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Case for HS2 "must continue to be argued", says expert, following critical NAO report

The Government must "continue to argue" the case for a high speed rail link between London and the rest of the UK following the publication of a critical report by the public spending watchdog, an expert has said.

Patrick Twist of Pinsent Masons, the law firm behind Out-Law.com, said that the report by the National Audit Office (NAO) was a "salutary reminder" that the passage of legislation related to the High Speed 2 (HS2) rail project would be a "bumpy ride".

In its early examination of the work done by the Department for Transport (DfT) to prepare for the new network (56-page / 759KB PDF), the NAO said that the Government was yet to demonstrate a "clear business case" for the project, particularly in relation to the ability of the new line to stimulate regional economic growth. It was also unclear if the business case covered just the first phase of the line, which will connect London and Birmingham, or the second phase, which will extend the line to Manchester and Leeds.

"It's too early in the High Speed 2 programme to conclude on the likelihood of its achieving value for money," said Amyas Morse, head of the NAO. "Our concern at this point is the lack of clarity around the Department's objectives."

"The strategic case for the network should be better developed at this stage of the programme. It is intended to demonstrate the need for the line but so far presents limited evidence on forecast passenger demand and expected capacity shortages on existing lines. It is also unclear how High Speed 2 will transform regional economies by delivering jobs and growth," he said.

The initial London to Birmingham phase of the 250 miles per hour rail link is scheduled for completion in 2026 and will cut journey times between the two cities to 45 minutes, the Government has said. A proposed second phase of the project envisages the construction of an onward 'y network' connecting the line to Manchester and Leeds, as well as a spur to Heathrow Airport, by 2033.

In its report, the NAO said that a new estimate of the cost of the first phase of the project "based on a clearer route and more information" was currently being prepared. According to its estimates, the Government will need to find £3.3 billion in additional funding for the project over the four years from 2017-18 to 2020-21. Estimated costs of the project will change as costs become firmer, it said, as would the relationship between the costs of the project and its expected benefits. The cost-benefit ratio for phase one of the project had "twice contained errors", the NAO said.

However, Patrick Twist said that some of the NAO's criticisms of the project were "surprising".

"Projecting rail capacity requirements over the next 25-50 years is inevitably imprecise," he said. "However, there is ample evidence that passenger rail usage has risen sharply in the last fifteen years and has continued to increase even whilst the economy has been flatlining. Rail freight is already severely constrained by the lack of spare rail capacity."

"The Government will no doubt produce more evidence of the economic benefits to the regional economies. But the NAO's criticism on this point is symptomatic of the blinkered and formulaic approach which has blighted infrastructure investment for decades. The Chambers of Commerce in Birmingham, Leeds and Manchester all support HS2 because they see the benefits to their members and to their local economies," he said.

HS2 Ltd, the DfT-owned company responsible for delivering the project, has begun consultations on a draft environmental statement and proposed design refinements. Among the most significant changes to the route, introduced following lobbying from businesses and individuals, are new tunnels under Ealing and Northolt in north west London, and at Bromford in the West Midlands. It also plans to redevelop and improve Euston Station to accommodate the new trains, rather than rebuilding the entire station.

New legislation which will allow development to begin will be introduced to Parliament later this year, following the announcement of the High Speed Rail (Preparation) Bill as part of the Queen's Speech. If approved, the Bill would allow for quicker construction and design expenditure. It would also give Parliamentary authority for ecological surveys and other preparatory work to take place, and allow for compensation payments to property owners living along the route.

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