Public Accounts Committee
Oral evidence: Delivering HS2 and Euston, HC 611
Monday 14 September 2026
Ordered by the House of Commons to be published on 14 September 2026.
Public Accounts Committee members present: Rupert Lowe; Sarah Olney; Tristan Osborne; Matt Turmaine.
Transport Committee members present: Ruth Cadbury.
In the absence of the Chair, Sarah Olney took the Chair.
Gareth Davies, Comptroller and Auditor General, National Audit Office, Jonny Mood, Director, National Audit Office, and George Osborne, Alternate Treasury Officer of Accounts, HM Treasury, were in attendance.
Questions 1-54
Witnesses
I: Jo Shanmugalingam CB, Permanent Secretary, Department for Transport; Dean Creamer CBE, Director General Major Rail Projects Group, Department for Transport; and Mark Wild OBE, Chief Executive Officer, HS2 Ltd.
Report by the Comptroller and Auditor General
High Speed Two reset (HC 52)
Witnesses: Jo Shanmugalingam, Dean Creamer and Mark Wild.
Chair: Welcome to the Public Accounts Committee on Monday 14 September 2026. I am Sarah Olney MP and, in the absence of Sir Geoffrey and Clive Betts, I am chairing today’s session on delivering HS2 and Euston—a perennial subject for the Committee.
The HS2 programme aims to deliver high-speed railway between London and Birmingham, but the project has been plagued by a number of issues since its inception, including significant cost increases and delays. In May this year, the Secretary of State announced that the expected cost of completing HS2 now stands between £87.7 billion and £102.7 billion, with £46.8 billion having already been spent on the project. Delivery of the programme has also been significantly delayed, with full services now expected to be introduced between May 2040 and December 2043—between three and 13 years later than previous estimates.
As we expressed in our last report on the subject, HS2 has become “a casebook example of how not to run a major project.” Today we will be looking to challenge the Department for Transport and HS2 Ltd on their latest cost and schedule estimates, and the trade-offs being made to reach them. Other lines of questioning will include the DFT and HS2’s approach to revising their contracts, improvements in governance and organisational capability, the development of the Euston project and the issue of land and property disposal.
Will our witnesses please introduce themselves and their roles?
Dean Creamer: I am Dean Creamer, the director general for major rail projects at the DFT.
Jo Shanmugalingam: I am Jo Shanmugalingam, permanent secretary at the Department for Transport.
Mark Wild: I am Mark Wild, the CEO of HS2.
Q1 Chair: Thank you all for making time this afternoon. I also extend a warm welcome to our guest member, Ruth Cadbury MP, who is Chair of the Transport Committee. Thank you very much for coming along, Ruth.
I will start with some questions not about HS2 but about the defence investment plan. Jo, what steps will you need to take to deliver the £700 million-worth of savings needed to deliver the defence investment plan?
Jo Shanmugalingam: As the Government set out at the time the funding for the defence investment plan was announced, the DFT has made two contributions. Like all Departments, we have a 1% reduction in our capital budget over the rest of the spending review period, which we will be managing through our normal advice to the Secretary of State and our in-year business planning.
We also made a separate commitment to reduce funding for roads by £700 million. The consultation on proposed changes and variations to the road investment strategy—the statutory mechanism by which we fund the strategic road network—closes today, and we will also receive advice from National Highways. Ministers will then consider that, and if there is any variation to the road investment strategy, we will announce that later in the autumn.
Q2 Chair: How are you considering the economic impacts? There will obviously be downsides to all this cancelled investment. What assessment have you made when weighing up which road schemes to cancel or change?
Jo Shanmugalingam: There is probably not a lot I can add to the information that was put out in the consultation on varying the road investment strategy. I should be clear that Ministers were very clear, in making the decisions, that they were protecting funding for road maintenance. The commitment to invest in the ongoing repair and renewal of the road network was one of the hallmarks of our spending review, and that has been protected in the decisions. The difficult choices that Ministers had to face were on whether we could still afford the enhancements that had been planned at the spending review. The analysis that we undertook was set out in the consultation.
Q3 Chair: Thank you very much. We will now move to the main topic of the session: HS2. What assurance can you give us that your latest £100 billion estimate for completing the programme will not increase again in future? I feel like this is a perennial question—it has been posed by this Committee on a number of occasions in the past, yet here we are again.
Jo Shanmugalingam: If I start, Mark might then update you on the work he has led since the end of 2024, when he and our predecessors gave evidence to the Committee.
The NAO is not an organisation known for hyperbole, but having re-read the NAO Report, I think it is fair to say that the statement the “HS2 programme has not gone as planned” is one of the most understated sentences it has produced. I do not say that lightly—we sit here as representatives of the organisations that bear responsibility for that.
But we were pleased and heartened by the NAO’s assessment of the work that has happened to date to identify the root-cause issues that Mark spoke about when he was last here and, most importantly, to put the programme on a stable footing, in terms of cost and schedule, the capability of the organisation, and the governance arrangements that we need to operate in a different way.
I have also looked back at the Committee’s reports, which were very prescient of the challenges that have come to pass in the programme. Today, a lot of those issues, particularly around working relationships and the grip on the programme, are in the past. That is not to say that there aren’t very significant challenges with a programme of this nature, and I am sure we will come back to it, but we are very mindful of the NAO’s advice that we must not rush the final step of exiting reset and making sure that we have firm foundations to move to the future.
Mark, could you explain the work of the last 18 months?
Mark Wild: Yes. Would it be helpful to spend a few minutes on the journey from the last time I was here in December 2024 to now? That would help to answer your question.
Chair: Yes, please.
Mark Wild: In December 2024, the programme was unco-ordinated and there was no clear way to complete the project. We did not really understand where we were physically with the work completed and, crucially to your point, no figures or numbers could be relied on. There was clearly a misalignment between the Department, the company and its supply chains. That was the situation in December 2024. It was clear that a fundamental reset was required.
It is also clear that we have, at the minute, 30,000 brilliant colleagues working every single day, 24/7. I would like to acknowledge the hard work of the construction industry, which has not missed a beat in my two years or so in this job.
In resetting the programme, we have taken a five-step approach. At its core—to answer your question about why this time will be different—it is a similar process that we used in Crossrail, but this is a much bigger, more complicated problem, happening much earlier in the programme. We first worked out what had gone wrong. We went through the programme with a fine-tooth comb and found three systemic problems that had to be addressed—I think this is fundamentally answering your question.
First, we underestimated the effort of the programme by simply starting too early. We started without the right design, which meant that we greatly underestimated the risk ahead of us. It was a huge underestimation of effort. Secondly, the contracts we entered into, particularly in respect of the main works civils, transferred all the risk back to the employer, HS2 Ltd. Thirdly, HS2 Ltd did not manage the situation well enough. Despite the hard work of a very hard-working, dedicated group of people, those were the underlying causes we found.
In stages 2 and 3, we put the programme back in the right sequence, module by module. We found all the scope that was missing and resolved all the interfaces. All the activities are now in the right sequence. We produced what we have called the reference case, which the Secretary of State, in her statement, called the challenging ambition. This is important. HS2 Ltd previously made a bad mistake of trying to have an over-optimistic route forward. What we call the reference case—the challenging ambition—is forward leaning, but it has two feet in reality. It is the version of the future that will get this railway open at the right quality and at the lowest cost, but it is not a fantasy. That is the first thing I would say about why this is different.
We also identified ranges of uncertainty. You have said what they are, including delivering the first stage of this railway, between Old Oak Common and Birmingham Curzon Street, by 2036-39. You mentioned the large range of financial uncertainty. That is another indicator of why this approach is very different: we have a large range of uncertainty ahead of us. The NAO has commented that we are taking a considered approach, and I agree with that. The Secretary of State asked me to try to get, within those large ranges, to the earliest good-quality railway that we can. To do that, we have adjusted some of the specification of the railway. We have reduced its speed, and taken some of the complex technology out, all pursuant not to changing the bookends of the ranges, but to getting the earliest good-quality railway that we can.
At the moment, we are concluding the reset with two very important steps. First, we are forming something called baseline 8.0, which will supersede the current, discredited baseline of 7.1. Baseline 8.0 is the chassis of the framework that we will report against. We aim to have that in place by Christmas. If the quality is not right—as you would imagine, we have extensive external assurance—we will keep going until it is. I am very confident that we will have baseline 8.0 by April next year. This is crucial, because it forms the framework that will maintain the alignment between the Department, the company and its supply chain. The third area you should be confident about is that when the baseline is struck, you will be able to see a clean line of sight from this Committee into the Department and right down to the person in orange on the frontline.
The final bit of the reset is what we call 8.1, which binds up all the residual matters, including backing off the supply chain as much as we can. I am sure that we will come to the topic—
Q4 Chair: Can you clarify what you mean by “backing off the supply chain”?
Mark Wild: Yes. There is still a huge amount of uncertainty in the HS2 programme to the very end of this job. I am sure we will talk about Euston—
Chair: We will talk about Euston.
Mark Wild: The reality is that there are contracts to be placed for Euston that are many years in the future. That needs to be addressed by a measurement of risk and uncertainty. For the contracts we have, it is essential that we get the agreement of the supply chain, as best we can, to the plans that we jointly share with the Department. That comprises, fundamentally, seven existing contracts: four main works civils, two stations and the rolling stock. It is very important that we bind those seven contracts, as much as we can, into the commitment we make, so that there is a vertical line of alignment.
It may be—I am sure this will be a topic of questions—that we cannot get the exact contractual conditions that we want, but the crucial thing for me is that everybody agrees that that is the schedule of work to come. That is really the essence of 8.1. As the NAO said in their very good Report, we really must keep working at that and resolve all matters of disagreement. That might not be that we conclude commercial arrangements—I hope it is—but the crucial thing is that we all agree that the schedule is viable, and the sequence of the work. That is the work of the next six months or so.
Q5 Chair: How long is it going to take you to agree the elements that are still uncertain and still need to be agreed before spring next year? What is the degree of uncertainty? Does the degree of uncertainty in any way threaten that timescale of spring next year?
Mark Wild: Because there are counterparties to these deals, and it goes through extensive assurance, it would not be right for me to guarantee it. I believe we are on the right trajectory. If you take all seven contracts, all of them are legal contracts that we have today. Two of them are agreed: EKFB and Align have reset their contracts and there are deeds of variation completed. On the main works civils, we are working very closely with BBV and SCS, and I believe that in the next two or three months we will get to a position where we have done the best we can commercially. I very much hope we can get those companies to agree to an alignment of the commercial and the time and the schedule. I hope that will happen before Christmas.
On the other three contracts—the two stations and the rolling stock—I am very confident that we will get to March next year, because at the end of the day those contracts are simply to agree the revised parameters of our programme. The greatest uncertainty is in the two main works civils, SCS and BBV. I meet the CEOs almost every week in that regard. We have great collaboration, but at the end of the day we need to be given just the next two or three months to get alignment.
Jo Shanmugalingam: I should add that that work is fully joined up with the Department and the work that Dean does, as our new SRO for the programme, and with the support of the Government commercial function overall.
Mark Wild: And NISTA and the Treasury are fully involved in that.
Dean Creamer: We do need to be prepared in case we do not have a deal. Mark is confident, which is good, and the relationships seem to be going well, but we also need to be prepared in case we need to move forward with the programme without all those deals in place, and to be able to manage that effectively.
Q6 Chair: Does that imply that there will remain uncertainty around the final cost?
Dean Creamer: There will be uncertainty in the programme through to the end. There are more than 10 years left. The NAO has set us a really interesting challenge, which is, “Do not move until every t is crossed and every i is dotted.” The reality is that there will be uncertainty all the way through the programme, and we will need to manage that. From my perspective, it is about making sure that, although there will be a plan A, we have a plan B for all of those outcomes, and HS2 has to have the capacity to manage it, whichever outcome they get to.
Mark Wild: The bookends of the ranges include no-deal scenarios. I am confident that the bookends we have provided cater for anything but extraordinary circumstances that we couldn’t predict, such as pandemics or disturbances to the economies.
Q7 Chair: That gives you a very wide envelope to operate within.
Mark Wild: That is another reason why you should be confident that this is a different approach. There is a wide range of uncertainty, but I am tasked by the permanent secretary and the Minister with getting to the lower end of those ranges. The reason why we want deals is to drive everybody in HS2 to the lower end of the ranges. The wideness of the bookends recognises the great uncertainty and the mistakes, I think, in the past of being overtly optimistic about risk. I think that was one of the root causes of problems.
Jo Shanmugalingam: If it is helpful, Dean can explain how we expect the ranges to translate into the financial framework from the next financial year onwards.
Dean Creamer: The first thing you ask, when coming to this programme as a new SRO and looking at those ranges, is, “What’s the small print?” The Committee should be clear that the small print around these ranges is that they cater for all the things that ought to be in Mark’s control, but they do not cater, as Mark says, for events that we call black swan events, such as hyperinflation or wars. The ranges should be robust to all but those extreme things, but they do not cover everything that could possibly happen, and we should be really clear about that.
Q8 Ruth Cadbury: One element of cost that has been agreed is reducing train speeds to 300 kph. How confident are you that that will genuinely reduce risk and cost, and is there any downside to doing it?
Jo Shanmugalingam: If I start, then maybe Mark can explain the advice. You will appreciate that, through this reset process, the Secretary of State has been keen to understand everything that can be done to assure the safe delivery of the programme at the lowest reasonable cost and how the benefits can be realised as soon as possible, which means bringing the service into operation. She therefore commissioned Mark to look at speed, which had been identified by the company and the Department’s team as an element that could be looked at, and how we could effectively take technical risk out of the programme by taking out and not pursuing marginal performance gains, and making sure we are relying on a trusted system. We have assessed the high-level impact on benefits: for example, for London to Birmingham, it will be a three-minute reduction, which is still a 30-minute saving on the conventional speed. Mark, do you want to explain how that risk reduction comes about?
Mark Wild: Again, learning from projects like Crossrail, we do not want to be on the bleeding edge of technology. Equally, we do not want to create a situation where there is a cul-de-sac and people cannot evolve the railway. This railway specification will deliver the 10 trains an hour specification for the very end of this phase, and it future-proofs 16 trains an hour. It does not create a technological cul-de-sac.
The reduction is in two areas. First, the reduction in speed—to 300 or 320 kph—is exactly what the French, Japanese, Spanish and Italians will build. By going to 300 or 320 kph, we can use the same technology and testing scripts. Convergence with High Speed 1 in the UK greatly derisks the testing effort at the end of the job, and as the permanent secretary said, does not really damage the benefits in that regard. The reduction in speed is very straightforward—I would not say it is a no-brainer, but it is an obvious thing to do. Only one railway in the world—in China—operates quite frequently at 350 kph, but not all the time, and the Chinese struggle to get from 350 to 360 kph. There are many, many pilot programmes in Europe to get to 360 kph, but none of them has achieved it. We do not want to be in the club of striving for that.
The other thing we have done is to take the automatic train operation out. Automatic train operation is what you would experience on the Elizabeth or Victoria line: the driver is basically attending the train and opening and closing the doors, but the running is done by automatic computers on the train. There is automatic train operation over what is called the European train control system. Thameslink runs like that at the moment, but not at the quality standard and the specification we would need for high-speed rail. Automatic train running for high speed at the latest standards of European train control does not exist. It does in local areas, but not enough for this railway, so we took that out. The railway becomes a manually driven railway, exactly the same as High Speed 1 or all the railways in France. That takes a huge amount of testing effort out.
The 360 kph and automatic train operation were very, very risky and difficult things that would need to be tested in the future. Automatic train operation could be put back in, and somebody in the far future could go back to 360 kph, but for now and the foreseeable future—the coming decades—these changes really derisk this project and enable us to strive towards the front end of the ranges.
Q9 Ruth Cadbury: For future passengers, is there a loss of benefit, and to what extent does it create opportunities?
Mark Wild: This railway is designed to run 10 trains an hour from Euston to Birmingham and across Handsacre junction. That will be exactly what is needed to meet that specification reliably and safely. Some future Government policy may enable us to get to 16 trains an hour. If in the future the eastern legs were reinstated and railways were built further north by future Governments, that railway specification would allow modification at that time. It was not worthwhile doing that now and spending a tremendous amount of effort—maybe one or two years and £2 billion to £3 billion of testing work—to future-proof it, because in 20, 30 or 40 years, the technology may have changed completely anyway.
That technological response aligns us with what the best of the French, Spanish and Italian railways would do. It converges with Network Rail’s digital signalling programme and greatly derisks the task ahead of us, which is to get this railway open in 2037. There would be no chance of opening this railway then if we had had to do those technological changes.
Jo Shanmugalingam: In effect, the decision means that our successors in a decade’s time are not coming to explain to this Committee and to passengers that, despite the spend of a decade, it was not possible to commission a railway at 360 kph despite the investment that we made. That was the nub of the decision that we were making.
Dean Creamer: Just to be clear, the provision that Mark had was to attempt to get it working for two years, but then to revert anyway. One of the lessons that we have tried to employ is not to wait until you are sat with the issue. You need to front-load and allow Ministers to take a decision to deal with the complexity before the issue arises.
The benefits largely cancel each other out. You lose some benefits in the time saving but bringing it forward by a year makes up for that. Potentially, with the loss of ATO and the signalling downgrade, you may have some additional people, but that is offset by the reduction in power that you potentially need. We think the BCR does not change particularly. This is about derisking the programme and understanding how much risk it is carrying and then allowing Ministers to take a decision to deal with it.
Q10 Ruth Cadbury: It does make you wonder, because the technology is not there for operating trains at 360 kph now, so it certainly was not there 15 years ago.
Jo Shanmugalingam: I think it comes to the work that Mark has done and the experience he has brought from Crossrail, to understand what it was going to take to test and commission the railway and therefore show Ministers the size and scale of that challenge.
Ruth Cadbury: As the Chair said, we are looking forward, not backward.
Q11 Rupert Lowe: I am relatively new on this Committee, but I have done nearly a year and have brought myself up to speed with HS2, so forgive me if I ask questions that appear to be stupid.
I would like to thank both of you. Whatever questions I ask are not being critical of you, because I blame both politicians and civil servants who made what I consider to be appalling decisions in the past. They have displayed to me that their decision making is flawed and their ability to carry out contracts—you have confirmed it just now, Mark—is not there.
You have done a great job tidying up Crossrail, and HS2 is very lucky to have you. However, we have now spent between £87.7 billion and £102 billion. We will end up with a line between Birmingham and London; it will be 2043 before it is complete, probably. Ultimately, we were sold this project on the basis that it would get you to Birmingham quicker—quite what the economic benefit of that is, I am not sure—and it would open up the north; it would equalise the wealth in the south and opportunity in the north. You could argue it just focuses opportunity in the south, because it makes it quicker to get to the south from the north.
My question is for Jo initially. Technology is arguably reducing the need for travel: the advance in communications and AI will change the way we all live our lives, the number of people employed and the necessity for people to travel. What do you think the benefits of this line will be, and how will you maximise those benefits for the beleaguered taxpayer, who is very much out of pocket?
Jo Shanmugalingam: Of course, and Dean might continue on our benefits strategy if that is all right. The case here, and the reason that Ministers have made a clear decision to continue with the programme, is that despite the name of the company and the programme, this is about capacity and connectivity on the west coast main line. It comes back to the hearing the Committee had earlier in the year on Northern Powerhouse Rail, when there was quite strong support from a number of Committee members for the commitment to build north from Birmingham to Manchester.
We see today that the west coast main line is one of our most constrained rail corridors. HS2 will transfer those long-distance services to Birmingham and north beyond Birmingham to a dedicated line, freeing up capacity for those commuter services and improving reliability. The standard of performance in the rail industry is what we call T-3: trains arriving within three minutes of their scheduled time. For Avanti in 2025-26, that was 57% of services against an industry average of 85%. In July 2025, the Office of Rail and Road rejected three applications for new, open-access services on the west coast main line because of the lack of capacity to build new paths.
When constructed, HS2 will more than double the peak long-distance capacity from London to Birmingham from fewer than 800 seats an hour to more than 4,000 seats an hour, and there will be a more than 45% increase on all those peak services. The benefit will be as much for all the people and our freight customers who travel today on the existing west coast main line and suffer the problems of such a congested rail corridor. Dean, do you want to talk about the benefits strategy overall?
Dean Creamer: The headlines are that trains will be more reliable, there will be a 30-minute difference between London and Birmingham, and it will be 20 minutes quicker for all destinations to and from London. We do not talk about capacity very much—Jo mentioned it a bit just now—but there will be 45% additional capacity in the south, which gets freed up by HS2. We have not spoken very much about it, and part of what we will do is look at what you do with that capacity—do you use it for freight or commuter services? This is something GBR will need to do as it builds its strategy, but there are huge benefits around how you use that extra capacity.
It is not just about the journey times and capacity; it is also about the regeneration benefits. If you look at what is happening all along the line, a huge number of jobs and homes are being built at each station. Broadly speaking, that is being led by local development corporations. Across Old Oak Common, Interchange and Birmingham Curzon, we think there will be about 49,000 additional jobs and about 60,000 new homes. There will be jobs and homes as well as the direct train service benefits.
Q12 Rupert Lowe: What modelling have you done of the demand for this? I mentioned AI and better communications, and most of the civil service work from home now and do not travel. How do you know that there will be a demand for this? If there is no demand for it, there is no benefit.
Dean Creamer: Since covid, demand has largely recovered. There is slightly more leisure demand than there is business demand, but demand has broadly recovered from covid. The expectation is that there will be between 1% and 2% growth per year over the next 25 years. That is lower than what we experienced before covid, so demand is forecast to be lower and is one of the reasons that our benefits are quite low. In the BCR, we talk about the benefits being about £36 billion; those benefits will go up if demand is high, but we have taken a cautious approach.
The expectation is about 1.3% growth, but the capacity allows us to move significantly beyond that. If we get to 4% again, there will be enough capacity between London and Birmingham to manage that. We have the ability to flex. Demand is fundamentally uncertain, and we recognise that. As part of the update to the business case next year, we will demonstrate the sensitivity analysis we have done of the range of demand we may see.
Rupert Lowe: I have to say I struggle to see the benefits of a slower line to Birmingham. You mentioned freight, but most of Britian is set up for road freight, not rail freight, as you know. In order to make rail freight work, you will have to spend money. Thank you for that answer, but I cannot personally see that it is logical.
Chair: Ruth, did you want to come in?
Q13 Ruth Cadbury: I just want to clarify the capacity. We know that there is very little capacity for more passenger trains on West Coast at the moment, and I know—Mr Lowe may not—that the freight companies are desperate for more train paths. How much freight capacity will HS2 free up, both if it goes just as far as Birmingham and Handsacre, and if a line can go on to Manchester in future?
Dean Creamer: There is not a number for that at the moment. Freight will not go on to HS2—
Ruth Cadbury: No, obviously.
Dean Creamer: That question and that balance will be for Great British Railways. One of the things it will want to consult on is how we make use of these additional benefits.
Jo Shanmugalingam: It also goes to the importance of the duties on Great British Railways, which are part of the legislation that is in Lords Committee at the moment, and the very clear responsibility to support the rail freight market because of the demand that we see, as you say, for increased rail freight capacity.
Q14 Rupert Lowe: Mark, I think this one is for you; you basically answered this question in your opening summary of the situation. Basically, being a contractor myself, am I right in thinking that the reason we signed up to the NEC3 cost plus contracts was largely that the Government did not know what they wanted to do or how they wanted to do it? These contracts are basically an opportunity for contractors to benefit from the fact that the client does not know what he is doing. Is that a fair summary? As a result of that, they are going to be quite difficult to renegotiate. Is that fair?
Mark Wild: I would say that is fair. A root cause of the problem, which needs to be learned for future projects, is commencing work with great design immaturity and asking the supply chain to fix its price. Clearly, the contractors we have used are some of the biggest in the world—we have the largest European contractors and the best of British.
The fact is that, at the notice to proceed, there simply was not enough certainty for contractors to take a risk. They were never going to risk their companies, so you can imagine the situation, which meant that the risk flowed back to the client. The client should have then made an appropriate risk assessment, which should have been, in hindsight, much bigger than was allowed for. I was not there at the time; all I know is that the process we now use for risk and uncertainty will capture that. At the time, the only way to get the job going and to mobilise the supply chain was for HS2 Ltd to take the risk back in.
It is a bit graduated, Rupert, and the main works civils are certainly the most difficult. Actually, although the stations contracts have had a great increase in cost, that balance of risk has not been distorted as much. They have suffered from optimism bias in the estimating, but the contracts themselves do not require radical change. The target cost needs to be readjusted.
I am very pleased about what we have done with the four main works civils. For the two that we have signed up—EKFB and Align—we have done three things, which I think will be interesting to the Committee. First, we have settled the past. We do not have historical claims and a lot people discussing or spending wattless energy—you might want to say—on the past. We have settled the past on public money principles.
For the future, we have fixed the fee with those two contracts. What do we mean by that? Instead of having the inherent problem of contractors earning a percentage on every pound that goes out of the door, we have agreed with EKFB and Align that there will be more tension in the system, so they have some skin in the game. It is not a panacea, and it would certainly not be optimum if you were starting this from scratch, but it is very good at creating a downward pressure for the first time, so we are jointly incentivised to minimise expenditure.
Thirdly, we have agreed some good incentives that incentivise early delivery. At the end of the day, we want the civil engineering completed in 2029, and I want to start laying the track in March 2030, which means the civil engineers need to complete their work to the right quality and allow the systems to mobilise. We aim to have similar deals with SCS and BBV.
From my point of view, we have done the best we can to reintroduce some commercial tension for the benefit of everybody. In my 18 months or so here, I have been very pleased with the quality of work in the supply chain. The contractors’ productivity has been very good. We have had good safety. It could always be better, of course. Generally, I have had no instance where I haven’t been really pleased with the quality of the work.
Q15 Rupert Lowe: Did we sign these contracts because, politically, they wanted to get the contract going? Was that what it was? Is it now a case of experience? It cost us money, but have people learned from that as a result?
Mark Wild: I don’t know, Rupert. I was not there. What I know is that the contracts transferred the risk back to the client, which inherently made them cost reimbursable. The contracts we are renegotiating now do not fix that problem, but they certainly reintroduce tension where everybody is incentivised to minimise public money, and also to complete this job as quickly and safely as possible and to the right quality.
Q16 Rupert Lowe: But also, Mark—I am sure you will agree—when you sign these deficient contracts, it is actually very difficult to get out of them. Once you have signed them, you become a hostage to the contractor. In the NAO Report, it mentions potential savings, not actual savings. How much at risk is that potential £2 billion?
In my experience, when you sign a duff contract, which clearly has happened, the contractor will do a deal with you, but he will extract his pound of flesh from you. As you say, you might do an acceleration or pay them if they deliver—that is just an acceleration clause, as you know—but, ultimately, are you sure you are going to make this saving? In my experience of contractors, when they have you by the short and curlies, they don’t tend to let you off very easily.
Mark Wild: I would give two perspectives. First, these contracts are certainly not the panacea of people fixing their costs to the end. That £2 billion is really about an avoidance of risk in the future, so you are right that there remains uncertainty. That is exactly why we must be very careful about not moving away from these bookends until we get a bit further into the civil engineering.
On the other side of the coin, Rupert, in my experience with these subcontractors, they all want to work for UK plc. They all work on the biggest projects for the Government. They do not want to stay too long on HS2. They want to get on and do other jobs. I really believe, based on the CEOs I speak to and the evidence on the ground, where we have had our most productive two years, that there is a productive spirit not to stay in this job.
The reset creates conditions where we create more tension to positively get off the job. Hopefully it is clear that these resets are not a panacea of people fixing their costs and transferring all the risk back. I will give you one example from the EKFB reset. The number of exclusions to the contract was several hundred; now it is fewer than 20. There has been a seismic shift there, but it is not a panacea.
Certainly with EKFB, for example, this financial year, we were meant to move 16 million cubic metres of earth. As of last week, we have moved 15 million cubic metres. I know the weather helps and I know we have done a better job of getting the design ready, but you can see the tension of the reset working where the contractor is incentivised to get the job done as fast as possible. But it is not a panacea.
Dean Creamer: There are two things we need for these new deals. The first is to start in some form to get the contractors to care about our money. The second bit is about the big risk to this programme, which is prolongation—it takes a long time to get firms off the job. One of the things that is part of this new deal, as Mark is talking about, is incentives to get them off the park as soon as possible so that Mark can get on and put the systems in. Those two things together give us more confidence. As Mark says, what gives me some reassurance is that those firms that have signed deals are—guess what?—performing better.
Q17 Rupert Lowe: With the Chairperson’s indulgence, I have a couple of other things I wanted to ask you, having looked into this. I have been trying to get my mind around the methodology you have used to estimate the cost of cancelling. I have seen your letter to the Minister. Ultimately, it looks to me like you have costed the amount to complete independently, but you have not necessarily independently verified the cost of cancellation. That seems to be a bit of a pig deal between the DFT and HS2. Do you think you should get that independently verified? Is there not a case for that?
Jo Shanmugalingam: Can I start briefly before Mark answers? This is the question that we asked of Mark to do this work, and it goes to the Chair’s exhortation that we all look forward. At all times, we have had to think about proportionate work. We asked Mark to look to history, and in this case to look at the cost of remediation and cancellation versus us wanting Mark and his team focused hour by hour and day by day on executing the programme safely at the lowest reasonable cost as quickly as possible.
We have had a view about the proportionality of the work we wanted Mark to do for us to be able to understand the scale of the cost of remediation without distracting from the work to get the programme back on track through the reset. Mark can explain the actual methodology further.
Mark Wild: I completely understand the concern that we had a vested interest. The request from the principal accounting officer, though, to me as the accounting officer, was to verify the methodology and the range of costs. From my point of view, bearing in mind how uncertain this is, assessing a percentage of the cost we have spent so far to assess what might be needed to complete is a valid methodology.
We have used a range of uncertainty from, I think, 35% to 55%. That seemed prudent to me. If anything, it seemed a bit conservative because I have no designs for putting the assets back where they were. Inherent in the methodology that the DFT have used is that there will be a realistic remediation, whereas actually the law says that I should replace every blade of grass. Again, to me that seemed the inherently correct methodology, but rather conservative. They applied 66% on top of that for estimating uncertainty.
Q18 Rupert Lowe: You used 66%, but the Green Book says that you can use between 6% and 66%.
Mark Wild: That comes straight out of the Green Book.
Q19 Rupert Lowe: You have taken the maximum loading. I do not want to cast aspersions, but it looks to me as though there has been an attempt to make the facts fit the story because it would be embarrassing to cancel. I want to understand why it has been done that way, because I think it is so full of uncertainty and there being a finger in the air that I am not sure that we can actually base very much on it.
Jo Shanmugalingam: If I can just explain the 66%, that comes from the Green Book as an appropriate optimism bias to apply to a programme of this scale of immaturity, given that we do not have a programme to cancel.
Q20 Rupert Lowe: That is a subjective judgment, Jo.
Jo Shanmugalingam: Absolutely, but if you look at the history of the Committee’s work on this programme, and how costs have inflated from the maturity of the understanding in 2018-19 to today, that certainly feels like a perfectly prudent way to look at the costs of this as an accounting officer. These are assets that are built for 120 years. We had no comparators to work with anywhere in the world of seeking to dismantle a project of this nature and, as Mark says, remediate it completely.
Mark Wild: I also think, as you just alluded to, Rupert, that our contractual position is not very strong, and there is no organisation to handle the claims that demobilising a supply chain of 30,000 people would generate. All those factors lead me to believe two things: the methodology has been appropriate, but in my personal view it is a conservative assessment. That is the best I could do.
Q21 Rupert Lowe: This is my final question, because I can hear that Sarah is getting restive. In 2023, we could have cancelled this white elephant for £11 billion. That was the advice that I think the Government were given but they chose not to. Captain’s starlog three years later, it is now going to cost us between £33 billion and £58 billion to cancel it. Personally, I would have cancelled it because, as Rod Stewart said in his song, the first cut is the cheapest.
In the end, my question to you on the contracts, Mark, is why would you make the decision to actually go ahead with it before you have renegotiated the contracts? In my experience of negotiating, if you have the nuclear option, it strengthens your hand in negotiating with the contractors, because you might just say to them that you are going to cancel it. That would strengthen your hand. Why did you feel it was important to state that you are going to go ahead before you have actually sorted out these contracts?
Jo Shanmugalingam: I should be clear that going ahead was a decision of the then Government in 2023.
Q22 Rupert Lowe: No, I am talking about the latest decision, which appears to be, according to the letter—this is public knowledge—that you are, I think, recommending that you go ahead.
Mark Wild: I would say two things. First, on the £11 billion, it is a matter of record that HS2 underestimated its costs, so I would not be relying on HS2 estimates from that point of view. Secondly, since that date, we have spent £25 billion on the infrastructure. My belief is that if you spend that amount of money, it is clearly going to cost you at least half that to put it back again.
We did think carefully about the fact that the cancellation of the project could be a lever. The reality is that, with 34,000 people on the job and £25 million being spent every day, the supply chain would not think that a credible option. In a perverse way, Rupert, without resetting these contracts, the supply chain could have made more money with the demobilisation. I think we have done the right thing by continuing our productivity. The facts speak for themselves, given the productivity achievement of the past two years. We have good deals with EKFB and Align, and I aim to get SCS and BBV. On balance, we have handled it the right way, but it is a fair question.
Q23 Tristan Osborne: I mentioned this when we looked at the Northern Powerhouse. Obviously, there are issues around the sustainability of the neighbouring HS1. They are looking at pan-European engagement. They are looking to expand that network’s capacity as well. Euston and St Pancras are within spitting distance of each other. You mentioned earlier that you are expecting 1% to 2% growth, as a cautious estimate, based on your current figures. I appreciate the scale of the programme already—it is only considering going into Euston—but has there been any thought given to linking it with the HS1 programme, so you get pan-European network expansion, which might increase capacity as well as the viability of the project and profitability?
Jo Shanmugalingam: These issues were looked at in the past. HS2, as we have discussed, has been a very troubled programme, and scope has been reduced by successive Governments to concentrate on the core capacity issue on the west coast main line. In relation to Euston and St Pancras, there has already been, as the NAO Report sets out, considerable spend to make that site ready for the HS2 stations, as well as to address the significant challenges at the conventional railway station. It is the Government’s firm view that continuing to deliver the programme to Euston, and progressing as speedily as possible the regeneration of the three stations at Euston and the community around it, is the right approach for us to take at this point in time.
Q24 Ruth Cadbury: Dean Creamer, the political decision to stop the programme beyond Birmingham caused a major headache in terms of the rolling stock contracts, because the longer trains cannot run on the existing infrastructure north of Birmingham. How are you managing the impact of the decisions around seat capacity? My understanding is that, if nothing is done, there will not be more capacity on the west coast corridor. How are you managing that, and when do you expect to resolve the debacle around passenger capacity?
Dean Creamer: It is absolutely true that, if we had no mitigation, shorter trains would give us less capacity, but that is not where we are planning to end up. There are a couple of guiding principles in terms of the wider reset and the work we are doing, and this is the lens through which we look at all key decisions. One is that we can deliver on the Secretary of State’s requirement to do so as soon as we can and at the lowest reasonable cost. The second is that we create a piece of infrastructure that properly integrates into the wider network. That is absolutely essential. The third bit is to make sure that we do not block off the ability to expand the network and to have trains in the future. Those three things are the guiding principles.
That requires us to have rolling stock that can manage all those things and work on the captive network between, eventually, Euston and Birmingham, as well as then to go beyond Birmingham. We are in contract with a supplier at the moment, so one of the things we cannot do is give a running commentary on how things are going, but what I can say is that we are working with the train supplier to find a way through all those challenges to meet those concerns.
The other thing I should say is that we are not doing this alone. Mark and I meet regularly with Network Rail, DFTO and Alex Hynes, and, for all these big strategic decisions on the programme, we try to make sure we have an industry view and come to a shared view on how the operator will manage this as an effective railway in the longer term. We want to hopefully get a decision in the next year on the rolling stock, and that will fit into the wider rolling stock strategy for a future west coast main line in due course, but it will be joined up. But I cannot give you an exact timeline, because we are having those conversations right now. Is that fair, Mark?
Mark Wild: There is a lot of speculation in the press—fair comment. I think we need to conclude the negotiations with the train manufacturer. They are going very well, but it is noted that we need to fix this problem. The way to do that is through our contract, which we are right in the middle of.
Q25 Matt Turmaine: I want to ask a couple of questions about governance and organisational capability. The Report, in paragraph 18 of the summary, says, “The HS2 programme is subject to new assurance and decision-making processes following its designation as a mega-project.” Has this definition of a mega-project changed your approach to programme governance?
Jo Shanmugalingam: Yes, absolutely. I think David Goldstone, who did that work for the Office for Value for Money originally, would say that he is very pleased with the demonstration of taking the HS2 reset through that new integrated assured governance and the positive benefit it has had for the programme. It is fundamentally taking out lots of duplicative layers of governance over a very long period of time, when everyone might think that somebody else had taken the real judgment to make sure that there was deep, integrated assurance on the programme. We have seen that with the reset, the cost and schedule.
It sounds like we will come on to capability. We are very pleased and supportive that Mark and the HS2 board are applying that same rigour to the capability of the organisation, and we now have the new mega-project decision panel and the new ministerial taskforce, which has met seven times since it was reformed. I chair a new shareholder board with three independent members, including James Stewart. We are not complacent, as I hope you see and feel about the programme overall, but we are pleased with how the governance has improved at all levels of the programme.
Q26 Matt Turmaine: There is always a risk, isn’t there, that you take one ineffective, complex governance system and replace it with another ultimately ineffective governance system. What have you done to avoid that or to make sure that that does not happen?
Jo Shanmugalingam: We keep under review how the governance is working, and we learn the lessons of the governance. We are currently doing a review of our new shareholder board to make sure that it is on the right path. As Dean would say, as SRO, the proof is in the pudding, and the pudding is that we are making good progress through reset. The company under Mark’s leadership is making much better progress with the programme.
We need, as the NAO says, to make sure that the governance stays fit for each stage of the programme. We have another decade to go, so we will continue to review and refine the right governance. I take a lot of comfort and confidence from the challenge and scrutiny I see—challenge and scrutiny that ultimately support the focus on delivery of the programme.
Dean Creamer: To give you an example, you want to take the right decisions in the right places at the right time. Your point is well made. The ministerial taskforce makes sure that we make those strategic decisions. We have met a number of times now—I think three or four times already this year—and so big decisions on things like speed and rolling stock will be taken there. The shareholder board makes sure that Mark and I stay honest and that we are delivering as expected.
Mark and I also have a performance board where we sit and look at progress on the programme every month in a formal way and make sure that we have a really clear view on both the programme for the year ahead and our progress towards that. That is different in reset from what it will be afterwards, because we will put a new regime in place once we exit reset. For now, Mark and I have a programme of work that we assess month on month through the course of the year—I think Mark would probably like to have less meetings with me than he does.
Our teams meet every week—we do not just meet at those formal meetings. One of the really important lessons that somebody like David Goldstone, who has done lots of these big programmes before, would tell you is that you need to get the senior teams together to tactically work through all the issues—not just the big, strategic ones at formal meetings. You need to get your teams together to manage all the issues and challenges, so Mark’s senior team and mine meet every week to work those through.
We work with the governance at lots of levels to make sure that we stay on track, and then we have the ability to escalate. I can escalate things that I do not feel I can manage on my own up to the shareholder board or the ministerial taskforce as necessary, but I also know that I have to go there and justify that we are making good, sensible decisions.
Jo Shanmugalingam: The Committee’s last report was very clear about what you saw as the state of the relationship between the Department and the company, and the problems that was giving to the oversight of the programme overall. With huge thanks to Dean’s predecessor as SRO, Alan Over, and the work that Dean and Mark have done together since, I hope that what you see today and what the NAO observed in its field work is a robust but strong relationship and partnership between the Department and the company.
Q27 Ruth Cadbury: This question is for you, Jo, as the permanent secretary. What is the difference between a mega-project and critical national growth infrastructure?
Jo Shanmugalingam: You are challenging me—
Ruth Cadbury: So you don’t know!
Jo Shanmugalingam: I may need to write on that. Dean?
Dean Creamer: If I look at the OVfM report, what David Goldstone said was that there are certain things that mega-projects ought to have, including the regular plan and reporting to Parliament; an agreed and full funding envelope for the lifetime of the project; funding being drip-fed to them before they are ready to have a full lifetime project fund; proper governance that is bespoke to that project; and some flexibilities to get the right people so you have the capability, as we are doing with HS2, to get those people in. Those are the things that you get as part of being a mega-project, so that is the test that we would apply.
Ruth Cadbury: It sounds to me that that is once it is agreed and getting on the ground—
Dean Creamer: Yes, and there is a number—I think it is about £10 billion. NISTA will take a view with the Departments about which projects are appropriately deemed to be mega-projects and whether the designation of mega-project helps you to deliver the programme—because, fundamentally, that is what it is all about.
Jo Shanmugalingam: I think I am right in saying, too, that critical national growth infrastructure are not necessarily Government programmes—they could be privately delivered programmes, and that is how they are considered in the planning system. This is about the assurance and oversight of Government-funded programmes.
Q28 Ruth Cadbury: But they are both Government definitions for national infrastructure.
Jo Shanmugalingam: Yes, they are.
Q29 Matt Turmaine: I don’t want to go down this rabbit hole, but maybe being a mega-project is about the delivery methodology as opposed to a description of the infrastructure—but I do not know; it is not for me to answer that. Mark, what assurances can you provide that the identified capability gaps in the organisation will be addressed in time to support the delivery of the project?
Mark Wild: There are two things: the here and now, and during. In the here and now, I believe our performance speaks for itself in terms of safety, control and productivity. With the help of the Department, we have certainly strengthened the board of HS2. It now has a really good, deep subject-matter expert in the new chair and lots of experience around the table. The executive team is much strengthened, with the chief commercial officer and the chief programme director. One of the things that I really wanted to fix when I took this job was that we did not have a dedicated commercial function or a dedicated programme function. That might seem obvious, but we have put that in place.
We also identified an imbalance of bureaucracy between HS2 Ltd and the frontline. I have been pleased with the really good-quality people in HS2, so all we have really tried to do is rebalance the focus. We have taken 300 roles out of the corporate centre and put them on to the frontline while we are resetting. In the here and now, I believe that we are demonstrating much more transparency and grip.
Of course, that has to be maintained and sustained. We cannot exit reset until we demonstrate the organisational capability to match the baseline and the supply chain contracts. It is an area of intense focus; Dean and I look at it every single week. We have discrete criteria for the capability we need, particularly in the areas of delivery, commercial management and project management, to make sure that this new baseline is maintained and delivered.
The key thing that I think was wrong in the previous baseline was that once the baseline was struck, there was very little in the way of leading indicators about organisational health. I know what we are going to do: we are going to create not only engineering metrics, but metrics of the underlying health of the organisation and its effectiveness. I think that should produce the red and green traffic lights that I am sure the Department and the shareholder board will want and that this Committee will want to see. Obviously, baseline 7.1 didn’t go wrong suddenly after a few years; there was probably an underlying problem that should have been detected.
Q30 Matt Turmaine: Do you have confidence that you are able to recruit and retain the staff that you need for that maintenance and sustainability?
Mark Wild: Yes, I do. The balance between permanent staff and contractors is one where we want to increase the number of permanent employees a little bit more, but we will always have a flex. You can’t have a fully 100% directly employed client team, because obviously the project comes and goes. I have no constraints at the moment on recruiting the right people. We are getting a lot of very good senior people joining the team, and I think that is partly about the reputation of the company and the quality of the organisation. We are attracting people; at the moment, we don’t have any constraints with regard to recruiting people.
Q31 Matt Turmaine: That is great. Finally, if I understood correctly what you said earlier, you have applied a lot of Crossrail project thinking to what is going on with this. Why do you think that approach was not being taken already?
Mark Wild: Interestingly—and credit to the previous team before me—not everything was wrong. If you look under the bonnet, a lot of lessons from Crossrail are directly in the engineering, which is reassuring. I think the direct lesson from Crossrail is about transparency. This is not meant to be critical of the past because I wasn’t around, but my commitment to the permanent secretary, the SRO and the board of HS2 is about having one source of the truth.
I think the key learning in Crossrail was that the integrated baseline had everything in it that you needed, from the operator to the system engineering. That is why, as the NAO pointed out, it is worth getting the fidelity of this baseline right, before we strike it. Equally, there is a balance—we can’t get everything right—and that is the balance that we work on every day and month.
Jo Shanmugalingam: Following the transparency and the commitment from Mark to us as shareholder and to the programme SRO, our commitment to Parliament is to report transparently through the six-monthly parliamentary report. Our next report will be due before the end of the year.
Q32 Tristan Osborne: I have a series of questions concerning Euston train station specifically. The NAO Report, at paragraph 19, says that this is a significant project with four key elements: “building a new HS2 station, redeveloping the existing railway station, improving local transport infrastructure, and commercial and housing development.” In paragraph 6.9, it itemises the cost increases. It was £3.8 billion in March 2026, and we are expecting to “potentially spend around £8 billion”. Is that £8 billion figure a mature estimate of the scope and cost of this programme?
Jo Shanmugalingam: I will start, because as part of the reset we have taken responsibility for Euston directly, so Dean oversees the Euston element of the programme. Thank you to all the Committee members who took the time to come and visit the site earlier in the year.
Looking back at previous Committee reports and what was observed about the lack of co-operative working between partners, we were really pleased that people on that visit, but also the NAO in the field work, saw the step change in what is now happening at Euston. Again, the proof of the pudding is that we now have an agreed spatial plan, and we now have the Euston Delivery Company up and running to act as the single guiding mind and guardian of time and cost. That addresses a lot of the Committee’s previous recommendations.
We are very clear that cost estimates for Euston are less mature. What you see in the reset, and also represented in the NAO Report, are orders of magnitude in the reset for what we expect the cost of the programme at Euston to be. We have a commitment to secure private finance in a number of forms, which Dean might be able to talk about further. We have orders of magnitude.
Again, we want to learn the lessons of HS2 overall and the James Stewart work. We will not refine those numbers further until we have that detailed concept design—the work that is starting now with all of our partners—to make sure that we have an assured basis to go forward. This programme has failed twice; we can’t and won’t let that happen again. Dean, do you want to say anything more?
Dean Creamer: In response to James Stewart, he was very clear about his diagnosis and the things we needed to do: “First of all, get a model. What is your delivery model for this programme?” Part of the reason why the previous two failed was because partners did not support the plans; it was not just about the cost explosion.
One of the things about this model, and the reason that we have created the delivery company, is that all those partners need to be brought into the tent. In the same way that we do with the Olympics or the Commonwealth games, which I have done previously, you need everybody in the tent and you need everybody aligned—particularly everybody who has a delivery role to play.
The EDC’s purpose is to be the guiding mind for time, cost and benefits on the programme within that campus. The way you do that is by bringing all of those organisations inside the tent so that it is not just another voice talking about what needs to happen at Euston. TfL, Network Rail and HS2 all sit on the board of the EDC. We are appointing a chief executive now; we had interviews last week, so we expect to be able to do that soon. You have a delivery model that is basically a guiding mind that can be the guardian of that time and cost, and that can endure.
The second thing was around the governance and how you get the governance working properly. The EDC sits in the middle of the new governance. When we talk about mega-projects, one of the things about them is that you have proper bespoke governance. Euston is such a big and important project for the country that you need to have the political buy-in and the political alignment as well, so above the EDC sits a strategic board where the Ministers, the GLA and Camden—the political level—come together to make sure that we are aligned at that very top level on what are we trying to do.
Beneath the EDC you then have the operational partners. We call them the delivery alliance—the technical people; the engineers who come together—so you have integration at all stages. That is essential in these big programmes.
We have proven that you cannot try and do each one separately; you cannot pick and choose. You cannot have a pick ‘n’ mix of each of those stations—the underground station, the conventional station or HS2. They have to be managed together because they are so close together on such a small site. It is complex and it is hard work, but it has to be done together.
The next thing is about having a plan. James Stewart was clear about asking, “What is your plan for Euston?” The permanent secretary talked about having a spatial plan, which is the first stage of that. There is a long way to go.
The next step is to get into the concept design. That basically gets everybody in the tent, broadly, with their red lines. You have the three dutyholders in TfL, Network Rail and HS2 that have real safety responsibilities, and they need to be worked through very carefully. Are those red lines understood? Do you have, if you like, an early design of how you will operate the station—so you have your red lines, but can you bring it all together as well? What is the early plan for that?
Then you need the rules of the game, so the EDC need to understand how they are going to manage that all together. As we go into concept design, the plan is that the strategic board will sign off that package. That gives you the ability and the confidence to move into scheme design further down the line, probably next year.
When you have your model, your governance and the right plan, we then get to the funding. This is the bit, I know, that everybody gets a bit excited about—“Why isn’t the funding in place? Where on earth is it?” The funding needs to follow the plan.
We have a lot of anxiety and nervousness on Euston. We have failed twice. If you are in the Treasury, you need to see that we can demonstrate that we have the right plan with people bought into it before you set the funding. Even before we get to the David Goldstone element of, “When do you get your full envelope?”, the question is, “First, do you have a plan that we think is feasible and deliverable?”
Our plan is that that will come together probably as part of the spending review in the course of the next year. We will put the funding in place, and we have to do a number of things to get to the bottom of that. There will be some public funding, we expect, but we are also pursuing a range of private funding that needs to be worked through. We have talked about the potential for a PPP for the HS2 element of the station. That is one element.
The second element is the potential land receipts for developers. We have Lendlease on board with the Crown Estate, which will help us develop and frame the vision for Euston more broadly. We are also looking at the possibility of tax increment financing and land value capture because of the improvements we are making. All of those things need to be properly bottomed out and worked through. There will be a balancing figure that will need to be taxpayer-funded direct from the Exchequer. That is a lot of work to get through over the next few years.
James Stewart talked about capability for the sponsor, which is me and my team. We in the Department are undertaking a review of the capability that we think we need for the next stage of delivery. There are about four or five years now of planning ahead of getting to spades in the ground on the station itself. We are working through that as part of the reset. As we come out of reset, we as HS2 need to take our medicine and say, “Have we got the right capability in the organisation to sponsor that responsibly and appropriately?”
Q33 Tristan Osborne: You have enunciated quite a few of my points, so thank you for that. My question is about the Euston Delivery Company. What is the headcount at the moment? You mentioned the chief executive is being hired. I saw that the chair is being hired as well. Can I get a sense of the size of the organisation? Which hires have been completed? Can we get an org chart sent to us as well? Is it fully established and fully operational at the moment as an entity?
Dean Creamer: There are about 30 posts at the moment and it is established as a business unit of the Department. Over the course of the autumn, we expect it to be established as an ALB. We want that to go alongside the chief executive, who will become the accounting officer, so we can manage the work in a sensible and responsible way.
Our expectation is that the chief executive will need to take a very close look at the capability they need. One of the opportunities we have, though, is that the technical capability to deliver Euston actually resides largely in the organisations that partner us. One of the things we are looking at is how we can take secondments. We already have those from, in some cases, TfL and Network Rail, so we can bring the experts into that central organisation to help us deliver the programme. Our expectation is that that will be a core part of how we manage.
Q34 Tristan Osborne: In the NAO Report, at paragraph 20, it talks about the agreed vision of DFT and the collaborative approach. Will the new chief executive and chair be given a clear timeframe by which they need to have their developed plan—for instance, are you saying it should be by Q3 or Q4 next year? Apologies; I am being specific because programmes can get delayed. When you hire these people, will there be an expectation that they have a plan in place within a designated timeframe?
Dean Creamer: Yes.
Q35 Tristan Osborne: Can I ask what that is, then?
Dean Creamer: There are different parts to it. First of all, let’s just acknowledge that it is an awful long time before we expect trains to run from Euston. It is an incredible amount of time, and the community has had a lot to put up with. One of the things that we will ask the new chief executive and the new chair is to really have a look at that timeframe and test, “What is the opportunity to improve on that?” Mark has set out his ranges—or bookends—of 2040-43, but we want a new chief executive to look at them.
We also want them to have the freedom, to be fair, to give us their honest views about the right time to deliver the various parts. The next few years are largely in the planning. The most important lesson we can learn is to get a really robust set of expectations around costs and around schedule before we move into delivery. We want the chief executive to have a really good run at that. What we will not do is put in an arbitrary date and say, “By next year you’ve got to have all this sorted,” because I think that you would fundamentally set them up to fail. We will give them some space.
Jo Shanmugalingam: We are also focused, with Network Rail and all the operators at the current station, on making sure there are benefits being delivered to improve the experience that passengers have going through Euston—today, this year, next year, every year—until we get the fully redeveloped station.
Q36 Tristan Osborne: That is fine. My next question is about whether this is a mega-project or not. I am looking at your Government major projects portfolio. In April this year, the redevelopment of Euston conventional station was considered a Government major project, which is a mega-project. Have you answered this question already? It is now a mega-project, isn’t it? Is that correct?
Jo Shanmugalingam: It is not designated separately as a mega-project. It is part of the HS2 mega-project. To my mind, it feels like a slightly moot point at the moment, because it benefits from the flexibilities and integrated assurance that comes from HS2 being designated a mega-project. There is a discussion for us to have with NISTA and the Treasury about whether at some point it will be useful to designate it separately. But I think it is fair to say, Dean, that we do not see any constraints in it having a separate designation to being part of the HS2 designation at the moment.
Dean Creamer: The thing it must absolutely not do is create some kind of competitive incentive with HS2, because it is a core part of getting Mark’s ranges delivered. It needs to be properly integrated. The ideal solution would be to get the flexibilities and freedoms that come with mega-project status, without creating it as something entirely separate.
Q37 Tristan Osborne: Apologies, but I am going to be very specific. The Government major projects portfolio, which lists the mega-projects, has them separately listed. It has HS2 phase 1 and then the redevelopment of the Euston conventional station. You are saying that they are actually the same thing. Is that correct, even though they are separately listed as two separate things?
Dean Creamer: Yes, they are separately listed. There is a genuine question that we need to work through with NISTA about how best to manage those two programmes together when there is such an interlink between them. It may be something that we phase, so that they may stay together for the next few years over planning, but as we get into delivery, we may change that. Our view is that we need to keep that under review.
Q38 Tristan Osborne: I appreciate that it is also below the £10 billion threshold, at £8 billion. My last question is on paragraph 6.10, which says that you have begun early market engagement on the approach with the private sector. Without a defined plan, it is probably difficult to define what that might look like, but you are looking at some form of PFI or other arrangement. Are you learning from other Government projects, especially those in the nuclear industry and others where good contract arrangements might be important?
Dean Creamer: Yes. Let me hopefully give you some reassurance. One of the reasons why this takes a long time is that if we go into a commercial arrangement but we are unable to be really clear, or we have a lot of uncertainty, we will pay significantly more for that uncertainty. In terms of the support that we are getting, we have some external expertise coming in to support the programme, so the Department is not doing it on its own. We are working closely with the Treasury and with NISTA, and with external expertise, as I say.
We have had some early engagement with the market. We have had about 70 responses to that engagement and they are saying the things that you would expect them to say. Their concerns are: “How do we manage inflation and what protections are there around inflation?” There are also questions about how you manage the interfaces within Euston itself. If you are a private provider, you want to be able to control your own destiny and deliver that programme, so if there are lots of interfaces, how are we as the Department going to make sure that those are properly capped off and managed?
Those are things that we will need to work through, so that as and when we go out to a procurement, we will have those capped off so that we get the best deal for the taxpayer. I would also say that we will do a deal only if we can get the right deal for the taxpayer. Again, we will need to agree the thresholds for that with the Treasury before we take a view on it.
Q39 Ruth Cadbury: I want to ask a question from the point of view of future HS2 passengers about their route to and from the HS2 terminus at Euston. On the whole, they will not be stopping at Euston, but getting the tube, rail, HS1, buses—
Jo Shanmugalingam: Bikes.
Ruth Cadbury: Bikes—everybody always says bikes, which is good and fine, but not if people have luggage generally—taxis, private hire, or private pick-up and drop-off by friends and family. Who is making sure that all those different transport choices are integrated into the design at the early stages? We all know of infrastructure developments where passengers were not thought of. Walking distances are an issue for many. TfL, much as we love them, tend to work in silos themselves, and they have three, if not four, different business interests in terms of their public transport provision. Who is holding the ring on this and how will we make sure that the design and the thinking is built in at the start?
Dean Creamer: It is a really good and fair challenge. I talked about the concept design and the reason why we have all the dutyholders in the EDC, and it is for that reason. TfL have already been very clear about how we will manage taxis and the bus interchange. When I talk about a concept of operations, before we move even into concept design, one of my challenges to the EDC and the partnership is: “Have we got a plan that understands how we would operate this station at a high level, and have we got all the red lines from all those partners that will be managing passengers?” We know, for example, that one of TfL’s concerns is that if you have two stations—Euston Square and Euston—some passengers might need to tap in and tap out. All those issues need to be managed, and that is why we are bringing all the partners into the tent. As we sign off and move into concept design, the EDC will need to get approval from its board and from that strategy board at a political level that says, “Everybody now says we are content that all our requirements are being met.”
There is a challenge that we will have to manage, which will be ambition versus affordability, and part of the EDC will have to manage those trade-offs with the partners and with Ministers as we do that. To give you some reassurance, the thinking is happening now, as part of that planning. We will not enter concept design unless we are confident that all the partners are happy entering into this level of design. Are we equally mature for Euston as TfL would be if they were doing a station on their own? If we are not, there is more work to be done.
Q40 Ruth Cadbury: The point I am trying to make is that there are some of those transport choices that none of those partners see as their priority, but HS2 is moving this new group of passengers.
Jo Shanmugalingam: I should be clear that Andy Lord, the TfL commissioner, is very clear about the centrality of the redevelopment of Euston to the overall London transport system. Just as Mark, as chief exec of HS2, is very generous with his time to the Euston programme and the new Euston Delivery Company, so is Andy personally for TfL, because he represents all those different transport needs for those travelling through London.
Q41 Ruth Cadbury: Except those going to St Pancras for HS1 and other lines out of St Pancras.
Jo Shanmugalingam: Making sure that they can get there and that the flows work effectively, which is the work that Dean has described.
Q42 Ruth Cadbury: We noticed on the visit how close the Euston development is to existing and often long-standing communities. What steps are you taking to reduce the impact of building works and delay on the residents and businesses around Euston?
Dean Creamer: Going forwards, our expectation is that the EDC will co-ordinate that work to make sure that all the partners are joined up in the way that they interact and manage the community. Mark might want to talk a bit about this, but on HS2 we have some funding—about £2 million—that has gone into making sure that we can mitigate some of the challenges that we are creating for communities. I know that Camden has put in about £3.5 million as well, particularly to mitigate around noise.
There are some things that HS2 has been able to do over the last year that have made things much easier, including road movements and the removal of spoil from the site by rail as opposed to road. But we are very conscious that it has been a long time and this will carry on for a long time, so we will also look at maintaining the community funds that we have now for as long as they are needed.
Mark Wild: It is a great question. The Drummond Street community, in particular, is one of a handful of communities on HS2 that has been very disrupted and suffered prolongation—in fact, it may be the most affected community with prolongation. I have spent a lot of my personal time with the community. As Dean said, one of the best things we have done in recent weeks is to get the spoil away by rail. We have one train a day that takes about 50 lorries off the road. But there are no two ways about it: the Drummond Street community, in particular, has been separated from the main effort.
We have to redouble our efforts to help the community. The Euston hub has been very successful for the community. The skills centre for Camden, for the construction teams, in the basement of our large development is very successful, and we have just opened a skills yard within our site to try to get local employment in the construction industry. But there are no two ways about it: we need to stay focused on the needs of that community. They will remain very disrupted and, to be sure, it is top of the agenda for Dean and me when we deal with them. I have a lot of sympathy and empathy with what has happened.
Q43 Rupert Lowe: Dean, I think this one’s for you—oh joy. In figure 12, we can see quite how much land, housing and whatever else HS2 or the DFT—HS2 was an agent, if I am reading it correctly, so whichever way you want to look at it—has purchased. It is a vast amount of property and many square miles of Britain. That no doubt enriched and put new wheels on the Bentleys of lots of lawyers through compulsory purchase orders and so on. The decision was made in October ’23 that we were not going to go ahead, so a lot of this land is now surplus to requirement. Why has it taken so long for it to be returned, and what is your strategy for doing so? Under the Crichel Down rule—if nobody has been there, it is a wonderful house down in Wiltshire—you are required to offer it to the landowner who has been disadvantaged as a result of the CPO. What is the plan? I think, having messed up people’s lives, it is incumbent on the state to put it right as quickly as possible.
Dean Creamer: There are four areas where we have property. There is phase 1, where we are closing our existing property. Mark and his team are doing that, and we continue to monitor them on their ability to close out properties at phase 1. There is phase 2a between Birmingham and Manchester, where we hold some permanent and some temporary land, and there are the small number of properties—about 200—that will be needed for NPR.
I think what you are talking about is the land on the east, which is the Leeds leg. That is about 500 properties that are no longer needed. We have an agent that will now take forward a strategy to dispose of those properties. It has taken a while because we needed to work out what the Government’s plan for that area was. As you say, we also needed a strategy. There are 500 properties, but only 300 of those will have the Crichel Down rule applied to them. The other 200 were bought by the Department, sometimes because the seller wanted to sell them to us—they were not necessarily compulsorily purchased.
On the next steps, an agent will provide us with a strategy in the autumn—we are expecting that to be by October. They will be testing and piloting that strategy with vacant properties over the next few weeks. We will then, in the new year, move into—I hope that we will have some properties on the market this year. The challenge we will have, and the balanced judgment we have to make, is that we want to get properties disposed of, but we do not want to flood the market and undermine the local housing markets for local residents, and we want to protect the taxpayer. There is a sensible sequencing that will need to come as part of that strategy.
Q44 Rupert Lowe: Presumably, a lot of this is land as well as properties, because you bought the land.
Dean Creamer: Yes, it is a mixture of commercial and private residential.
Q45 Rupert Lowe: But again, I could argue that given what has been happening with death taxes on farmland, farmland has come down. Equally, the economy is grinding to a halt, so you do not have the demand for housing. We are seeing house prices come down radically in London, and that is now starting to affect the rest of the country—we are told not Manchester, for some reason, but I do not believe that. At the end of the day, you are more vulnerable the longer you wait. As a matter of interest, why have you waited so long? Is it just because people have not been able to get their act together?
Jo Shanmugalingam: The picture is complicated, as Dean says, and it reflects the decisions that different Administrations have taken over a number of years—decisions on the full Y scheme moving back to phase 1, and the commitment of this new Administration ultimately to build a new line north from Birmingham to Manchester. That has meant, as Dean said, that we have needed to wait to understand and assess the consequences of the decisions to curtail the original HS1 programme for our future heavy rail infrastructure, and to make sure that we have the land and property strategy to deliver against. As with everything else, we are taking the decisions that we have in front of us and making sure that we best support all the communities and individuals affected, as well as securing best value.
Q46 Rupert Lowe: But in the same way that Ruth was concerned about the local residents around Euston, I think we should be concerned about people who have had their lives turned upside down by a centrally planned statist failure, which has not only messed up their lives but now left them with uncertainty. In my view, we have a moral obligation to sort that out as quickly as possible.
Jo Shanmugalingam: Absolutely.
Q47 Rupert Lowe: It is all very well to have ministerial decisions awaiting approval and everything else, but we need a plan.
I read in the Report that you are retaining some land in case you decide to go further north. When I was on the board of the FA when they mothballed the national football centre, they ended up with a load of grass cutting. You cannot just leave tracts of land with nothing happening to it, because you disadvantage local farmers, you create weed banks and you do all sorts of damage to nature. What are you doing about that, because that is going to cost you money?
Dean Creamer: It is a very fair question. First of all, on the strategy, we will share that with the Committee when it has been agreed in the autumn. On the land that we are retaining, I know that one of the concerns is what happens with empty properties. The plan is that we will maintain properties. Some of those are listed, as well, so we need to maintain those in a state commensurate with their listed status.
Where we can, we will look to rent out properties, and, as with sales, they are rented out at market rates. Some of those require some capital investment to bring them up to standard. There is a value for money and balanced judgment about the extent to which you invest in those. Let us be honest: the Government does not want to get into the business of being a property developer or manager here, but where we are holding assets, we need to do it in a sensible and well-balanced way where we rent out as much as possible.
I think we are at about 60% rental of the properties that we have in that space. We will look to maximise that at market rates as far as possible, without fundamentally spending more taxpayer money than we absolutely need to.
Jo Shanmugalingam: Those principles apply to the agricultural land holdings just as much as to the residential properties.
Dean Creamer: Correct. In fact, in many cases, the previous owners are still using that land under lease from us.
Q48 Rupert Lowe: Can you assure the Committee that we are not wasting taxpayers’ money on this now? It looked to me like this new agent you have appointed is quite well remunerated for what they are doing. Again, it is rather like when I was on the board of the FA. It was going to cost a million quid to cut the grass at the new national football centre, so I said, “I’ll buy some tractors and a topper and hire somebody, and I’ll do it for a quarter of a million a year,” at which point they changed it. Are the taxpayers being disadvantaged by this multitude of loose ends?
Dean Creamer: My view on this is very clear. We pay market rates, but we will look at this very closely. As it goes on, one of the challenges that we have is that we have an income stream from properties that are rented and we have an opex to maintain those properties. That broadly evens out. Let us be really clear: we lose money on these schemes because we are required to invest in them. We have an incentive to keep properties in a good state, but where we can get rid of them, we are looking to get rid of them.
This is something we will look at very closely. It is also something very close to Ministers’ hearts. We have a KPI with HS2 around the management, disposal and completion of properties as well. Frankly, it is something that I am checked on by Ministers regularly. This has visibility at the highest level.
Q49 Rupert Lowe: Finally—this is probably one for you as well, Mark—when are you going to start returning this unwanted land to people?
Jo Shanmugalingam: In terms of the temporary possessions?
Rupert Lowe: Yes, in terms of temporarily possessed properties, which I think is still your responsibility.
Mark Wild: The temporary land on the formerly known phase 2a is starting.
Q50 Rupert Lowe: That is starting, is it?
Mark Wild: Yes, it is starting. We are filling boreholes in. There are 450 boreholes on temporary land to fill in. They need to be remediated. That is under way now. We will have that completed in the next 18 months. Some of this land is under licence; some of it was actually purchased, but that process is under way. The permanent land requires a decision before—
Q51 Rupert Lowe: So it is in hand and it is not going to be delayed by ministerial holidays or tardy decision making.
Mark Wild: No, no. The temporary land is under way.
Q52 Rupert Lowe: Finally—Jo, I think this is for you—I have been thinking about this following my question earlier. Would you commit to the Committee to doing an independent review of the cancellation costs? I don’t think it is great that it is just HS2 and DFT; I would like some form of confirmation that that is independently verified. That is for you, I think.
Jo Shanmugalingam: Absolutely. As I said, we are very focused—I hope the Committee would support that—on making sure all efforts are applied to the decision that has been made by the Government to complete the programme safely, at lowest reasonable cost and as fast as possible. We have made a judgment about the proportionality of the work. The decision has now been made to continue. Obviously, if it is something the Committee recommends, we will consider it with Ministers, but we made a proportionate assessment of the amount of work we wanted Mark and his team to put into assessing the cost of remediation. But we will of course consider—
Q53 Rupert Lowe: With my taxpayer hat on, I think that would be desirable. That is my opinion; the Chair—
Jo Shanmugalingam: We will consider recommendations from the Committee—
Rupert Lowe: The Chairperson might overrule me!
Chair: Let’s wait and see what is in the recommendations, shall we?
Q54 Tristan Osborne: My final question follows on from Rupert’s. Clearly, we now have some answers about some of the commercial and housing development. The NAO Report says: “The government will also need to decide”—I know you have answered this question before, but I just want to get a tiny bit more detail about whether this should be designated as a mega-project now. I know that it is below the threshold of £10 billion, but we are seeing increments and also commercial real estate and retail development here. The NAO assessment is that it does fit “most of the characteristics of one,” so are the Government going to recommend that, and what parameters will you need to utilise to get it to that point if you are going to?
Jo Shanmugalingam: It is something we keep under review with the Treasury and the National Infrastructure and Service Transformation Authority. It is not in my gift to designate it. It is a discussion that we will continue having within Government, and certainly the assurance the Committee can have from me and from Dean is that we will advocate for whatever we think gives the Euston programme, and the HS2 programme, the very best conditions for successful delivery, given the difficult history that has got us to this point.
Dean Creamer: At the moment, the Euston programme, because it is part of HS2, does not lack any of the flexibilities that it would get as part of a mega-project.
Tristan Osborne: Thank you very much.
Chair: Thank you. That brings our session to an end. Thank you all very much for appearing and particularly for the candour with which you have responded. It is obviously a project with a very troubled history, as everyone on this Committee knows, but it has been really useful and constructive to hear your most recent update, so thank you very much for that.