How HS2 could be descoped to hide cost overruns
January 10, 2015 1 Comment
There are two main ways of dealing with cost overruns on big government projects without scrapping the scheme in question. The first is to ask the Treasury for more money – and this often works given the political embarrassment of half finished infrastructure.
The second method is ‘descoping’, which involves delivering less for the same budget. Examples include reducing the length of a route, making greater use of existing infrastructure, or lowering the quality of interconnections at stations. In recent years several schemes have been descoped to address rising budget estimates, including Crossrail, the Edinburgh tram and the planned high-speed line in California.
There is some tentative evidence that a similar approach has now been adopted for HS2, perhaps reflecting fears that further increases in the official budget would be politically disastrous at this stage of the project. (This may also explain why the budget is still quoted in 2011 prices in 2015). The HS1-HS2 link through Camden would appear to have been abandoned for the time being and there is now a major question mark over the £1 billion Warrington spur.
If the next government deployed economic logic it would scrap High Speed 2 entirely. However, the strength of the special interests backing HS2 raises the possibility of further descoping as a face-saving compromise.
Perhaps the least damaging ‘descoping’ option would be cancel current plans and speed up the existing West Coast main line instead, rebranding it as a high-speed route. One train operator has suggested London-Birmingham travel times could be cut to under one hour given improved signalling (and this would be to New Street, giving comparable overall travel times to HS2). At the same time various strategies could be undertaken to increase the capacity of the existing infrastructure (perhaps including the Chiltern Line to Birmingham).
Far less desirable, though still a big cost-saver and hugely preferable to current plans, would be to abandon Phase 2 entirely but keep elements of Phase 1. Now that Phase 1 is planned to reach Crewe, it could be argued by politicians that the line more or less reached the North of England. Northern cities could be bought off with (much cheaper) better links across the Pennines, together with improvements on the ECML.
Phase 1 could then be descoped by abandoning the Euston terminus and ending the line instead at Old Oak Common. This could reduce construction costs by roughly 25 per cent and would also undermine efforts by Transport for London and the Greater London Authority to ‘bully’ the Treasury into funding Crossrail 2 – now costed at an astounding £27 billion. Similarly the Birmingham spur could be scrapped with trains using existing tracks instead. Once again this could eliminate substantial ‘off balance sheet’ costs. Devious politicians might recycle some of these savings into longer tunnels in the Chilterns and better compensation to ‘buy-off’ opposition.
With the budget deficit stubbornly high and other spending priorities growing in political salience, cuts to the scope of HS2, and hopefully full cancellation, now seem increasingly likely. Observers should also watch out for hidden budget increases disguised by pushing elements of the project off-balance-sheet or delaying them until after the core scheme is completed.