The National Audit Office has today published an investigation following concerns raised about the purchase of land and property to support the delivery of the UK’s high speed railway. It has found the purchase of around 70 square kilometres to build Phase One of HS2 between London and the West Midlands is at a very early stage, but is on schedule and within available funding.
The estimated cost for HS2 Ltd to buy the land and property has increased significantly since the start of the programme in 2009. However, the way HS2 Ltd estimates and monitors costs have since improved, as the scope of the programme and route of the railway have stabilised.
In 2012, HS2 Ltd estimated that the acquisition programme would cost £1,120 million (2011 prices). HS2 Ltd provided cost estimates to Parliament as required, and by the time the hybrid Bill for Phase One was sent to Parliament in 2013 this estimate had increased to £1,608 million (2011 prices). The most recent estimate in 2017 was £3,295 million (2015 prices).
In addition to inflation, costs have increased due to changes to the route introduced by government during the hybrid Bill process, petitions from those affected by HS2 and following public consultation. HS2 Ltd also developed a more detailed understanding about the land required, significantly increasing estimated costs. The government also introduced additional discretionary compensation schemes designed to enable property owners to claim compensation if their property is affected by HS2, but are not on the route itself.
Despite these changes, HS2 Ltd believes costs will remain within the available funding. It is still early days in the programme delivery and therefore significant uncertainty remains about what the final cost will be due to the potential for further changes to the scope of the programme, the number of property owners that will apply for compensation, and the final value of almost all of the properties that need to be bought.
HS2 Ltd and the Department for Transport factor in the potential cost of risks should they materialise. As of July 2018, HS2 Ltd forecast that the total cost of the acquisition programme would be £3,356 million; £308 million less than its budget of £3,664 million.
Since 2015, the capability and capacity of HS2 Ltd’s land and property team has improved, and HS2 Ltd is on track to access the land it needs to start construction. However, there are risks, which HS2 Ltd has identified and is taking steps to manage. For example, substantial changes to the scope of the programme, or the engineering methods used by contractors, could significantly change the land that is required, which could impact the overall construction schedule.
HS2 Ltd predicts it will need to compensate up to 10,000 affected individuals and businesses, and process up to 50,000 compulsory purchase notices between 2017 and 2022. The NAO’s investigation has found that HS2 Ltd needs to do work to help claimants receive timely compensation. HS2 Ltd has completed only half of advance payments within the required three months from HS2 Ltd receiving a claim request. HS2 Ltd considers that in 35 of the 52 cases where payment is not expected to be on time, the main reason is claimants’ not providing required information in a timely manner, but acknowledges that it is at fault, at least in part, for the remaining cases.
While HS2 Ltd’s estimated acquisition costs have increased significantly over time, cost estimates, particularly in this sort of major land acquisition programme, are inherently uncertain and subject to change as more information becomes available. The current estimate provides a reasonable basis for monitoring the cost of the land and property acquisition programme, but it is too soon to determine what the final costs will be.