HS2 chief admits Euston station £2.6bn budget was never likely to be enough

HS2’s chief executive acknowledged it has “proven to be the case” that the work on Euston station was never likely to fall within the original budget, after the government paused construction due to a drastic hike in costs.

Mark Thurston told a public accounts committee meeting on April 24 that due to the complexity of projects such as HS2, initial cost estimates are very “preliminary”, and that a more comprehensive and detailed budget was always due to be delivered at a later point.

The government recently announced it would be pausing the work on Euston station, and the tunnel connecting it to Old Oak Common, after HS2 updated its estimation of the final cost to £4.8bn, £2.2bn more than the £2.6bn budgeted, itself a stretch target on a £3bn prediction.

This sparked fears that HS2 will end up terminating at Old Oak Common, in north-west London, never to continue into Euston.

Mr Thurston, who appeared at the committee meeting alongside Dame Bernadette Kelly, permanent secretary at the department for transport (DfT), and Alan Over, director general at High Speed Rail Group, explained that the most-recent estimate is “the most comprehensive, most detailed and most confident figure we’ve got”.

Responding to the Huntingdon MP Jonathan Djanogly, who asked whether the station was “ever affordable within the original envelope”, Mr Thurston said: “I think that’s a great question, and I think it’s proven not to be the case.

“We took a view at the time, our best view of an estimate was £3bn in 2019 prices, that was a base estimate of £2.3bn and £700m of contingency. We knew that we would probably have to re-assess that at some point.”

He continued: “The reality with all of HS2, and it’s the same across the sector and across government, you don’t really know what this is going to cost the taxpayer in a lot of these big projects until the marketplace has priced it.”

The pause of Euston means the group can “draw breath and decide what we do next”, Mr Thurston added.

Pressed on the DfT’s role in the pause, Ms Kelly said it is her department’s job to make sure the “taxpayers’ interests are being properly reflected in that process”, and that decisions must now be made as to what happens next.

Ms Kelly said the revised costs for Euston are “disappointing”, after already being scaled down from an 11-platform station to 10 platforms following the Oakervee Review in 2020, in a previous bid to save money.

Asked how £2.2bn can be cut from the proposals to achieve the £2.6bn budget, Mr Over said: “There are choices you could pare back if you’re prepared to make difficult ones, and we might need to do that.”

Noting potential savings in areas such as scaling back the re-working of the underground station, Mr Over said he “can’t promise” £2.2bn can be cut, and that it may require the government to spend more than the £2.6bn budgeted.

In a recent National Audit Office (NAO) report, the government and HS2 were criticised for not being able to deliver a design within budget, with the NAO warning that a pause is not likely to deliver cost-savings.

Gareth Davies, head of the NAO, said: “The March 2023 announcement by the transport secretary pausing new construction work should now give DfT and HS2 Ltd the necessary time to put the HS2 Euston project on a more realistic and stable footing.

“However, the deferral of spending to manage inflationary pressures will lead to additional costs and potentially a more expensive project overall, and that will need to be managed closely.”