The completion of the High Speed 2 railway could be delayed again as the government carries out a cost-cutting exercise.
Citing Department for Transport (DfT) officials, the Financial Times reported that the government has started work on “Project Silverlight”, which is looking at how it can cut costs through delays and cuts to the scope of Phase 1 of the railway, which runs between London and Birmingham.
“This is a function of inflation, we are having to find huge savings because the cost of everything the department is already doing will have become so much more expensive by then,” a government official told the FT.
The official budget for HS2’s first phase is £44.6bn, including contingency funding, but that’s at 2019 prices, so it will have risen even without the current high inflation rate. Last October, the transport secretary Mark Harper confirmed that the railway was under pressure to come in under budget and that plans were being looked at to bring the project back in under budget.
However, while inflation is at the moment high, delaying the project doesn’t save money unless inflation were to turn negative. Even if inflation returns to the target two percent range, costs will still be rising by 2 percent a year. Delays due to inflation do not save money.
If inflation is the trigger, then bringing the project forward would save money, not the other way around.
There is though an argument that could be put forward that some of the inflationary pressures are more intense for HS2 due to construction supply constraints — with inflation hitting 18% against general consumer price inflation of 10.1% last September. Therefore a modest delay may reduce supply chain pressures and help pull construction inflation down, but if so, it’s likely to be in the range of months instead of years worth of delays — and well within the 2029-33 range for opening the railway between Birmingham and Old Oak Common.
A second project, called “Operation Blue Diamond” is looking at cost cutting across the entire HS2 railway line, including the potential for further cuts to the already truncated eastern spur of the railway.
The review is said to be looking at cutting the remaining 60km section of the eastern leg that was to have run between East Midlands Parkway to Leeds, but had already been cut back two years ago, with a more limited upgrade of the existing railway line. Another option being looked at is cancelling the Handsacre Link, just outside Birmingham, which has been designed to allow HS2 trains to reach Stoke-on-Trent and Staffordshire.
Those cuts would however effectively negate much of the benefit of HS2 north of Birmingham, which is to add capacity to the rail network so that more regional and commuter services can be added to the existing railway tracks.
The FT said that both reviews would run until the summer with no final decisions made before then.