our thinking. We are doing lots of demand modelling with Network Rail, TfL and HS2 but also with Camden about the organic demand that the economic growth there might create. We are refreshing that. There is a trajectory and the further that trajectory gets away, the more uncertain it becomes, but we are very much trying to design this to make sure that it is future-proofed. That might have staging points. Let us take the HS2 station as an example: if we look at this across the line of route and the decisions taken by the last Government and are yet to be opined on by this Government, we think six platforms will be sufficient to provide all the foreseeable services, unless there is a major expansion of the network in the future. But we want to make sure that our successors have that option, so we are actively planning for future-proofing at the HS2 station that would make provision for an additional three platforms, or possibly four platforms, next to the ones that we have a concrete plan to build. That option could be called later, and we need to do work on how actively that is provided for, because the more active provision you make, the more front-loading of the cost you provide. Conversely, if we do not put enough future-proofing into it, it is very difficult to return to at a later date. We are trying to make sure that that is protected and to work across the three stations to make sure that there is an integrated view of demand. We need to ensure that we do not build for demand that has not yet appeared, but we do not want to preclude the option to make sure that we can accommodate future demand, because that is essentially the purpose of this. We want to use this scheme and address the problems with the conventional station at the moment in a way that fosters transport use, which fosters economic growth.

I ask the question because the Elizabeth line is an example that has way exceeded its projections in the first year of operation. It is a really live question from passengers current and future.

That is completely right. The only thing we can be certain of is that our projections will be wrong, and that is why we need to have ranges and flexibility.

I think we might have echoed those words when we started. I call Sarah Olney.

To continue on Euston, Mr Over, there is continued uncertainty for local residents around the future of the Euston development, which it seems from your previous answers is projected to continue for quite some time. It is obviously having a very negative effect on local businesses that might be trying to find investment or people who perhaps are needing to raise a family in the local area. It is a really challenging situation. Those of us who were on this Committee in the last Parliament paid a visit to Euston. As well as being very impressed at all the work that has happened there so far, it is really evident when you go there quite what an impact the continued work is having on the local community, yet currently it does not look like there are many answers on how long that disruption is going to continue. What is the Department doing to try to best manage the disruption and continued impact?

I hope you heard me say earlier that I really do feel that keenly. We work closely with Camden, which supports us but is also critical of us in making sure that the interests of its residents are properly focused. It is not acceptable that we do not have a clearer plan, which is why we are vigorously trying to get to one. We will set that out and engage with local communities. The truth of the matter is that that plan will take a decade or more to come to fruition, and there will be continued disruption to local businesses and communities during that period. We can commit to provide transparency about where we have got to and engage them in the process. Camden is correctly pushing us to do that as fulsomely as possible. I do not want to mislead people and say that there are easy answers here but, at the same time, I need to reflect actively on the real impacts that the uncertainty is having and on the real impacts that will be there once we remove the uncertainty and have concrete plans.

On the issue of residents impacted by HS2, I was on the Transport Committee in May last year when we went to Buckinghamshire and spoke to a number of stakeholders, including the county council, parish councils, landowners, farmers and residents. They had an almost universal regret at the way HS2 was communicating with them. They accepted that the rail line was being built—they no longer opposed that—but they felt they were being treated unfairly, with disrespect and sometimes quite rudely, by HS2. In terms of land purchase, some things could have gone a lot better and a lot easier had better processes been in place, which would have saved HS2 money as well. Is there going to be any kind of reset? Is there an acknowledgment that that has been a challenge, and is there any kind of reset or review of that within HS2?

First, it is very disappointing to hear that feedback, because I want to be clear that we really care about the communities we are operating within, and about the landowners and homeowners we are in the process of agreeing property transactions with. We do care, and we are investing an awful lot of time and effort to try to improve those experiences. There is an absolute commitment to do that. We have made some substantial improvements in our processes over time in terms of the period that has gone through there. I met very recently our two commissioners—the residents’ commissioner and the construction commissioner—who were there to give an independent voice of feedback and advice to us about we are doing. There were some encouraging signs in terms of what we are doing but, clearly, we still have to listen and improve. We realise that the best way, when there is disruption, is to be in a position to keep people informed about what is taking place and respond quickly to their queries and concerns. There are well-established resources and processes to make sure that we are updating as early as possible with information about disruption. We have a 24/7, 365-days-a-year response line for people to call and respond to. We are really focused on those most urgent queries that come through that, and I am proud to say that 100% of all those queries have been dealt with in two days, for this year. All in all, it is an area of great focus to us. We need to listen and reflect, and if there are any specific concerns that people want to highlight, please do let us know to make sure that we are on it.

That will come as a great relief to many property owners out there. I heard of one case where HS2 took quite a lot of land off someone and did not pay them for three years. When they got the bill from the inland revenue for capital gains, they still had not received the money from you to pay the capital gains tax bill. It was quite a big bit of land; it was quite a lot of money. That sort of example gives HS2 a really bad reputation, so I am grateful for that reassurance. I am sure property owners—house holders—along the line will be reassured by the reset in that respect.

It is also about residents not knowing in the morning whether they can take their kids to school or go to work, on the route that they have normally used. They then have to go a long way around and end up being late.

Ms Cadbury raises an important point, and it is also about the way in which you handle local authorities. I suspect that if you handled local authorities a little better, planning permissions for all the various bits of the line would be a lot easier.

That has been a key area of focus for us.

I am going to come on to some specifics in a minute about selling off property, but on the general point can we have it as a fairly cardinal principle that when property is sold off, it will be, wherever possible, offered back to the person from whom it was purchased? Many people have had their house purchased and will have moved on, but there will be some who would actually quite like to move back into their house. Can those requests be handled sympathetically?

We would endeavour to handle requests sympathetically. Our responsibility is, of course, to achieve value for money, in terms of the resale of land, and to follow the very strict laws that are in place—the Crichel Down rules—in terms of the way in which the property and land should be considered as it goes through that resale process. However, there should be consideration for those requests.

Dame Bernadette, this is where the Department can come in. I have been involved in a number of cases with Crichel Down rules in the past. It can take years, if not decades, to resolve those problems. I just think that in relation to some of the issues—particularly the smaller ones, rather than the bigger ones—in which people’s houses have been purchased, there should be some sympathy in how these matters are dealt with.

Understood, and I am far less of an expert on the Crichel Down rules than the company is, or than you are, it sounds. However, the framework is there to provide a fair balance in managing the interests, on the one hand, of the taxpayer in securing value for money, and on the other hand, of the individuals who have been affected, who have sold their homes and may now want to return to them. I think the process needs to be followed and the rules need to be applied, but they need to be applied in a way that remembers that there are human beings at the end of the process.

Exactly. I would like to ask you a question of policy, which is not something for this Committee, but it does affect the finances considerably. It is about the protection of the line of phase 2. I think the previous Government announced, and I think it is the present Government’s policy, that the line is not to be protected, which means that we could get all sorts of planning applications that would make building a future phase 2 much more difficult. Is that still the policy?

I ask Mr Over to cover this point, please.

There are two aspects to it: one is safeguarding, and the other is how we treat the land that was already acquired. To begin with, the safeguarding is treated differently on the former western leg and the former eastern leg. On the former western leg, which is the phase 2a Bill and the route to Manchester, safeguarding was lifted by the last Government. Safeguarding remains in place on the eastern leg because some parts of that need to be retained, at the request of local authorities, and we have to decide which parts are to be retained before we can lift it and then reinsert it. The current Government have not taken a position on land acquisition yet. We are providing that advice at the moment and they are reflecting on the position that they inherited. However, we have about half of the land purchased on the former 2a scheme, and the powers to acquire further land expire in early ’26. For the section between Crewe and Manchester, the Bill that was in Parliament would have brought forward powers to acquire that land, so it is very much in the hands of the Ministers at the moment. We are providing the initial advice, but that will cover their intent for any long-term decisions on strategic rail investment. That will then have consequences as to whether land is either bought or sold, or whether it is re-safeguarded, or whether safeguarding is how it is lifted on the eastern leg. Setting all that aside, there is some land that we are very confident that isn’t going to be required under any plausible scheme, and we will be looking to release that in a sensible and sensitive way, so that the communities don’t suffer that detriment, and so the Exchequer gets the revenue back.

When will those policy decisions be made, because—again—people are looking to see whether they can purchase their old properties back? If my deputy Chair, who represents a Sheffield constituency, were here, he might have asked about some of the schemes that were rejected, or not proceeded with, quite some time ago—for example, the Doncaster and Sheffield bit. When will decisions be made on all that?

It is right that the new Government and particularly the new Secretary of State have time to consider these options and then work them through. Some aspects of them really need collective agreement about what the long-term strategy is for strategic rail investment. We need to give them that time; I think it is a matter of months, not a matter of years. I am very conscious in giving that advice that we are making sure that the clarity should be provided in either direction for the people impacted.

I apologise for my ignorance here. If land has been acquired by a CPO for a project that it is then subsequently not used for, are there any limits or rules on what can be done with any profits that come out of that?

The Crichel Down rules are really set up to make sure that the Government are not speculatively making money by selling land that it has compulsorily purchased for one reason to a different party for a different reason. That is where some of the protections for the original owners come into play. There is a set of six or seven rules that I am not an expert on either, but that is one of those protections.

I will go and look those up then; that is my interest. My question was actually for Mr Foster and it is about the decommissioning of the sites in phase 2. Can you just give us an update on that, please?

We have put together a full plan for the safe remediation of that plant and it was covered in the NAO review. We are now in the process of refining and optimising that activity, but then awaiting instruction in terms of whether to go ahead with that plan.

I think the original plan was to be completed in 2027. Is that right?

That is right. The plan would be that we can deliver that plan within three years and within that timeline.

At an estimated cost of about £100 million. Has anything changed?

Up to £100 million, yes, as set out in the Report.

Dame Bernadette, the decommissioning costs so far have been £2.2 billion—I think that is correct—or that is the loss that has been reported to date. Can you perhaps give some reflection on how the costs have got to that level and what lessons the Department might have learned from the decommissioning work that it has carried out?

I am not quite sure what is in the decommissioning costs. I assume you are also talking about impairment costs—the costs of 2a and 2b, which are now impairment costs because—

May I just clarify? In HS2’s annual report and accounts, we reported the £2 billion constructive loss. One component of that is effectively £1.1 billion related to spend on the development of the phase 2a and 2b Bills prior to Second Reading. Then there was an impairment of around £950 million, which related to the build of the assets that took place once the Bill had been approved. So it has those two components.

Mr Foster may be in a better place than me to describe what the various elements of that spend are.

The question is more about the lessons learned. I mean, the costs are the costs. Obviously, they were not costs that were planned at the start of the project, because you planned to finish it, but what are the lessons that have been learned by the Department?

We are still mining the lessons learned from HS2, you will not be surprised to hear, and I am happy to say a little bit more about how we are doing that. We have done some internal work already with the Treasury, the IPA and HS2 Ltd on all of the lessons to date, and there is further work currently being done as part of the independent review of governance that Ministers have commissioned—that is the broader work. As for reflections on this particular aspect of the lessons, I guess that the really obvious lesson is that is good, as I said, to have a plan and stick to it. If we are changing scope in a major way when a project is already well in flight, that has a financial cost to it. It is an obvious thing to say, but I do think a profound point about our experience of HS2, which needs to inform all our future infrastructure plans, is that we need to be very clear when we set out on a large project what it is there to achieve. We need to have, within our political system—accepting that politics is a real thing—some way of having a bit of stickiness, once we have developed a plan, to develop it and deliver it to its conclusion if we want to avoid incurring wasteful costs. We actually did that very successfully on the Elizabeth line. It seems to me that there are some very positive lessons from the Elizabeth line that we can learn about that. I dare say that there are more practical things around how those costs arose and how they might have been minimised, but ultimately, if we are going to cancel programmes when they have been some years in development, that will unfortunately result in nugatory costs.

I appreciate that I am getting slightly hypothetical here, but if in future you find yourself in the position of needing to assess the costs of stopping a programme versus the costs of continuing it, what lessons from stopping phase 2 will you be able to apply?

I might ask colleagues for reflections. In a sense, this was driven by political uncertainty and political decision making, rather than the practical delivery of the project. Mr Over, do you have anything to say?

I have a couple of thoughts. One is that if we are more certain at the start of the project what the likely cost is going to be, it reduces the chances of it being reopened. They cannot be eliminated, but there is that front-loading of investment. There is also a conceptual shift in how we set out our delivery of infrastructure, which is perhaps too focused on grand projects or big schemes that are binary—you do them or you don’t do them. I know that HS2 was broken up into three subsections, but they are pretty big subsections. What I think we are exploring at the moment is whether you can set a long-term intent and deliver it in smaller incremental stages. There are a number of benefits to that. First, it is easier to commit to each stage, but it has to be done coherently with the ultimate aim that you are trying to get to. Secondly, it is more controllable as a project and you can learn the lessons from the first stage and reapply them to the second stage more swiftly. Thirdly, it is likely to bring forward passenger benefits and economic benefits sooner, because it does not rely on the whole thing. At some point, that does not work because you have to get from Birmingham to London, and if you do not want any stops in between, that is a big section that needs to be delivered. But in terms of northern infrastructure—what we are trying to do on the trans-Pennine route upgrade or what we might do in terms of northern connectivity—that more staged delivery towards an ultimate big ambition is still something that I think would help. That would then minimise the consequences of the nugatory costs that we are facing here.

I agree with all that. At a practical level, clearly, part of the reason that we have seen the cancellation of phase 2a and phase 2b is because the costs were rising so fast on phase 1. We know that. There are practical lessons around cost estimation as well that we are drawing from our experience that we will certainly be building into future projects. It is very clear now that the further back you go with HS2, the more wildly optimistic the cost estimates were. I think we have learned a lot from bitter experience on this programme about how you do cost estimation and how you do it more realistically and robustly. That is a massive lesson for everything we try to do in Government on infrastructure delivery, I think. On my point about changing scope and the challenges of that, this Government have committed to a 10-year infrastructure plan and to setting up a new national infrastructure authority. I think we need to take the opportunities both of a long-term plan and of NISTA, this new authority, to really ensure that we are embedding good practice in how we set projects up such that they do not find themselves being truncated later and incurring those sorts of costs.

That is very helpful.

I want to focus on phase 2, but from a growth perspective, how much value will phase 1 on its own provide the UK economy compared with including phases 2a and 2b? Has that been considered?

When I did my accounting officer assessment at the time of the Network North announcement by the previous Government—I am sure the Chair will recall the lengthy discussion we have had about that—I did a value for money assessment for continuing with phase 1, which produced a BCR range at that point, based on a number of scenarios, of between 1.1 and 1.8. One of the things that the decision not to continue with phase 2 did was reduce the capacity of phase 1. It had a negative impact on the benefits, because you are not running the 14 to 15 trains that I think we were previously anticipating going north. That had an impact on reducing the values of phase 1. Before cancellation, we had separate BCRs and business cases for phase 2, but I am afraid I cannot recall them off hand. I do not have that data to hand, and I do not know if Mr Over can remember it—

We can write to you.

Given the significance of phase 2 for the overall project—the speed element and the capacity element—and given that the DfT has estimated that the west coast main line will reach capacity by the mid-2030s, surely this is a priority. What alternatives are being considered as this has been scrapped?

I absolutely understand the issue. We fully acknowledge that we face a capacity challenge in the late 2030s on the west coast main line as a consequence of not building phase 2. The Government are clear that they do not intend to reinstate those northern sections, but they are also considering what options exist for dealing with capacity north of Birmingham at that point in future years. I will ask Alan Over to say a bit more.

That is right. We project that, if trend growth returns, the west coast main line capacity will be exhausted from the late 2030s. That is advice that we are giving to the current Government. It does not have to be just infrastructure solutions, but there are not easy alternatives. If you listened to Mayors Parker and Burnham, they would say that this is a significant concern as a potential constraint on economic growth. We need to come to a view as a Government, recognising the difficult fiscal position, on the long-term plan. There is still time to address some of that. As I said, we might be able to do smaller-scale investments in infrastructure that would not be a reinstatement of HS2 or anything like it. We can do some stuff to optimise services in terms of the trains that we run with the existing capacity, and that will be augmented by HS2, which will alleviate some of that. There is time to work this through.

There are fewer seats on those trains though, aren’t there? And there are infrastructure problems around the station sizes and the platforms.

That is correct.

That feels a bit like a sticking plaster, or a second-best option. You have the London to Birmingham option, and the phase 2 option is some extra, longer trains. It does not seem to tackle the issue.

That is why the Government have to look at this issue, and they are doing so. I do not want to prejudge the collective views on how to work that through, but there is not just one answer—to reinstate HS2. There are infrastructure options below that. We can also do some stuff with rolling stock and service patterns, but if the projections are right, as you say, that will delay the problem not resolve it. South of Birmingham, HS2 has provided sufficient capacity that can cover all reasonable growth scenarios, and it will release more capacity for freight and for regional commuter services.

Finally, has the Department looked at the effect of the cancellation on tackling regional inequalities, particularly in the smaller towns in north-west England?

Not specifically. We are looking at that through the northern connectivity programme, which I am also responsible for, and working with northern leaders on their transport priorities. It is important that we take a wide framework on transport. There are benefits from widening the urban areas of cities, and making sure that local transport is getting people into where economic activity is concentrated. There are agglomeration effects for joining up our big northern cities, but there are also regional economic effects for how we connect the big three economic regions, and how they interact with each other. It is important that we look at those in the round. The Government are committed to dealing with northern connectivity as a manifesto priority, and we are already delivering the early benefits from the trans-Pennine route upgrade, which is a foundation for that further work.

A view on the relative priority of all the things that we could do on transport investment is something that will need to be addressed in the spending review and the Government’s 10-year infrastructure plan. It will need to look at rail connectivity east to west and north to south, and it will need to, as Alan Over indicates, look at the balance between inter-city investment and investment in local and regional transport. Some choices will have to be made, because we know that the fiscal environment is a tough one. I know for a fact that whatever the conclusion of that is, it will not include all the transport investment that my Department would ideally like to see. We have to recognise that choices are inevitable in a constrained environment and seek to make the ones that are as effective as possible in driving the Government’s missions and plan for change, as well as ones that tackle some of the challenges of inequity in the towns and regions.

Is Northern Powerhouse Rail still viable following the cancellation of HS2 phase 2?

The Government have said that they are committed to improving northern rail connectivity east to west, and we will need to look actively at how we do that. There is still development work going on to do that. I am slightly stepping back from the language of Northern Powerhouse Rail, because as Mr Over indicated, it is important when we think about what we are going to try and achieve through rail investment in the north that we look at it as a series of programmes and choices rather than a big totemic thing. As we know with HS2 Ltd, that can become quite problematic as we try to deliver things. I did an accounting officer assessment under the previous Government, which was published following the election. In the plan that the previous Government set out there are big value-for-money challenges around Northern Powerhouse Rail. There are also a number of things that would need to be taken to address those value-for-money challenges—if that is what you mean by viability challenges. In the end, the Government are going to need to make a choice through the spending review and the infrastructure plan on what investment they prioritise.

I would like to acknowledge Sir Jon Thompson and Alan Foster’s work in the past year. HS2 is already on the journey of change. It is actually just completing quite a major reorganisation. It created a role called the chief railway officer, with someone called Emma Head—a very capable professional. That is a direct lesson from Crossrail. I am inheriting a ship with Alan that is already recognising its need for change. We are coming to the end of a cycle that for HS2 people has been quite a significant change. It has reduced the number of people and has put the wiring, you might say, in the right position. Looking forward, I would say that change in HS2 Ltd is pretty fundamental. The three things I need to do are: reset the programme; re-contractualise our relationship with the supply chain; and make HS2 responsive to those requirements. All three of them are significant interventions, and they are all interdependent. The three things that HS2 Ltd needs to do are relatively straightforward, but again, they might take a little bit of time. First, we need to reinforce our frontline teams that are managing the contractors—bearing down on costs and driving productivity. As with the previous answers, it is quite a difficult and complex thing to renegotiate. Right now, as the Chair said, we are 31,000 people out there spending a lot of public money. First, we need to reinforce and rebalance our frontline teams. Some of that has occurred, but there is more to do, particularly in areas such as the commercial functions of HS2. Secondly, with the systems contracts coming on board, we need to get into the more end state issues. We have an infrastructure maintainer to stand up, which is a major programme in its own right. It is actually a very good time to be doing this. I would say that the civil engineering is at the beginning of the end, but there is still a long way to go. In parallel, we need to make HS2 a capable systems infrastructure maintainer, so there is a lot to do in that space. There are good plans, but we need to create the organisation that will operate the railway in the future. Thirdly, HS2’s culture needs to change, quite profoundly, to be more focused on the singular task of delivering phase 1 at the lowest feasible cost. To be fair to HS2 Ltd, its task two years ago was somewhat different. I cannot opine whether it was doing well or badly, but I know now that we have a more singular task, and certainly with Alan Foster, we will be committed to that. So we need to reinforce our capabilities, particularly at the frontline, make HS2 a more capable systems organisation, and change and pivot HS2 to have a singular purpose of delivering phase 1 for the lowest feasible cost. I am heartened, though, by the quality of the people in HS2, and I think we have the opportunity to implement it.

Dame Bernadette, if what has happened in the last 10 or 12 years tells us anything, it is that the Department did not have enough control over the whole project—over costs and everything else. We have heard lots of encouraging words this morning about this reset, but what are you going to do differently in the Department to make sure you have greater control, particularly over costs? I have a lot of confidence in Mark; I know him from his previous project, but nevertheless, it is the Department that sponsors this project—it is responsible for the costs. What are you going to do differently this time compared with what you have done in the past?

I want to say, first and foremost, that we have always sought, at all stages in the delivery of this project, to ensure that there is effective and robust oversight by the Department. It has been delivered through a framework agreement, a sponsor board and a ministerial taskforce. I expect you will recall that we strengthened governance quite significantly at notice to proceed in 2020 when we appointed two special representatives to the board, and that was the point at which we set up the ministerial taskforce. I think Mark and Alan would agree that they do not feel any lack of oversight from the Department in the operations of HS2 Ltd. The particular difficulty we have seen is that when the underpinning information that the company, the board and the Department are receiving is unreliable, it is very hard to provide the appropriate level of intervention. That said, I want to give a flavour of what we have been doing. As soon as we saw costs increase, we commissioned reviews and remediation plans. We have worked with HS2 Ltd to establish a strategy on the main works civils renegotiation. We obviously worked with the Chair to recruit Mark Wild, whose leadership will be critical going forward and an important part of the change we want to see. However, I have to acknowledge that all this oversight has not delivered, ultimately, the outcome and the level of cost control that we need to see on this programme. I accept that point entirely. In terms of what we are going to change, we have an independent review being conducted at the moment by James Stewart, commissioned by incoming Ministers a few months ago. He is currently concluding his work, so I do not want to pre-empt it. He has not yet concluded it, so it has not yet been formally considered by Ministers, and we will need to acknowledge it. It is going to make a number of changes, or proposals for change, to our future oversight and sponsorship of this programme. I know that he is going to make proposals for how we organise our own boards within the Department, and for how we work with HS2 Ltd, to build greater trust, transparency and collaboration in the delivery of this project, as well as more effective control. There will be more to come on that, but I will not be able to give you a detailed answer on what changes we expect to implement until we have received his review and decided how to take forward his recommendations.

I accept that answer, although I wish you had answered it. Within this reset timetable—you have not been able to tell us this morning exactly how long it is going to take—will his report be completed in time so that you can actually give us the information? Then, when it comes to the reset announcement, hopefully both a reliable figure and all the Government’s control issues will be addressed at the same time and wrapped up together so that the public will have confidence that it is likely to be a much more reliable outcome than there has been hitherto?

I expect changes to our governance and oversight to happen much sooner than that. They are relatively more straightforward to determine and execute. The independent review is concluding at the moment, and Mr Stewart is coming to the end of his work. I expect us and Ministers to be able to consider his recommendations very early in the new year. We will then want to implement the changes that we think are sensible and needed for this programme as quickly as possible. I would expect to be able to tell you more about that much sooner than the whole reset.

There have been one or two changes on key personnel, so can we just clarify their status? In paragraph 4.4 on page 30, it says: “A new organisation structure. HS2 Ltd has established a new role of Chief Railway Officer. This new role is intended to act as a ‘guiding mind’, with responsibility for integration and focusing programme decisions on how to best deliver the railway, rather than individual component projects.” I thought you were doing that, Mr Wild, but who is this person?

Sorry, I just referenced that, but I will restate it. One of the key lessons from Crossrail—

But who is the person?

The person is Emma Head, who is the Chief Railway Officer. She is a very capable person who has been on the programme for several years. She was our head of safety and is now the Chief Railway Officer, who is the guiding mind, taking instruction from the Department and turning it into the engineering configuration.

We are also getting a resident commissioner and construction commissioner being combined into one role, Dame Bernadette. Is that correct? Who is that person? When are they going to be appointed? What exactly are they going to do?

Those two roles are already in place and we have had good support from the current commissioners. Their contracts are coming to an end and they have kindly agreed to extend them. The function of both of those roles is to make sure that there is an independent view, looking at the impacts of construction on local communities and residents, and also making sure that the residents’ interests are protected, for example, in the case of compulsory purchase or other decisions. Given the reducing volume of work, both in new property acquisition on phase 1 and the beginning of the end of construction, which Mark talked to, Ministers have decided that they should be combined into one role that will still be independent and make sure that our Ministers and HS2 Ltd are very firmly aware of any concerns felt by people impacted by the construction or purchase of land. The two commissioners came to see Lord Hendy earlier this week and gave their views on performance, and they were positive about the progress that HS2 Ltd was making. That is not a new set of people or new set of arrangements. It is a consolidated way of making sure that those existing protections are delivered in the future. The recruitment process is under way and we would expect to have a candidate announced at the start of the next financial year.

So, Dame Bernadette, they will be a commissioner with significant powers. Presumably, they will have powers to call for any papers they want. Any information will not be withheld from them, and they presumably will report to you, and then you will report to Ministers. Is that how it will work?

They will report to Ministers, in effect. Obviously, we would want to ensure that they have access to all the information to enable them to do their jobs appropriately.

This is a very quick question. This is London-centric. Mark may remember when I was chairman of the London budget scrutiny committee, so some of this déjà vu. In terms of the development of the Euston site, have there been any conversations with the mayor about setting that up as an MDC?

There are two models being contemplated in terms of the wider Euston development. There is a mayoral-led development corporation, but also a Camden-led one. We are talking to the GLA and to Camden about preferences for that. That would be a development area constituted under MHCLG’s legislation and would be designed to bring forward the wider housing and economic opportunities.

Again, I am very familiar with these models, having worked with and tried to unwrap some of the challenges around the LLDC site. I know Mark will be sighted on some of the complexities and difficulties that can throw up, and also how that might delay any progress, especially in negotiations with Camden.

Well said, but I would say that a collaborative approach of all parties being in an enterprise owning the whole of it has got to be the right thing, particularly when you are talking about very complex inputs and outputs. I do not know what the decision would be. Certainly, you are right to raise the complexity, but they can be made to work. An environment where everybody is around the table is probably the right thing to do.

It is a two-layer thing. The focus of that would be the area around the station, and the delivery company I was describing earlier would be focusing on the station’s delivery, but the two have to work in kilter. We are working closely and very well with Camden, which is correctly challenging us in a tough way on behalf of its residents, but also being supportive of trying to do this in a different way.

I would imagine that Camden would want control of it because it is right in the heart of the borough. I will tell you what made me think of it. I just recalled a leaked report about the state of Euston underground station, which I think was in November. It talked about the fact that it would need a rebuild, which is why the concept of an MDC just jumped into my head. I think it is a huge issue, so can we be kept informed on that?

Certainly.

We are almost at the end of the session. Just for a bit of fun, I will put you all on the spot and ask a $94,000 question. What year will we have a properly functioning, high-speed railway from Euston to Birmingham?

We are up to $150,000 already.

I do not have an answer. I am not focused on the delivery of the Euston site, so I will pass on that one.

No—you are going to set the scene. I want a best estimate.

2037.

Golly. Mark Wild, I hope you can do better than that.

I am going to be more circumspect. I have really got to do the work. You would hope that in the 2030s, you would have a functioning railway, but the truth of the matter is that—sorry to pour cold water on it—I need to do the work.

Given that we had an original estimate on phase 1, which was 2030 to 2032, I am not quite sure why it has slipped so much. I will just put Mark Wild on the spot for a start and see where he gets to.

Honestly, I think if I did speculate—I have not done the work. I would say that the current range we have is under pressure, but I really do need to do the work. I am sorry to be evasive, but you are triggering my—

I shall ask the question in future sessions, so by then, hopefully, you will have an answer. Dame Bernadette?

The current range for phase 1 between Old Oak Common and Birmingham, which of course is different, is 2029 to 2033. That is the current range, which Mark indicated he considers to be under pressure. There will be trains running between Old Oak Common and Birmingham before there will be trains running between Euston and Birmingham. I think I can say that confidently. The schedule for Euston services has an outer limit of 2036, and our current work on Euston suggests we are still within that parameter.

Alan Over?

I am going to listen to Mark’s advice carefully.

I think the conclusion from the day is that we do not know when the reset is going to take place, we do not know what the cost is going to be, and we do not precisely know when it is likely to come into operation—but there we are. We have probed as much as we can. I thank our witnesses very much for attending the Committee today. An uncorrected transcript of this hearing will be published on the Committee’s website in the coming days. The Committee will consider the helpful evidence we have been given today and will produce a report with recommendations in due course, but inevitably after Christmas.