HS2 review says project could be delayed seven years and exceed budget by £26bn

HS2 could be delayed by up to seven years and run £26 billion over budget, according to Transport Secretary Grant Shapps.

He said that the final phase of the railway may not open until 2040 and the project could cost £88 billion.

Mr Shapps’ warning was based on the results of a review carried out by HS2 Ltd, the Government-funded firm building the high-speed railway.

A separate review into whether to scrap the railway was launched by Prime Minister Boris Johnson last month and will be completed this autumn.

Infrastructure projects must be subjected to “the most rigorous scrutiny” and this must be done “with an open mind and a clean sheet of paper”, Mr Shapps told MPs.

The report by HS2 Ltd chairman Allan Cook stated that the original plans “did not take sufficient account” of the effect of building a high-speed line through areas that are densely populated and with challenging ground conditions.

He said the project’s budget has “proved unrealistic”, but added: “At the same time the benefits have been understated.”

Mr Cook recommended that the opening dates of the three phases of HS2 should be changed, adding that their costs will be above the previous budget.

With figures in 2015 prices, this would involve:

– Phase One between London and Birmingham being delayed from December 2026 to a “staged opening” between 2028 and 2031. Cost to increase from £27 billion to between £36 billion and £38 billion.

– Phase 2a from Birmingham to Crewe being delayed from 2027 to between 2028 and 2031. Cost to increase from £3.5 billion to between £3.6 billion and £4.0 billion.

– Phase 2b from Crewe to Manchester, and Birmingham to Leeds, being delayed from 2033 to between 2035 and 2040. Cost to increase from £28.6 billion to between £32 billion and £36 billion.

In a written statement to Parliament, Mr Shapps said adjusting for inflation in construction costs means Mr Cook’s estimate of the final bill for HS2 ranges from £81 billion to £88 billion at 2019 prices, compared with a budget of £62.4 billion.

Mr Cook’s report also stated that the method used for estimated the benefits of the railway has “proved inadequate in capturing the full transformational effect of HS2, particularly on changing land values”.

He recommended that revenue from selling off land close to HS2 stations after construction has been completed – believed to be worth between £3 billion and £4 billion – should be used to offset the cost of the project.

A spokesman for HS2 Ltd said Mr Cook’s assessment “makes clear that HS2 remains a compelling strategic answer for Britain’s future transport needs, relieving overcrowding and congestion on our roads and railways, and reducing the carbon footprint of the UK”.

He added: “It will drive economic growth and regeneration in our regions, and bring Britain closer together.”

Shadow transport secretary Andy McDonald claimed that successive Conservative transport ministers have “shown themselves to be utterly incompetent and unable to oversee the finances and governance of HS2, among other infrastructure projects”.

He went on: “This Government has misled both Parliament and the public about the cost of HS2. People need to have confidence in the project, so this delay is bad news for the UK transport system as a whole and the north of England in particular.”