The Public Accounts Committee (PAC) has questioned why, despite spending over eight years planning and designing the station at Euston for High Speed 2 (HS2), the Department for Transport (DfT) does not know what it is trying to achieve.

In March the DfT announced that new construction work at Euston would be paused for the next two years. The PAC has called for the pause in construction to be used to establish what the design and expectations for the station are against what it is willing to spend.

The costs and impacts of the pause on the local community are unknown, yet work is still to be done during the pause in construction to make the site safe and potentially useable by local residents. The PAC does not believe that the impact on the DfT’s supply chain can be mitigated by their deployment elsewhere on HS2.

The decision to pause construction of the station followed estimates of £4.8 billion against the original completely unrealistic £2.6 billion budget. Previous updates to Parliament by the DfT have not disclosed the risks that construction costs could be significantly higher than expected.

Questions also remain on the effects of high inflation levels, and there have been 30% to 40% swings in the cost of raw materials. The Treasury has made clear that departments are expected to absorb the higher costs from inflation within existing cash budgets, but the DfT and Treasury have not agreed on how to deal with this without taking decisions that would risk poor value for money, including further reductions in spending.

Dame Meg Hillier MP, Chair of the Committee, said: “The HS2 Euston project is floundering. This is a multi-billion pound scheme which has already caused major disruption to the local community put on pause. The pause, ostensibly to save money, is not cost-free – mothballing and possible compensation for businesses which have lost work will all need to be added to the HS2 tally. The Government must now be clear what it is trying to achieve with this new station, and how it will benefit the public.

“Our report finds that a wildly unrealistic budget for HS2 Euston was set in 2020 in the expectation that it would be revised. The Government must demonstrate that it is not just repeating the same mistakes of unrealistic costings. HS2 Euston has shown us that forging ahead over-optimistically in an unclear direction is clearly not the right approach.”

Following its investigations, the PAC has made the following recommendations:

• Recommendation 1: The current construction pause should be used to finally establish the design and expectations for the station against what it is willing to spend.
• Recommendation 2: Before construction work restarts, DfT must make clear that its revised budget is realistic and the station design is affordable and deliverable with timescales set for construction.
• Recommendation 3: Within three months DfT should produce an interim report on how it and HS2 is managing the costs of the pause, exactly how much has already been spent, and how much more they expect to spend to complete the project.
• Recommendation 4a: DfT should agree with HM Treasury and report back to the PAC in six months how the continued consequences of high inflation will be managed.
• Recommendation 4b: HM Treasury should set out to PAC how it will work with all departments to manage the consequences of high inflation on major capital programmes.
• Recommendation 4c: DfT to establish and set out to PAC the requirements to access the government contingency on the HS2 Programme.
• Recommendation 5a: As part of its six-monthly updates to Parliament on HS2, DfT must clearly explain of the maturity of its cost estimates and risks that could result in material changes to provide greater transparency.
• Recommendation 5b: PAC queried:

Why the existing report was late and contained so little information;

Whether the next six-monthly report would be submitted to Parliament on time;

Whether the 2019 figures would now be stated in 27 March 2023 report figures;

Whether the next report would have an up-to-date BCR.

Recommendation 6: DfT needs to demonstrate that it is successfully embedding lessons from past rail projects.

Regarding Euston, DfT and HS2 Ltd should report:

• what measures did DfT and contractors take internally to address costs overruns and to identify who was responsible
• what lessons were learned from the Euston project and how they will apply to Birmingham Curzon Street and Manchester Piccadilly,.
• how the work on the Euston site will be integrated once it has decided what it wants to achieve there.