Tag Archive for: Rail

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HS2 Delayed – What a Surprise!!

So, the UK’s biggest case of Bad Buying for decades has hit the news again. The high-speed rail link (HS2) between London and “the north” is being delayed. The programme will slow down to spread the cost over a longer period. The line to Manchester will not open until at least 2043 and the new London terminal will also be delayed. So passengers travelling south will end their journey by being dumped in a siding near Willesden Junction*. Well, what a surprise.

The delays also kick the can down the road beyond the next election, so the government can continue making vague statements about levelling up and supporting growth in the north rather than just admitting they messed up. This is all stacking up to be a monumental waste of over £100 billion of our money.

I don’t claim amazing clairvoyant powers but since the beginning of the HS2 fiasco, I have predicted that it would cost far more than planned and would probably never be completed. I think it was on Twitter some years back that I got involved in an argument with a keen “train guy” who rubbished my claim that the eventual cost would be over £100 billion. And the business case was always dodgy – based on strange assumptions about how people use their time – but it became even more ridiculous once the working from home movement picked up steam during Covid. Back in September 2020 I wrote an article  – here is an excerpt.

“Construction of the HS2 high-speed railway network in England started formally last week. Some will be cheering – not me. At a time when working patterns have been changed because of Covid, perhaps for ever, and everyone is getting used to Zoom, Teams and the like, it seems crazy to be building new rail capacity so businesspeople can go to meetings. Other possibilities such as autonomous road vehicles make also make this very much a 20th century option.


HS2 is basically a job creation scheme, but an incredibly expensive one. The projected cost was initially £1-36 billion, but we’re now looking at £106 billion, incredibly.  The National Audit Office (NAO) report in January said this in summary. “In not fully and openly recognising the programme’s risks from the outset, the Department and HS2 Ltd have not adequately managed the risks to value for money”.

At the end of 2021, the eastern leg to Leeds got cancelled, and even the government had to admit that the business case was awful. As The Times said, “HS2 has long since ceased to be a project based on anything resembling a sound business case. The most recent business case published by the government, in June last year, awarded HS2 a benefit-cost ratio of 0.9. In simple terms, it will cost more to build than the advantages it bestows”.

Inflation is being quoted as one of the drivers for the delay – but ironically, delaying will only increase the cost further because of that very factor.  It is only the sunk cost fallacy that drives even the London-Birmingham leg to completion, and the political embarrassment if it were halted, after not just the money squandered but the impact on the countryside and wildlife through the construction to date.

In the meantime, much of the north of England suffers from dreadful public transport. A fraction of the HS2 budget could have made a real difference to local train and bus services, improving for instance the trans-Pennine routes which have been in a state of virtual collapse in the last few years.

The Times called for a “brisk inquiry into who got the country into this mess. Politicians, senior civil servants and the executives who have ridden the HS2 gravy train should be called to account”.  I’d also like to see a real analysis of why construction costs appear to be so much higher in the UK than elsewhere. There may be some genuine reasons – geographical, for instance – but I suspect there are other more addressable problems around the procurement process, risk appetite, the role of consultants and more. It would be good (but probably optimistic) to think that something could be learnt out of this disaster.

* Joke. Well, I think it is…

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Should HS2 Go Ahead At All? Business Case Now Even Weaker…

So the eastern arm of the high-speed rail programme HS2 from London up to Leeds, has been cancelled. Well, what a surprise. The biggest money pit dug in the UK for a long, long time has become too deep even for this spendthrift government. As Construction News reported,

“The eastern leg of HS2 phase 2b between Birmingham and Leeds has been scrapped by the government as part of its Integrated Rail Plan (IRP) for the Midlands and the North. The cost-cutting on HS2, which the government estimates will save around £18bn, was unveiled … by transport secretary Grant Shapps alongside pledges to upgrade local and intercity rail links in the regions. The £96bn investment package will cut journey times between many towns and cities, and increase the capacity of the rail network, Shapps said”.

I wrote here and here about HS2, with some thoughts on why huge programmes fail and how it sometimes seems that everyone involved with such programmes has an incentive to mislead the public – and often some of the decision makers – about the true costs. 

Most of the press commentary about the recent decision has focused on the “betrayal” of the north of England and what this means to the Prime Ministers supposed “levelling up” agenda, which is aimed at spreading wealth from the south of England to the north.  But surely a bigger question is whether the rest of HS2 should be going ahead, given the costs and a business case that look weaker and weaker as time goes by.  I pointed out a year ago that the initial business case was, in effect, a fiddle or a fix, designed to justify the programme.  As I said then:

“The business case for HS2 was always highly questionable. It relied on ascribing a value to the extra 20 minutes or so the passengers would have because of their somewhat faster journey from London to Birmingham. It assumed that the journey time was “wasted” from a benefit point of view, which is clearly not true (have they never heard of smartphones or laptops?), and also assumed that passengers wouldn’t use the extra 20 minutes by staying in bed a little longer!”

Now the new issue of Private Eye magazine has pointed out that the initial business case also made it clear that the whole programme would only offer value for money if it was all completed. The full benefits of “Northern Powerhouse Rail”, some of which is still going ahead, were also conditional on the HS2 leg to Leeds.

Private Eye also points out that economic growth in the UK has been slower than the figures used in the 2015 business case, which reduces the return further. And of course, the pandemic has driven a major drop in rail usage, and it is far from clear at the moment whether pre-Covid traffic levels will return, given what appears to be a seismic change in working habits and the growth of hybrid home /office working patterns. 

So we are now in the crazy situation where the government is subsidising existing rail companies and lines by billons a year because of the lower levels of usage, whilst spending £60+ billion on the western arm of HS2. Think what that money could do to improve the creaking railway system in the north of England, the trans-Pennine routes, commuter services into Manchester, Liverpool or Leeds, getting Sunderland connected properly… I am not anti-rail, I should say, but I do not believe HS2 is a good use of public money in such huge quantities.

I also have doubts about the HS2 programme’s ability to avoid Bad Buying in terms of how it spends money with suppliers, but that’s another issue altogether!

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Why Do Complex Programmes Like HS2 Always Overspend – Conspiracy or Cock-up?

I was interviewed about my new Bad Buying book by Jeremy Vine on his UK Radio 2 BBC show last week – over 7 million listeners apparently. He seemed to have read at least some of the book which was surprising and pleasing, and said it was a “fascinating book … I haven’t read a book like it before”. Which you could interpret in a number of ways!

During the interview, the positioning from Vine was about governments wasting money, which was not my choice really in term of emphasis.  I believe private sector firms probably waste just as much money through bad buying (procurement) as public sector organisations. But it is not as visible, because there is no UK National Audit Office (or their equivalent in other countries) to keep an eye on private firms. And of course the private sector is only wasting shareholders cash, not that funding provided by every citizen via their taxes.

One issue we got onto during the interview was why major projects always seem to run way over budget.  HS2 is a good example. Some £30 billion was the initial budget – we’re now at around £100 billion and I’ll be pleasantly surprised if we come in at even that amount. But why does this happen?

One of the callers to the show identified a key issue. “If we’d known it was £100 billion from the start, HS2 would never have been approved,” he said. Another example is the Scottish Parliament building which amazingly went from initial estimates of around £40 million to a final cost of £414 million!  The eventual report into this said, “The figure of between £40 and £50 million originally put before the Scottish public was never going to be sufficient to secure the construction of a new Parliament building of original and innovative design”.  

My feeling is that there is little incentive for key stakeholders to be honest about costs at the early stages of major construction, technology or other programmes. The supply side wants the programme to be approved as they will benefit. On the buy-side, lots of civil servants, consultants and interim managers see a gravy train going on for years, maybe for the rest of their careers (in the case of something as mega as HS2).

The politicians want their vanity project to go ahead, knowing that when the chickens come home to roost and the overspends become public, they will have long gone to lucrative private sector jobs or the House of Lords.  (I’m sure some Scottish politicians just wanted a prize-winning new building, whatever the cost). So most of the key stakeholders are likely to underplay the potential costs, and overstate the benefits too (the HS2 business case is largely a work of fiction).

It is not just the UK that is vulnerable to this either. In 2019, Jean Nouvel, a celebrated French architect, started criminal action against the owners of the Philharmonie de Paris, the new concert hall he designed. He claimed fraud, embezzlement and favouritism, all in response to a 2017 claim by the owners as well as city and local government against him for payment of €170 million in damages for budget excesses and delays in the construction.

He was contracted to build the auditorium in 2007 for €119 million, but the final cost was estimated at €328 by the owners and €534 million by the regional state auditors (which in itself seems like a big discrepancy).

Le Monde reported Nouvel saying that the €119 million was quoted purely to match the ceiling set for the public tender, and was not really a genuine cost estimate. He claims that €100,000 per seat was the established cost for similar concert halls, and the €119 million total would have required spending only half that much, so it was never realistic. He also claims that everyone knew that the real cost would be much higher – “this is pretty usual in France in public tenders for cultural projects”, he was quoted as saying.

So in cases like this, do buyers really know the supplier isn’t to be believed, but everyone conspires to make sure the programme goes ahead? I’m sure this happen in defence projects, where the buy- side and sell-side are very cosy members of the same industry, and every major purchase seems to lead to a huge cost overrun.

The problem is, I’m not quite sure what we can do about this. Maybe more scrutiny up front, from NAO, the media, or opposition political parties? Or a “citizens convention” to review major spending ideas and bring a note of cynicism to the optimistic projections?  Or perhaps we will just keep spending a fortune, then wondering after the event how on earth it all happened. Again.

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HS2 Construction Starts – The Money Pit Gets Deeper

Construction of the HS2 high-speed railway network in England started formally last week. Some will be cheering – not me. At a time when working patterns have been changed because of Covid, perhaps for ever, and everyone is getting used to Zoom, Teams and the like, it seems crazy to be building new rail capacity so businesspeople can go to meetings. Other possibilities such as autonomous road vehicles make also make this very much a 20th century option.

HS2 is basically a job creation scheme, but an incredibly expensive one. The projected cost was initially £1-36 billion, but we’re now looking at £106 billion, incredibly.  The National Audit Office (NAO) report in January said this in summary. “In not fully and openly recognising the programme’s risks from the outset, the Department and HS2 Ltd have not adequately managed the risks to value for money”.

Does anyone really think that those “risks to value for money” will be achieved through the rest of the programme? Look at Crossrail, where the project is now three and a half years (at least) behind schedule, and the cost has risen to at least £19 Billion, some £5 billion over budget.

The business case for HS2 was always highly questionable. It relied on ascribing a value to the extra 20 minutes or so the passengers would have because of their somewhat faster journey from London to Birmingham. It assumed that the journey time was “wasted” from a benefit point of view, which is clearly not true (have they never heard of smartphones or laptops?), and also assumed that passengers wouldn’t use the extra 20 minutes by staying in bed a little longer!

This is an example of a vanity-driven Bad Buying project, and there are others described in my new book, Bad Buying – How organizations waste billions through failures, frauds and f*ck-ups,  published by Penguin on October 8th (you can pre-order it here). Politicians love to spend money in a way that they feel will provide them a “legacy”, assuming that posterity will thank them for their initiative and forget the huge waste of taxpayers’ money once a few years go by.

Another problem with huge programmes of this nature is the lack of anyone in a controlling position who has a vested interest in really managing costs. The engineering and construction firms are probably smart enough to avoid signing up to onerous fixed price deals, so they would like the construction to go on for ever. Likewise the well paid HS2 staff, including thousands of “contingent labour” workers (including procurement people) no doubt earning a very good day rate. The longer the better for them.

We might assume that the politicians have an interest in managing costs, but the problem here is both the relative timescales and the asymmetry of information. Even the Transport Minister has no idea whether they are being spun a line by the experts who are closely involved in the programme. And most Ministers last less than 3 years in post so they know that they probably won’t be around themselves to carry the can – and later Ministers can blame their predecessor! So who really represents the interests of the poor old taxpayer in this? NAO perhaps, but their reports, although excellent, tend to be put together well after the event.

The only positive I can see is that if I do write a sequel to Bad Buying, I’m sure HS2 will give me some good stories. But I’m not sure that offsets the likely spending of £5,000 for EVERY family in the UK, to build what may well become a major white elephant.

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