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Examination of Witnesses

High Speed Rail (Preparation) Bill – in a Public Bill Committee at 12:00 pm on 11th July 2013.

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Steven Hayter, Terry Morgan and Nicola Shaw gave evidence.

Photo of Annette Brooke Annette Brooke Chair of the Liberal Democrat Parliamentary Party 2:30 pm, 11th July 2013

For the record, please would the new witnesses introduce themselves to the Committee—their name and organisation.

Steven Hayter: I am Steven Hayter, for the Institution of Civil Engineers.

Terry Morgan: I am Terry Morgan, for Crossrail.

Nicola Shaw: I am Nicola Shaw, for High Speed 1.

Q 215

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

Good afternoon. This question is primarily for Mr Morgan and Ms Shaw. It took more than two years to get the hybrid Bill for HS1 through Parliament, and it took three and a half years to pass the hybrid Bill for Crossrail. I wanted your comments on whether those Bills were subjected to any unnecessary delays. Do you think that the Government’s timetable for passing the HS2 hybrid Bill by May 2015 is realistic?

Terry Morgan: That is a great question. I do not have a view on High Speed 1; Nicola might, but I do not. When you look back and say to yourself, “Why did it take three and a half years?”, to be frank I think we were exploring. In terms of scale and complexity, with Crossrail a number of things were learned. A number of the people involved in High Speed 2 were involved in the preparation of the original hybrid Bill, so some of that knowledge has transferred across to HS2. It is a very demanding timetable, but you often find that when there is a demanding timetable, things can happen in the right way. I think this is one of those processes that is better driven by a timetable to get a conclusion than allowing it to be open-ended. Meeting the timetable is possible, but it is very demanding.

Nicola Shaw: I think Terry is right about the transfer of knowledge from the process with High Speed 1 to the process with High Speed 2 and the parliamentary support you need through this process. The scrutiny you are giving now and the scrutiny that will come forward as you go on will be useful.

Q 216

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

Mr Hayter, in your recent “State of the Nation” report, you said that the delivery of the project could be sped up. Is that assessment purely from an engineering perspective, or do you think that the consultation and legislative timetables could also be hastened?

Steven Hayter: It is mainly from an engineering perspective. What we were really driving at was that, provided the hybrid Bill could be seen through within the time expected, then from an engineering perspective, something like phase 1 of the railway as planned could be constructed in about five years. That would give a much more competitive timetable than the one that is projected at the moment by High Speed 2.

Q 217

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

Mr Morgan, could you say a bit about Crossrail’s apprenticeship programme and what discussions you have had with HS2 Ltd about how it could deliver apprenticeships as part of its project? May I ask you to cover in your reply Crossrail’s commitment to delivering one apprenticeship for every £3 million spent and how that ratio was reached?

Terry Morgan: You are quite right. We took some learning from the Olympic Delivery Authority, which had a similar ambition but did not put that into the contract with its providers, and that made the delivery of the ambition more difficult. In other words, contractors committed, but if they did not have a commercial obligation, they still felt that they had choice. When they have choice, you often find that the commitments that you want them to fulfil, around what I would describe as the soft subjects, are sometimes lost. We on Crossrail—I am certain that it is the case on HS2 as well—have always felt that, given the scale of what we are trying to do, there is obviously the importance of delivering the programme, but there is also a question of legacy. That is why we have built a skills academy in east London, on the border between Ilford and Newham, and our contractors are under a commercial, contractual obligation to deliver apprenticeships for every £3 million, or recruit somebody who is currently unemployed.

The words are there, but how do you then do it? We think it is important that we built a skills academy. We said that we would have 400 apprentices; we are now at 230 and the number seems to grow every week, so we are very confident that we are going to get over the 400 apprenticeships mark in that process. The thing we have learned, though, is that there is more you can do with people who are currently unemployed, so we have been running pre-employment programmes. Some of it is very simple: how do you get people up to the idea of getting out of the house and turning up for work at the same time each day, and not having a choice about it? It is very simple, but people lose that sort of habit. At the same time, if people have some vocational skills, how can we enhance them? I am a great advocate for it, because we have taken 1,000 people through that programme so far, and 500 have got jobs on Crossrail. We are great advocates for this, but never doubt that unless you make it a commercial obligation, in my experience contractors will find ways to avoid it. You have to have a determination from the beginning that this is part of the legacy.

I emphasise that our skills academy is not badged Crossrail; it is legacy. If you were ever to go there, when you are inside there you will see Crossrail, but my ambition for it is that the next phase will be Thames tideway, which will need the same skills and I want them to use that academy. They are part of my advisory board. Because of the increased tunnelling that is coming through, HS2 are also starting to show some interest, so I will be encouraging them to participate in the skills academy that we built, which is the first in the world.

Q 218

Photo of Nicky Morgan Nicky Morgan Assistant Whip (HM Treasury)

Ms Shaw, in your written evidence you stated that since its construction, the railway has been a catalyst for growth and regeneration, delivering broad transport, economic and regeneration benefits to London and the south-east, which is good to hear. Is there anything you want to add?

Nicola Shaw: Yes, I would love to. There are four stations along the line—at Ashford, at Ebbsfleet, at Stratford and at King’s Cross—and at each of them we have seen a lot of regeneration; a report done in 2009 by Volterra estimated that overall that amounted to just under £4 billion. We are seeing all sorts of things coming along now, including jobs and housing developments. Exciting things are happening such as the development of the shopping centre for McArthurGlen at Ashford; the development of a new scheme with Paramount at Ebbsfleet; huge developments, first for the Olympic park and now at King’s Cross, around what we are doing in central London; Google announcing that they are coming and starting to build; Camden town hall relocating; BNP Paribas, the Aga Khan—a number of different things are happening at each of the stations along the line.

Q 219

Photo of Nicky Morgan Nicky Morgan Assistant Whip (HM Treasury)

A question for all three of you: do you think that there is a nervousness in this country about big civil engineering projects, and that sometimes we do not think big enough? This might be particularly for Steven. We have seen with the Olympics that we were able as a country to deliver a big project on time and on budget. Do you think that might be why there is nervousness around HS2—it is just so big that perhaps we are biting off more than we can chew?

Steven Hayter: I think yes. There is certainly a nervousness reflected among parliamentarians and the media, especially. The civil engineering industry and the railway industry have shown in the past 10 to 20 years that large major projects can be planned, constructed and maintained much more efficiently than previously, to time and to budget. You mentioned the Olympics, and that has to be a prime exemplar of that new way forward. We have to emphasise and make information available to the public to try to give them more confidence that the structures and our professions can deliver to a prescribed time scale and cost.

Nicola Shaw: I have to commend High Speed 1 on that basis as well, as a precursor to the Olympics in the same vein, and I am sure that Terry will go on to say that he is on track for delivery. The notion that we are not confident in this area simply needs to be dispelled. We need to move on.

Terry Morgan: We are twice as big as the ODA in terms of scale. We are on time and we are going to deliver the project inside our funding envelope. I think that we are rebuilding a reputation that says we know how to do these things. Provided that we make sufficient funding available to handle the inevitable unknown factors, we are more than capable of delivering the programme.

You cannot imagine—I find it fascinating—how many overseas delegations come to London to look at world-class projects such as those we have done at the ODA and are now doing at Crossrail.

Q 220

Photo of Frank Dobson Frank Dobson Labour, Holborn and St Pancras

Ms Shaw—this may be a question for Mr Hayter, too—you mention the importance of the transfer of knowledge. Have you contemplated transferring to HS2 the knowledge that Walt Bell, the huge man from Bechtel who masterminded HS1, decided that it was better to have a double-bore tunnel all the way from Barking to St Pancras, rather than face the  construction risks of running it along the North London line? Yet HS2 has announced that it wants the line to run along the North London line because there are fewer construction risks, despite the fact that it will come out of a five-mile tunnel that it is going to bore.

Nicola Shaw: Let me answer that by going directly to the point, which is that yes, the knowledge transfer is happening. Tim Smart, who used to be the engineering director at High Speed 1 and worked on the construction of HS1 throughout its life, now works at High Speed 2, reporting to the engineering director there, Andrew McNaughton; so we have the brain that was working on High Speed 1 working on High Speed 2. Tim Smart has been part of the design committee around the link between High Speed 1 and High Speed 2.

Q 221

Photo of Frank Dobson Frank Dobson Labour, Holborn and St Pancras

Do you think he has forgotten, then?

Nicola Shaw: No; he would say that he is choosing the right tools for the right job. Part of the consultation is about establishing that everybody agrees that that is the case. When he was at High Speed 1 he provided for the connection, so it is already possible to come off High Speed 1 and go onto the North London line. The connection exists; they are building on that and using it to make the link to High Speed 2.

Steven Hayter: We at the Institution of Civil Engineers were consulted; we made a submission for the phase 1 consultation in which we were generally supportive of the High Speed 2 routing. The one area we focused on as perhaps needing more work was the one Mr Dobson just described. We think that the North London line is very constrained in that area and agree that there are risks associated with bringing a line to the surface along the North London line in that particular location. Therefore we think that High Speed 2 needs to look at the engineering and the possibilities for that part of the route.

Q 222

Photo of Martin Vickers Martin Vickers Conservative, Cleethorpes

My question is similar, but perhaps slightly broader. Ms Shaw, are you satisfied that mistakes made in HS1 have been learned from and that none are being carried forward into the new programme?

Nicola Shaw: I am not sure what mistakes you mean, so I will talk more generally about the positive transfer of lessons. Are we transferring lessons learned—the good things and the perhaps not so good things? Yes. I would be very happy for you to see the line and go on a tour: we have done similar things with a number of MPs already, some of whom are here, and with members of the High Speed 2 planning and design teams. There is a lot of talking to people who were at High Speed 1 during the construction, who either continue to work there or work for other organisations. We are trying to ensure that that embedded knowledge is transferred to the people working on the other side.

Q 223

Photo of Graeme Morrice Graeme Morrice Labour, Livingston

Terry Morgan and Nicola Shaw, do you believe that the benefit-cost ratios of High Speed 1 and Crossrail adequately reflected their economic impact?

Nicola Shaw: For High Speed 1, the answer is probably no. The work was not done in that way; it related much more to passenger numbers than to economic growth. As I said in the answer I gave before, the growth that  resulted from High Speed 1 has been significant. None of the development around King’s Cross or Stratford and the Olympic park would have existed without High Speed 1. We have seen significant growth and continue to do so. Only recently, 20,000 homes have been approved for development in Ebbsfleet.

Terry Morgan: The GDP benefits of Crossrail have underpinned the support for this programme all the way through. We have always taken a view that the calculation, at £42 billion over the lifetime of Crossrail, was a conservative estimate of the regeneration benefits. Mr Dobson has already heard these numbers quoted, but I think it further emphasises the regeneration benefits.

We commissioned some work at the end of last year. Now we are starting to see Crossrail become something real on the ground, we are already starting to see regeneration occur in a broader way than perhaps we had anticipated. So we commissioned some independent work that asked: what was the delta that was being created by Crossrail to the rest of London as a consequence of it being there by 2020? The bottom line of that is that our calculations in support of the £42 billion—and, in my opinion, much more—is that by 2020 there will be £5.5 billion of regeneration value created as a consequence of Crossrail, and the acceleration of 57,000 new homes, because property developers now have more confidence, by actually seeing Crossrail arrive on their doorstep. We are starting to see some real, significant changes occur as a consequence of that. I do believe the model is robust, but I also think it is—you might say it is probably the best way to be—a conservative model in terms of the value of Crossrail and its regeneration value.

Q 224

Photo of Graeme Morrice Graeme Morrice Labour, Livingston

A question to Steven Hayter and Terry Morgan. In ICE’s written evidence, it is stated that the indirect costs of tunnelling may be higher in the UK than in Europe, particularly in the light of the experience of Crossrail. Are there ways for that cost gap to be closed?

Steven Hayter: I believe so. Yes. The indirect costs appear to be down to extended planning processes and, of course, the parliamentary and consultation process that we have in this country. There should be a way to make this more efficient. We believe that there is. We continue to look at how that might be done.

Terry Morgan: I guess I have two answers to that. We are going through a huge learning curve. We have been short of extensive tunnelling work in the UK, so we set up the skills academy. For example, we needed 1,200 people with a certain skill set who could do this work, and in the UK there were 700, average age 55—this is three years ago. So we are trying to catch up. It is important to recognise that Crossrail should be just a journey. Other infrastructure projects critical to maintaining that capability in future will bring cost benefits to it.

I have to make a plea that, when making these comparisons, people do not underestimate the complexity of building a tunnel of the scale that we are building under an old city like London. It is hugely complex. On the other side, people from around the world coming to look at us cannot believe the scale of what we are taking on in London—and we are doing it. We have a showcase: under a city like London we can do things. We have not created gridlock across the city as we have been doing the work; there may be examples where there has been a  degree of intrusion, but we have learned some real techniques about how to build huge infrastructure projects in a great city like London.

Q 225

Photo of Karen Lumley Karen Lumley Conservative, Redditch

It is obviously important that there is a direct link between HS1 and HS2. How closely are you working with HS2, and how do find working with them?

Nicola Shaw: We are working closely with them. As I explained, they have been coming to look at things that have been done on High Speed 1 through a long period up to now, and will continue to do so. The good news is that in the current design we do not have to make any changes. Already the connection exists on to the North London line. The focus for them is, what do we do once the trains have left High Speed 1, on to High Speed 2? That does not mean that we ignore them; it means we work with them as closely as we can. But from their engineering point of view, there is not any change they need to make in High Speed 1.

Terry Morgan: Could I add to that? It may not be obvious, but at Old Oak Common we have had to work with HS2 quite heavily, because when HS2 comes along, there will be a new interchange station at Old Oak Common to interchange with Crossrail and it is really important that we do nothing that frustrates the plans for HS2. We have done a certain amount of work in terms of design changes to ensure that we facilitate the arrival of HS2 at some stage in the future. The relationship is very strong. By working together, we have made some changes to the design at Old Oak Common for the better.

Q 226

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

I was going to check that you are content with the design and location of the Old Oak Common interchange. We heard also from Camden on Tuesday, who argued that rather than rushing to deal with Euston, Old Oak Common could act as an effective temporary interchange to allow time to get Euston right. Have you any views on that?

Terry Morgan: The expectation, as I understand it, is that Crossrail will take 30% of the load that High Speed 2 will bring to London. We have some flexibility about capacity carrying at Old Oak Common, and I do understand the engineering challenge of taking the route out of there to its end position, wherever that is in that regard, around Euston.

There are choices, but to be frank with you, I am not knowledgeable enough to know about the arguments on why Euston is absolutely as critical as the route that comes down from the north into Old Oak Common. I just know that we can accommodate the Crossrail station and the work that we have to do there in terms of Crossrail in the time scales currently envisaged.

Q 227

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

You have experience of vehicles similar to HS2 Ltd. Does it look to you as though HS2 Ltd has the effectiveness, capability and capacity to do the job that it is being asked to do?

Terry Morgan: I think there is more that we can do. As you might expect, we are quite fixated on delivering our programme. Very shortly, some areas of our programme will start to demobilise, and that is the right time to ask whether we are transferring knowledge and people to  where those will be best used. Obviously, Thames tideway is coming along as well, but undoubtedly we will be making available more capacity to do some of the enabling work.

Nicola Shaw: On that point, both in the Department and at High Speed 2, there is willingness to acknowledge that skills need to change over time as you move between different phases, so picking up people that Terry needs to move on works very well. That is a general point about how useful it is to have infrastructure projects rolling after one another, because you can transfer the skills from one to the next.

Q 228

Photo of Nicholas Dakin Nicholas Dakin Opposition Whip (Commons)

Steven, what is your experience of engaging with HS2 Ltd?

Steven Hayter: We have engaged both formally and informally. We had one of the cost-efficiency programme members from HS2 on one of our committees giving direct and important information that was exchanged between ourselves and HS2. We have been satisfied with the level of engagement.

Q 229

Photo of Caroline Spelman Caroline Spelman Conservative, Meriden

You mentioned Thames tideway a couple of times. I want to return to the theme of whether we have potential constraints on the availability of engineers. You just mentioned demobilising on Crossrail. The tunnel underneath the Thames, at an estimated cost of £4 billion, is another huge infrastructure project in London, but the construction of High Speed 2 would take a team out of London. Are you satisfied that we have enough engineers in the pipeline? Do you think that the Government could do more to ensure that engineers are coming through?

Those who study engineering at university do not always go into engineering. That is a difficult degree—it takes four years and has high A-level requirements—so, in relation to the viability of the project, is there anything that we should bear in mind in terms of potential constraint there?

Terry Morgan: You will not be surprised to hear that we have spoken to Thames Water about Thames tideway. The resourcing model is a really good fit, provided Thames tideway gets committed at the time scales we are familiar with. As an engineer, I understand your comments about how many engineers we train and how many of them end up in the profession. Historically, the challenge for engineering was the financial services sector, but that is less attractive nowadays, and our ability to retain graduates in the engineering world has improved.

Should we do more? The answer is undoubtedly yes. Again, the attractiveness of projects of the sort we represent today creates a model for what people should aspire to achieve. That is why these infrastructure projects are so important. They enable people to have a degree of certainly about their career path. People feel it is not going to through a hiatus post-Crossrail, and they do not wonder what they are going to be doing in two or three years’ time. We have to have more continuity.

Steven Hayter: I would like to add to that. It is really important that the STEM—science, technology, engineering and mathematics—initiative in schools is continued and sponsored heavily by the employer organisations within engineering and construction. Certainly, my company is  doing that at the moment. It is really key to maintain children’s and young adults’ interest through the ages of 13, 14 and 15, when they start to become more interested in their careers. Especially women—we want to attract more women into engineering. What seems to be happening is that girls, as they go through the schooling process, are interested in science and engineering, but when they get to choosing what degree to take, they go away from engineering. We really need to change the image of the industry to attract more young people, and women in particular, into the profession.

Q 230

Photo of Frank Dobson Frank Dobson Labour, Holborn and St Pancras

Going back to the transfer of knowledge, I was an advocate of both High Speed 1 and Crossrail. When problems arose with designs, and with local people and local businesses, both organisations were exemplary in dealing with those problems and responding to consultations by actually listening and doing something. Can you possibly advise HS2 that the process of consultation requires a response from them which reflects what has been said to them by the people affected?

Nicola Shaw: Generally, that is a good thing when you are consulting on something. We have done a major piece of work with High Speed 2, particularly from the property and environmental team, which was at the heart of the consultation. It explained the process we went through, the things we learned from that. High Speed 2 has taken that on when thinking about how to design its team and consultation process. It has a long way to go. It is out now on the core pieces of the network we have been talking about, but it has been talking to us about what we did and the lessons we learned in doing it.

Our lessons continue. Some of the trees have not survived where we planted them. We have had to adapt and go back and talk to local people about what trees would work in that environment, and to ensure that they are happy with the evolution over time. It is not that you build it and forget about consulting with your neighbours; that continues over time.

Terry Morgan: I thank you for the comment about being exemplary—I can show you the scars from when we were not. We learned very quickly that you have to resource it effectively. If you do not, you shortcut the need to look after local interest. We have put a huge amount of effort into that. We have been meeting so many groups of people every night of the week, to explain not just the status of the project, but how we will impact on the local neighbourhood.

Sometimes we have had to do things that, from a project point of view, we could not have imagined we would need to do. We have had to be flexible and have the ability to move quickly when things start to develop into an argument, so we can say, “Why are we arguing about this? Let’s find a solution.” Yes, we can transfer a huge amount of knowledge about just how much effort has to be put into maintaining local support for a project that, by its nature, is going to be intrusive.

Nicola Shaw: Intrusive while it is being built. Thereafter, the goal is that it is not. So quite a lot of what we have been demonstrating to people coming to look at High Speed 1 is actually how well the railway line sits in its environment, and how many of the villages around and about do not even notice that there is a railway line next to them. Certainly, if you come through central London  in the tunnel, if you are above you do not hear the trains coming through. So it is not ongoing issues; it is during the construction process, making sure you minimise the harm.

Q 231

Photo of Iain Stewart Iain Stewart Conservative, Milton Keynes South

I should like to return to the link between HS1 and HS2. Do you think sufficient research and modelling has been done to assess the likely demand of through trains from, say, Birmingham to Brussels, in the day, and also the potential for night-time freight movements between HS2 and HS1, to assess whether the North London line link will be sufficient in capacity or whether something else is required?

Nicola Shaw: May I talk bit generally about capacity issues along the whole route? We focus on infrastructure that we have in this country, but there are constraints on the continent, before you get here, on the railway network. There are constraints at Lille and in other places across the network. Working out how we interact with those and how I talk to my colleagues in European railways about development has been part of my role, and that will continue. It is not just us: it is actually all the way through the line. At the moment, the discussion has been, principally, on whether the capacity is there between High Speed 2 and High Speed 1, not whether the capacity is there all the way. We must make sure that, whatever we do, we are keeping in step across the whole of the route.

Secondly, is there enough work being done on the forecasts? I think there is a lot of work being done on the forecasts. Do not forget that these are difficult forecasts to do, because we are creating something new. Just in the way that, for the channel tunnel and High Speed 1, the forecasting was difficult, it remains difficult for High Speed 2. The good news is that we have learned things from the High Speed 1 forecasts and that learning has been taken on to High Speed 2. I think that we are seeing some more forecasts coming later this year, so we will know more about that from the High Speed 2 team.

In relation to freight, we have a few trains running at night on High Speed 1 at the moment and those use various ways to get on and off our network. We are connected to the classic network in a number of places, mostly through Ripple Lane, which is in the Ebbsfleet area. But we are only running a couple of freight trains a night, largely because the demand is lacking for high-speed services and because of the cost associated with that, for freight trains; also because of the complication, again, in the European railways of running freight. I am sure Lord Berkeley will tell you a lot more about that if you are interested to know.

We are working hard with the freight operators on what are realistic forecasts for the continued growth of rail freight. We have been talking to a number of them about what we might have to do to provide for better interchange capabilities around London. So if you have really express freight and you want to bring it into London, what would we do for that and what are the costs of the development? There is a lot of work going on in the freight area.

Q 232

Photo of Iain Stewart Iain Stewart Conservative, Milton Keynes South

To clarify, at the moment your best guess is that the North London line link will be sufficient, but there is still further research work that is ongoing and not concluded.

Nicola Shaw: I think that is correct.

Q 233

Photo of Iain Stewart Iain Stewart Conservative, Milton Keynes South

That may lead to a view that some other link between the two is required.

Nicola Shaw: At one level, whatever we do will not be right, because things will change over time. What I have learnt, in the way that we operate UK railways, is that we want everything: we want high-speed railways to do low-speed things as well. So what we do with High Speed 1 is operate domestic trains that run all the way along High Speed 1 and then go off on to the classic network and operate on different things. We are going to do exactly the same on High Speed 2.

That is completely different from the mode of operation of high-speed railways in the rest of the world, where they only run on the high-speed network. That is how people get punctuality and how they get high-frequency services. We ask our high-speed railways to do a lot more, so we are always at the cutting edge of these things, which is great, because it enables the people of the UK to use the system in the way that they want. It means that they do things differently in other places. Whatever we do, we will not get exactly the right answer, although we are looking hard at the question and trying to identify a pragmatic and good way forward.

Q 234

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

I have a question for each of the witnesses. Mr Hayter, what assessment have you made of the various alternative packages to achieve improvements in capacity that have been put forward by critics of HS2?

Steven Hayter: We held a consultation process ourselves—we did an initial consultation internally within the institution on phase 1 of High Speed 2. We were interested in looking at the options where the respondents had suggested perhaps following existing railway lines or existing motorways. The problem there of course is that being a high-speed railway, High Speed 2, you are constrained by the alignment. You cannot go around sharp curves and keep the speed and capacity to the level that you need. In the end, we concluded that the route chosen by High Speed 2 is the right one, purely because of the constraints that following existing corridors would lead to.

Q 235

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

I was really asking about the alternative ways of providing extra capacity based on upgrades to the existing rail network. Is that something you have looked at?

Steven Hayter: Yes, we have looked at that, too. We always come back to the lessons learned from the west coast main line upgrade and the disruption caused to local communities for a very long time. There were issues that meant the programme was extended. It cost a lot more than was expected. Looking at the corridor now, it is difficult to see that much beyond perhaps lengthening the trains by one or two more cars, lengthening the platforms slightly and improving the signalling. You are really talking about incremental improvements over the next few years, and we need a step change in capacity increase. Just tinkering with the existing railways will not achieve that.

Q 236

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

Ms Shaw, I wonder whether you can address the question about why passenger numbers on HS1 are fewer than was originally projected. What role have higher and premium fares played in deflating passenger numbers?

Nicola Shaw: The original forecasts that were made in the ’90s were very much related to the financing of the channel tunnel rail link. They came before low-cost airlines and were pretty much focused on the international services. The learning from that has been taken into the forecasting that has been done for High Speed 2, and was reset in 2007-08 when High Speed 1 opened for the full length to St Pancras. In 2009, the domestic services started and since then they have been growing 10% a year, which is ahead of where they were expected to grow, so premium fares are not putting people off. Indeed, we are seeing growth continuing.

One of the benefits for us of the Olympics was a much greater awareness of Ebbsfleet. Every day during the Olympics and the Paralympics, we saw more people using Ebbsfleet as a park-and-ride system to move into the Olympic park, and that is continuing now. Awareness of Ebbsfleet as an option in people’s travel patterns and as a park-and-ride site from the M25 into London has been greatly enhanced.

Q 237

Photo of Lilian Greenwood Lilian Greenwood Shadow Minister (Transport)

Mr Morgan, there has been a lot of concern around the increase in projected costs for HS2. Perhaps some people assume that it is impossible to deliver infrastructure projects in anything like their initial cost envelope. Can you say anything about how successful Crossrail has been at staying within its initial £15.9 billion budget? From your experience, what lessons are there for HS2?

Terry Morgan: It would be helpful to remind you that three years ago, as we went through the hybrid legislation and started to get ready for deployment, there were a number of delays in the process. That delayed the physical work. We found ourselves in a situation of negative float, with a programme that was due to deliver in 2017. The cost to complete was in excess of £17 billion. That is an example of the importance of ensuring that key decisions are made at the right time, and that what might seem to be quite trivial decisions tend to have a much deeper consequence down the food chain than we realise.

We had the opportunity to readdress that situation. Basically, a lot of the funding that we forecasted we would need was around mitigating interface risk between conflicting interests on the programme. We had one opportunity to look forward and say what the best value for money solution was, and we revised the timing from 2017 to 2018. As a consequence, not only did we close down the £1 billion overspend that we were forecasting, but we offered up a further £1 billion of savings; so we moved our internal cost to complete estimates by £2 billion and created a cost envelope that was £1 billion less than we had previously been allowed.

Therefore the balance between risk and how much funding is needed is very material. Three years on, we are on time and forecast that we will deliver this programme within the funding envelope. Inside that envelope there are still funds allocated to unknown contingencies that we will need to ensure that we can cope with, rather than have a project that has to ask for more funding. For me that situation is a complete and utter disaster and prevents the right decisions being made. In the past, many such projects suffered because cuts were made to the requirements in terms of spending and the project manager did not quite know how to deliver the project for those revised costs. The experience was—surprise,  surprise—that the costs originally estimated were realised at the end of the day. You have to be brave enough to recognise that these budgets are, by their very nature, risky; but they are manageable, provided that you ensure you have sufficient funds to deal with risks that arise that could not have been imagined.

Q 238

Photo of Caroline Spelman Caroline Spelman Conservative, Meriden

This session is all about lessons learnt from previous projects. Can you share your thoughts about compensation? Other witnesses have indicated that there are still some protracted disputes about compensation for land taken for the construction of High Speed 1. With hindsight, might you have done things differently? Do you have a view about property bonds, and could we have your received wisdom on compensation?

Nicola Shaw: I am surprised that you say the disputes about High Speed 1 are ongoing. I have been with the business for two and a half years; in that time two, perhaps three, different people have got in touch, but there proved to be no substantial changes in position from things that have been said in the past, which have gone through the parliamentary process and cleared. I do not see the disputes you mention; in running High Speed 1 people are not coming to me all the time, saying, “I’ve got a problem with how the property was dealt with in the past”. If you would like me to check my records or talk about any other detail later I am happy to do so, because that surprises me.

Terry Morgan: At the end of the day, we are very mindful that we are dealing with public money. Obviously the process we follow must try to get the right balance between individuals’ aspirations, which are sometimes very high, and what we think is right and proper in terms of the best use of public money. I think it is very important to focus on being as responsive as you can. I have to say that sometimes the process can frustrate. Only 2% of the claims we have had were referred to the tribunal, which is the process that people can follow. However, there is no doubt that, by its very nature, trying to manage what is right for the individual and what best protects the public interest can sometimes frustrate people, because they expect an instant answer.

I would say that generally it is again part of the learning process. We now have a much better process to deal with people’s expectations about what is possible. We try to make sure that people understand exactly what they are going through with the compensation process. Part of that is to maximise as much as we can very early on, and to leave those areas that are subject to a degree of assessment to a process that actually determines that we have done this in a fair and equitable way. So I think it is under control, to be frank, but there will be examples.

Q 239

Photo of Caroline Spelman Caroline Spelman Conservative, Meriden

Do you have your property bonds?

Terry Morgan: I don’t, actually.

Q 240

Photo of Graeme Morrice Graeme Morrice Labour, Livingston

Steven, in your written submission you said that the economic case for HS2 is strongest if it is part of a network connecting northern cities and Scotland. Why do you believe phase 2 is so important to the project’s overall success?

Steven Hayter: The analysis is quite clear that the railway should be developed as a network. The greater the network, where there is demand, then the better the cost-benefit of the investment. Because of that, we advocate that phase 1 and phase 2 should be taken forward together, not at the same time but with phase 2 directly following phase 1. This would be a more beneficial and efficient use of resource.

We talked earlier about the demobilisation and mobilisation of resources and the potential loss of skills. Well, if there is a gap of two or three years between phase 1 and phase 2, this is inevitably what happens. People get on with their lives, and they move abroad or they get new jobs. Those skills can be lost to the profession and to the project. That is the position we take. You mentioned Scotland. We see the high-speed railway as a network. We think that there is a strong case for looking forward to the future and extending it to Scotland, and making provision for extending further north.

Photo of Annette Brooke Annette Brooke Chair of the Liberal Democrat Parliamentary Party

I am just going to interrupt the flow for a moment. It looks as if a vote is anticipated. If it comes at about 3.25 it might be more appropriate to end this question session then, because we will need to suspend for 15 minutes. Obviously, we do not know quite when the vote will be called, but I suggest that we handle the questions as concisely as possible.

Photo of Nicky Morgan Nicky Morgan Assistant Whip (HM Treasury)

Mrs Brooke, may I propose that we might then extend the next witness session to reflect the additional 15 minutes that the Division will take? The Rail Freight Group would run until 4.15, and then the session after that would run until 5 o’clock.


That the Order of the Committee of 9 July relating to programming be amended as follows:

Line 48, leave out ‘4.00pm’ and insert ‘4.15pm’

Line 50, leave out ‘4.45pm’ and insert ‘5pm’—(Nicky Morgan.)