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High Speed Rail (Preparation) Bill

Part of the debate – in the House of Commons at 3:13 pm on 26th June 2013.

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Photo of Maria Eagle Maria Eagle Shadow Secretary of State for Transport 3:13 pm, 26th June 2013

I understand my hon. Friend’s point, and the one I made in response to the earlier intervention was simply that we had to get to Leeds and Manchester before we could go further. Work is going on—led by the Department, I think—looking at the prospects for further phases, if one wishes to put it that way, after we have got to Leeds and Manchester.

The delays over the past three years are no surprise, given that the Department has been promising to publish a transport strategy ever since the election, but has yet again delayed it until later this year. The failure to deliver progress on this new railway line could not be a better example of what happens when one decides on a transport strategy towards the end of a Parliament, rather than at the beginning. It means major transport decisions—for example, how we connect the new rail line into Britain’s hub airport at Heathrow—are not being taken forward in an integrated way. That is entirely a consequence of ducking the big questions on aviation for the whole Parliament and of the Government’s decision, which we believe to be wrong, to tell the Airports Commission not to report until after the next election.

It is not just the rapidly slipping timetable that raises alarm bells and worries those of us who support this project. The National Audit Office wrote:

“We identified three areas of risk to the Department’s effective governance of the High Speed 2 programme:… Underdeveloped governance and programme management… Insufficient resources in the Department’s High Speed 2 team”— and

“Inadequate stakeholder management”.

The criticism that Ministers failed sufficiently to resource the team in the Department will be familiar to anyone who has followed the fiasco over the collapse of the Government’s rail franchising programme. The NAO has warned that there is

“a high risk that it may have insufficient skilled staff in the areas of procurement, corporate finance, rail technical and programme management.”

Yet again, the reckless way in which the Department was reorganised after the election and the scale of cuts to key staff have put a major project at risk.

The Government have finally, belatedly, appointed a new director general for HS2 as well as a new senior management team, which is welcome news, but is it not extraordinary that, just as with the west coast main line fiasco, it took so long for a senior responsible owner to be identified for the project? No wonder the Major Projects Authority has rated the delivery of the new rail line as amber/red. That should have been a clear warning to Ministers to take its concerns seriously, not simply dismiss them as irrelevant.

To be fair to the Secretary of State, there was one bit of good news in the otherwise highly critical report from the MPA. It found that

“the Department has strengthened its working relationship with HM Treasury.”

That is very sensible indeed, particularly in the light of the NAO’s concerns about the budget for the project. It has called the Department’s use of a precise estimate of £16.3 billion for the cost of phase 1 of the scheme as “unwise”, as I think we have discovered today. It said that an honest figure would be between £15.4 billion and £17.3 billion, so I welcome the fact that the Secretary of State has today given updated figures. I am sure that he will continue to do so, as he has undertaken to do.

The NAO was also unable to verify the Department’s claim that the £1.5 billion savings recommended by Infrastructure UK could be delivered. Work apparently only began on identifying those savings in September. The House needs to be told whether the savings have now been locked in. The NAO also raises doubts about the Department’s claim that phase 1 will result in reduced operating costs on the existing network of £3 billion over 60 years. This is on the assumption that fewer long-distance services are likely to run on the west coast main line, but because the Department has not set out any revised service patterns it is difficult to see how such a precise and neat rounded figure has been generated.

The Government should also be clear that the £42.6 billion cost of completing the north-south line as far as Leeds and Manchester does not include the £7.5 billion cost of the trains to run on the line.

The Secretary of State has made that clear today. These factors are an essential part of the project, and they ought to be included in the estimates in future.

Worryingly, the National Audit Office also claims:

“The Department has not included VAT in its cost estimates or affordability assessments”,

and warns that

“HS2 Limited will be liable for VAT at 20 per cent on almost all of its spending.”

Ministers need to confirm that the Chancellor and Her Majesty’s Revenue and Customs have agreed that the VAT will be reclaimable. If that will not be the case, that should also be accurately reflected in the budget.

The NAO also warns that, even with the additional £3 billion capital spending from 2015-16 that has been confirmed today, there is a risk that the project

“may restrict the ability to fund other capital projects across government”.

It goes on to warn:

“We estimate that there could be a gap in affordability of £3.3 billion spread over the four years from 2017-18 to 2020-21, which are the peak spending years for phase one.”

The Secretary of State will, I think, have negotiated something in that respect, but he must make it clear, when he can, that the settlement he has reached with the Chancellor—the details of which we might get tomorrow—has closed that funding gap in full. It would be unacceptable if the Department’s failure to plan the spending needed for this scheme were to result in any cuts or delays to the vital upgrading on the rest of the network. That includes the rolling programme of electrification and new inter-city trains, both of which have already been delayed or scaled back under this Government.

Finally, on the budget for the scheme, there is already a creeping increase in spending from the allocation set for this Parliament in the 2010 spending review. The Minister of State, Department for Transport, Mr Burns, has admitted to me in a parliamentary answer that the budget for the current spending period has been revised upwards from £773 million to around £900 million. That is worrying in the context of the legislation we are debating today, which will effectively give Ministers a blank cheque from Parliament to spend on the scheme. I am sure that the Secretary of State will keep Parliament fully apprised of where the money is going.

In addition to the delays and the criticisms of the budget, serious concerns have also been expressed about HS2 Ltd. It was initially set up to advise Ministers on the route for the new north-south line, but the Government have expanded its role to include building support for the scheme and then delivering it, despite the fact that HS2 Ltd has faced criticism for the way in which it has engaged with communities along the route, with local authorities and with MPs. The fact is that it has not proved to be an effective advocate for the scheme.

The NAO has issued a warning on this, too, saying:

“The programme has a complicated governance structure. This is because the Department aims to preserve some independence for its development body, HS2 Limited, while also maintaining effective governance.”

By divorcing the scheme from delivery of the investment in the existing rail network, there is a risk that we will not focus on the need to create a fully integrated single rail network. It makes no sense that Network Rail is, in effect, having to mirror some of the work of HS2 Ltd, including appointing staff of its own to work on the scheme and having to lobby HS2 Ltd to ensure that decisions are taken in a way that does not have a negative impact on the wider network.

It is increasingly clear that a better option would be to transfer responsibility for the planning and delivery of the new north-south rail line to Network Rail. That would reduce duplication and cost while better enabling the integration of investment in the existing network and the new line. The hopelessly inadequate plans for connecting the new north-south line with HS1 are a good example. The focus of the debate on this issue has been on whether there would be any demand for services from the continent to go further north than London. We should surely not turn our backs on the opportunity to end unnecessary and environmentally damaging short-haul flights, but the real case for getting the connection right involves the opportunity to run the excellent Javelin trains that served us so well during the Olympics further up the country, instead of simply between the coast and the capital.