Oral evidence: Lessons learned from major rail infrastructure programmes, HC 709

Oral evidence, 10 November 2014.

Witnesses

Philip Rutnam, Permanent Secretary, Department for Transport, David Prout, Director General, High Speed 2 Group, DfT, and Clare Moriarty, Director General, Rail Executive, DfT, gave evidence.

Chair

Welcome. Today is a more deliberative day, looking at the work that we have done with you over the past goodness knows how many years. Fifteen years? How long, Geraldine?

Geraldine Barker

Eight years.

Chair

Eight years for you. We are going to see whether that is changing your approach now to projects such as HS2. That is the obvious one, and possibly HS3 and Crossrail 2. We will also look at any other ideas that are floating around. It is difficult to know where to start. Let me start with thinking about the first issue that the NAO raised about taking time on projects before you embark on them. I assume you accept that is a sensible thing to do.

Philip Rutnam

Indicated assent.

Chair

Great. When we looked at HS2 in the early days that was a criticism; that you had plunged in on the project without really assessing its viability and planning for it in the first instance. Do you want to bring us up to date on where, on that one, you think you are learning the lessons that have been brought out in the Report? Would you also tell me how that is impacting on your approach to the new concept of HS3 and the proposition that is around on Crossrail 2?

Philip Rutnam

I will start with HS2. The first point to make is that we completely accept and very much agree that the planning and preparation phase of any of these projects is vital. It is that phase more than any other that determines the success of the project. We are currently in that phase on HS2. We have talked before about the timetable for HS2. The Government have said that they now expect Royal Assent for the hybrid Bill to be by December 2016, so there is a time scale for the Bill, which in itself allows more time for planning and preparation. The Government have also said that they continue to expect completion of the project’s construction by 2026, but construction can start in 2017, following Royal Assent.

Chair

2026 is phase 1.

Philip Rutnam

Phase 1, yes. With completion by the end of 2026. I can tell you that the new management, which has leadership of the project and which has arrived since the last time we talked about it at this Committee, comprising David Higgins, the chair, and Simon Kirby, the chief executive, are from their long experience very focused on ensuring that they use this time to get the planning and preparation of the project right, on thinking through in great depth alternative approaches to procuring construction and on resolving as many of the issues as possible regarding the operating environment within which the project will proceed. That is their focus. There is immense effort going on at the moment into exactly those sorts of issues, which, as you will see from the reports on Crossrail, Thameslink and others, has proved so important to subsequent success. That is their priority.

Chair

I think that you got things wrong in HS2’s planning. I hope that that is common ground and that you will not defend how it was planned in the early stages. You may say, “We’re getting better now,” but it was very much finger in the air during earlier stages. When we looked at the matter, there was no really good economic case for investment, little work had been done around the cost-benefit analysis that showed any credibility, and the costings against which you were working were pretty tenuous. Those sorts of things look bad. That is not what I would call sensible planning. So we got it wrong on HS2. We will come back to Mr Prout on how it is much better now. I am glad to hear it, but we will test that a little. Regarding HS3, one assumes, given the way these things go, that there will be something in the Chancellor’s autumn statement about it. Crossrail 2 is probably a little further behind that, but it is being talked about and the Mayor has shown a commitment to it. The interesting thing there is whether, in developing those two, you learned the lessons of what you did wrong before.

Philip Rutnam

I don’t by any means agree with all of the characterisation of HS2 as it was before. What I would agree with, which is in the Report, is that the Government could certainly have articulated the strategic case for the project better. You will be well aware that after the last time we met on the subject of HS2 we did a great deal more work, informed by the Committee’s deliberations, the NAO’s Report and many other sources, on the strategic case. We produced what I thought was frankly a very good strategic case for the project in October 2013. There may still be room for debate about that, but I will move on to talk about HS3 and Crossrail 2, which you could say are at a broadly similar stage of development. If anything, there is a bit more detail about Crossrail 2, but they are broadly at the same stage, which is much earlier than HS2. For HS2’s first phase, we have a precisely defined route and obviously have legislation before Parliament. The Government have made many detailed decisions since January 2012 about the specifics of HS2’s first phase and decisions at a higher level, because it is earlier in the process, for the second phase. With HS3, it is more like the state of development of the proposals for a new high-speed line from London to the north in, say, 2009, very broadly—2009 or 2010. It is at a much earlier stage of development of the proposition. The absolutely critical thing that we need to do on HS3 now is to work up specific options—costed, with a business case—understanding the whole array of specific issues that go with any of these projects. I am talking about the same sort of options development process that the Department went through for HS2. The nature of the project is different again, because with HS3 it is very clear that we need to work in the closest partnership with the northern authorities and with Transport for the North, which is the new entity coming into being for the north. So it will be a different development process. We have to develop options with much more detail around them, and then decisions can be made. You will be aware that the Chancellor and the Prime Minister have asked the Department to lead the development of a production report on that for March of next year.

Chair

Let’s try to keep the answers tight. What worries me about that is that you are actually saying, “We’ll do the same as we did for HS2.” We were critical, as a Committee, of the lack of proper strategic planning for HS2, so I was hoping to get out of your answer the fact that you were going to do it in a different way, rather than the same way. I am trying to really pull that out, very briefly.

Philip Rutnam

Let me try picking up on that point, because I think you are right. One of the criticisms that I would take on HS2 is that we did a great deal on the economic case; we didn’t do enough early on to articulate, in a way that really helped to carry with us opinion formers and those with a keen interest, the strategic case. That has to be different, and I think we can do more, early, on the strategic case for HS3. I was just trying to explain that they are at a different stage and it is in a different context. I could talk about Crossrail 2 if that would be helpful, but that project is being promoted by the Mayor principally.

Chair

Mr Prout, you have never looked at the options for an HS2, have you? You have never looked at another way of using that money to similar effect. HS2 was a given; you never looked at whether there were other ways of achieving the objectives of HS2.

David Prout

Yes, we did.

Chair

When?

David Prout

Four extensive reports were published in 2010, 2011, 2012 and 2013. Work was done by Atkins and Network Rail on alternative ways of achieving the objectives behind HS2.

Chair

Which is what? Remind me.

David Prout

The first report looked at different ways of achieving the same objectives using different transport modes, so it compared rail, road and air. The other reports focused on alternative ways of achieving the same objectives through different rail-based approaches—either new conventional lines or upgrading of the existing network. These reports are all published; they are all in the public domain. The strategic case, for example, had a whole chapter on the alternatives to HS2 that we looked at, most recently in 2013. Even David Higgins’ report, published a few weeks ago, looked at alternatives to the eastern leg of the Y for HS2.

Chair

You looked at alternative routes, not alternative—

David Prout

No, alternative approaches—either building a different new railway line or patching and mending, adapting or improving the existing lines.

Nick Smith

When looking at HS2, did you look at the possibility of HS3 at the same time and think that it might be a good idea to build up in the north first?

David Prout

There are two different things, I think. HS3 achieves east-west connectivity. In some of the early work on HS2, there was an S proposal, which linked Manchester and Leeds and then came down to London. It has long been recognised that east-west route connectivity is not as good as it could be. In fact, the common ground between HS2, HS3 and Crossrail 2 is that they all address very long-established problems. The HS2 problem was first addressed by the west coast main line modernisation. The HS3 set of problems was addressed in the work on “The Northern Way”. And the route has changed slightly, but Crossrail 2, or the Chelsea-Hackney line, has been around for 30 years, I think.

Nick Smith

I take that point, but the south-east economy is doing very well compared with Wales and bits of the north-west and the north-east. If you were looking at HS2, why did you not think about having HS3 first? That would be my query if I was a northern MP.

David Prout

Sorry, I did not address that half of your question. The problems that HS2 is seeking to solve are around north-south connectivity and congestion. The question of building from the north—

Chair

Is it north-south congestion or commuter congestion? It is commuter congestion.

David Prout

It is both. It is the north-south train paths—the availability of train paths between our major cities and London.

Chair

Train what?

David Prout

Train paths: space on the railway for trains to run, like landing slots at Heathrow. There is a train path issue—

Chair

That is more for commuter traffic.

David Prout

It is for long-distance and commuter traffic. HS2 takes trains off the existing main lines, and puts them on to a new railway, freeing up space for commuters on the existing railway. Of course, it also creates 18 new train paths per hour between the north and south for long-distance travel. Building the new railway tackles both problems.

Chair

But the problem is the commuter problem.

David Prout

The problem is both. It is the fact that the west coast main line is a mixed-use, extremely busy railway line with long-distance, commuter and freight mixed up together. It is difficult to get any new trains in and to meet the demand of people from Shrewsbury, Blackpool, or north Wales to come direct to London. Secondly, there is the problem of not enough seats for commuters.

Austin Mitchell

How far do you evaluate these grandiose projects? It looks as if a Minister has come up with a fantastic idea with HS2 and HS3—why not give them a train across the Pennines, difficult as it is?—and you have to find the justification for it. You produced some fantastic justifications initially for HS2 and then whittled them down. How far do you evaluate grandiose projects such as HS2 and HS3 against real needs? The east coast main line is crowded out; you cannot shove more stuff on it. We are desperate for a direct service to London. The rails north and south of the Humber need to be electrified to serve, in our case, Immingham, which is the biggest port in the country. The rails are not electrified and there is no given date for that to happen. All those problems could be solved by investment now, but they are never evaluated against these grandiose projects, which are plucked out of the air.

Philip Rutnam

I do not think that is fair or right. We have a rigorous system within the Department of appraising projects to try to ensure that we are, indeed, investing only in things—

Austin Mitchell

Analyse the benefits of, say, the electrification of the south bank of the Humber, where the line needs to be reconstructed and where the trains have to go far slower than cars on the motorway. You have evaluated the benefits of investment there and the electrification against the costs and benefits of HS2 or HS3.

Philip Rutnam

In rail, which is a particularly complicated mode, we find that you typically need to have an investment portfolio of short, medium and long-term things that you are doing. Often—the east and west cost main lines are examples of this—to achieve significant increases in capacity, you need very big investment programmes. In fact, on the west coast main line, now that capacity has essentially been absolutely maximised through the modernisation programme of a decade or so ago, there is no sensible alternative for upgrading the capacity on that route other than building a new line—that was the subject of studies to which David referred. That is a large part of the justification for HS2. There are things happening right now to increase capacity on the east coast main line. There are some infrastructure improvements happening, and the planned introduction of the inter-city express programme trains, which we talked about when we last saw you. Taking the infrastructure upgrades and the new rolling stock together, that will increase the capacity that can go into London, the biggest pinch point, by 28%. There will be new train paths and, through the franchising process, we have invited proposals for how those paths should be used. So there are things that we can do on the east coast main line, but if you look longer term on that line and predict the growth in traffic that is likely to happen, again you will reach a capacity limit—

Austin Mitchell

All those things can be done now. We do not get any benefit at all on the east coast, but Leeds will not get any benefit from High Speed 2 until 2034, and there is overcrowding and pressure on the east coast main line now.

Philip Rutnam

And these things are happening now. The intercity express programme trains are on order and being built now. The infrastructure improvements that I talked about are happening now: some of them have finished and others are in progress. Leeds will get benefits and York, Newcastle and Edinburgh are all capable of getting benefits from exactly the changes I am talking about.

Austin Mitchell

It is high speed in the sky. You are talking about the 2030s.

Philip Rutnam

We are in a long-term planning business.

Austin Mitchell

But I am travelling up and down now in crowded trains that run late.

Philip Rutnam

To be clear, we are trying to do things now for the crowded trains now. Unfortunately, in railways even that takes some time, but there are things happening right now. Trains are being built in County Durham which will improve the situation on the east coast main line.

Stephen Phillips

When?

Philip Rutnam

The full introduction of those trains will be in 2019. So things take some time on the railways, but things are happening.

Chair

Let me ask you the question another way, which might help us on the strategic case. What have you forgone by going ahead with HS2? When you did the strategic overview—you claim you did it, though we were critical—and decided to put this huge chunk of money into this investment, what did that take priority over?

Philip Rutnam

In fact, as far as the Department is concerned, this is part of a portfolio of investment in the transport network in which investment in numerous areas is increasing.

Chair

You cannot have it all; you had to make choices. All we are trying to do is get is some feel for those. What Austin said in a different way from what I just said is that there is probably justification for zillions of pounds of infrastructure investment across the rail network, but you have got to make choices. You have plumped for this £50 billion here, but over what have you prioritised that?

Philip Rutnam

The Government, and it really is the Treasury which—

Chair

I know it is a political decision, so I am not blaming you, but what was your advice?

Philip Rutnam

The Government has been very clear that its investment in HS2 is not at the expense of investment in the existing national rail network, which is also increasing, or in the roads network, which is also planned to increase as was announced today.

Chair

There must be prioritisation. Why did the Government go for this?

Philip Rutnam

My interpretation is that the Government has taken the view that investing in infrastructure is a top priority and, therefore, if there is an opportunity cost, it is in other areas of the capital budget which are not in transport.

Chair

I want a bit of honesty, Mr Rutnam. We will come back to where we are on that and whether you live within it and achieve all that you set out to do, but it is a lot of money and there is scepticism—our Report was quite sceptical because we were among the sceptics—about how you determine this as a priority. How did it come about that the Government ended up saying yes to this? That is where we are all leading.

Philip Rutnam

Because, after many years of study by many of the best experts in the country inside and outside the Department, we see no sensible alternative if the country is to have the kind of rail network that it is likely to need in the third decade of the century and beyond. Yes, it is a very large investment, and it takes a long time to deliver, but we do not see an alternative for north-south connectivity between the great cities of this country to doing something on this scale. That is the reason.

Chair

Let me give you a little example that is completely in my patch. Fifteen or 20 years ago, we were supposed to have a DLR extension into Barking Riverside to allow for the development of about 12,000 houses. Along came the Olympics, and priorities then changed. Because we won the Olympics, we decided that access to the Olympics had to take priority over that. That was a priority decision; I did not like it, but it was a priority decision that was taken at that time. We are still suffering from that decision. I cannot believe that you are saying that this Government decided to make a £50 billion investment—much bigger than what we were asking for in Barking and Dagenham—without saying, “We are doing this rather than that.” That is what we are trying to get at. If you did not do that, you are wrong, because that is just the sort of priority strategic planning that we think you should be doing and the NAO Report tells you that you should be doing.

Philip Rutnam

I understand the challenge. There are many prioritisation decisions that this Department does make, directly trading off uses of resources and capital—even within the rail network, and smaller levels than that. I might ask Clare to give some examples of that in a moment. As far as the decision to provide resources for this project is concerned, I have to say that it was a decision well above my level to invest in HS2 and in other elements of the transport system.

Mr Bacon

There are not that many levels above you, Mr Rutnam; you are the Permanent Secretary.

Philip Rutnam

Believe me, there are. Can I try to help?

Mr Bacon

Are you saying that those conspiracy theorists who go on about the secret Government are right? We can only see one or two layers above you.

Philip Rutnam

I am not going to go there.

Austin Mitchell

This brings me back to my original point: the decision is taken and you then find justifications for it by amplifying the benefits. There are benefits that could be secured now by investing in existing track—upgrading, electrifying and improving it. You mentioned the benefits of the east coast main line; that was one of your main arguments for High Speed 2. Those benefits will not come through until 2030. The east coast line is overcrowded now. Last time we talked to your officials, they said, “Grimsby might get a couple more slots on the east coast main line after HS2 is built.” That’s crap. We need those slots and that upgrading now. We need a service across the Pennines. You are now talking about HS3. You could service the Pennines better by adding more trains with up-to-date rolling stock and by reopening the Woodhead tunnel, which was closed for some reason after being built after the war. Why do you not do the investment now to improve the railways?

Philip Rutnam

I am clearly not getting my point across that we are doing immense amounts of investment now. We do have to make prioritisation decisions. I will ask Clare to give some examples of when we prioritise within the Department.

Clare Moriarty

Within the overall enhancements programme which Network Rail is delivering, prioritisation decisions were made in order to arrive at that programme. The Department specifies in terms of the outputs we want. The sorts of thing that we were prioritising in 2012, when the current programme was being put together, were things like commuter journeys. We asked Network Rail to provide 140,000 additional commuter places into both London and major northern cities in the peak-hour period.

Chair

How did you decide on 140,000?

Clare Moriarty

A huge amount of work goes on in route strategies and through forecasting—looking at the demand that exists, how demand is developing and the long-term forecasting of what we are likely to need. Priorities were also set in terms of electrification and improving connectivity in the north. All of that goes into the current programme, which includes a huge amount of investment in the north of England, electrifying in the north-west, the North TransPennine route and £240 million of investment for the east coast.

Chair

We are interested in trying to stand back from this and ask, “How do you get to these decisions? Are they rational?” The evidence so far and the evidence in the Report is that no comparison is made and the decisions are not well thought through. That is the challenge here.

Mr Bacon

If you were doing it on the back of a fag packet—that is how the early stuff on HS2 was done, or certainly how it appeared to have been done—it is perfectly reasonable to suppose that your fag packet calculation might have said, years ago, “Do you know what would make the most difference to the north, economically? A northern powerhouse—HS3.” You might very well rationally have said to yourself, “You know what? It would be much better to do an east-west link in the north and to group northern cities prior to doing a further north-south link, because if you look at the map, most of the roads go north-south and are concentrated towards the south-east. It is the same for the rail and the roads.” You might very well rationally have come to the conclusion that it was better to do something east-west a long time ago. Did the Department do work a long time ago to analyse and evaluate that?

Philip Rutnam

I cannot answer that specific question.

Mr Bacon

You can’t answer it? You don’t know?

Philip Rutnam

I am afraid I cannot answer on what work the Department did on east-west connectivity years before I joined it.

Mr Bacon

I am not necessarily talking about many years ago. It is a pretty obvious thing to know about, because it is one of the major options—unless the knee-jerk is so strongly in favour of north-south that one doesn’t bother to think about anything else.

Philip Rutnam

In my time in the Department, it has done a lot of work on improving connectivity in the north. What we have demonstrated through that work is, first of all—and there is already investment happening that is demonstrating this—the very strong case for upgrading the infrastructure connecting the major northern cities through a programme of electrification and a programme of other enhancements. On infrastructure, there was a programme called northern hub for a long while—now it is called the northern enhancements programme—which is a very significant programme. The recent announcements on HS3 and the report by David Higgins show that the Government believe that there is a very strong case for going further than that and enhancing capacity even further. Can I just come back to the comparison between north-south and east-west? There is a very strong case for investment in both, but if you look at where the greatest stress is in quantum on the transport system at the moment in the national rail system, it is the key north-south arteries. Traffic and passenger volumes between the big northern cities and London have roughly trebled since completion of the west coast modernisation programme. The railways are a very significantly growing industry, and the most important artery in the whole of the national rail network is the west coast main line.

Mr Burrowes

Mr Rutnam, I presume that you take your individual performance objectives seriously.

Philip Rutnam

Yes, of course.

Mr Burrowes

The first objective says “Promote economic growth by delivering at pace.” That is interesting—it does not just say, “promote economic growth” but says “by delivering at pace.” How would you explain what that means?

Philip Rutnam

I would say that there is a strong expectation on me that we get on with things. We get on with things to the requisite standards of quality and performance, but we don’t hang around. “At pace” to me suggests a degree of urgency and a certain intolerance, if you like, of bureaucracy—a desire to get things done and see them delivered in the real world.

Mr Burrowes

It is there as the first business delivery objective. We spoke about three people above you watching and marking you in your territory. Here we have the head of the civil service, the Cabinet Secretary, the lead non-executive director, No. 10, the Cabinet Office, departmental Ministers and the Secretary of State all performance measuring you on that task. Does that not suggest pressure in relation to starting construction as quickly as possible?

Philip Rutnam

We are certainly expected to get on with delivering things. There is an impatience to see improvements in the country’s transport system—an impatience that I think has been evident even in the discussion so far. My job is to balance that understandable impatience, which comes at me from political quarters but from other quarters as well, with an insistence on the very highest standards of delivery, because I am also accountable for the use of public money—I think you will find that a little bit further on in the objectives. Part of my role is to manage those conflicting pressures, if you like—pressures that are potentially conflicting—and to try to end up with the best possible result.

Mr Burrowes

Yes, but if you have that overriding first objective that an element of pace needs to be seen by all those people I mentioned, how does that square with and relate to the concern in paragraph 13 of the Report, when there was plainly a great advantage in delaying the start of full operations, to the tune of costs reduced by £1.1 billion by the delay? How are you able to tell those masters that you are not delivering at pace in those circumstances?

Philip Rutnam

You have to have an intelligent discussion with them that is informed by the best possible evidence. I think you are referring to the decision to re-profile Crossrail.

Mr Burrowes

Yes.

Philip Rutnam

That decision delayed it by a year, saved £1.1 billion in capital costs, allowed the capital envelope to be reduced significantly and added to the contingency. It also meant some loss or deferral of benefits. I was not on the scene at the time the decision was made, but I would expect to have a grown-up conversation with those to whom I am answerable about the choices that were made. My job is to offer the best possible advice and the best possible set of options.

Mr Burrowes

Have you had that grown-up conversation about HS2? Can you point to examples of where you have said, “Actually, in this situation, we can’t go at pace”?

Philip Rutnam

You wouldn’t expect me to go into my advice to Ministers in this Committee. However, you can be assured that I take my responsibilities as accounting officer on this project and on other things extremely seriously, and I give whatever advice is necessary to Ministers about how to progress this project in a way that delivers good value for money for taxpayers. I am not going to go into a lot of detail, but we have already discussed—

Chair

We might want a bit of detail. You go on; I want a bit more detail on that.

Mr Burrowes

I do not want to direct the conversation, but can you give an example, in relation to HS2, of where your emphasis on ensuring that there is proper consideration of integration risks and that operational costs do not go in the wrong direction has made a difference?

Philip Rutnam

I am not going to go into specific examples of advice that I have given to Ministers. I will talk about things we have done that have helped to move the project emphatically in the right direction. Some of those things are alluded to in the Report. The strategic case that we produced—

Chair

After the event.

Mr Burrowes

What I am asking is this. You said that you have learned lessons from the other projects and that the pace needs to change—it needs not to go so fast. Can you give us any examples?

Philip Rutnam

Let me put it this way. I am very supportive of the work that is being done right now by David Higgins and Simon Kirby to ensure that the preparation phase for the project is properly conducted and fully thought through. They must take the opportunity to find the best practice for implementing projects such as this and they must take the time needed to get those things right, rather than rushing to procurement. David, you might want to add to that.

Mr Burrowes

Sorry, I have not quite finished. You said that you are concerned that we learn those lessons, but you have not yet told us about any elements of the HS2 project that have not proceeded at the ordinary pace because of your concerns. Do you have any examples of anything in the project that will lead to that?

David Prout

The key thing we have done is to bring forward the elements of the programme that were traditionally left until later to ensure we can deliver at pace. For example, we put in place the construction chief executive at HS2 Ltd much earlier than we did for Crossrail, for example, where it waited until after Royal Assent. We are putting together the construction company for HS2 Ltd at the moment and we are recruiting the people who are actually going to build the railway now. We do not want to get to Royal Assent and run at it at 100 miles an hour. We are doing the preparatory work before Royal Assent, and we are putting in place the company that will build it so that when we get Royal Assent we will be able to come out of the blocks quickly. Traditionally, we would do it sequentially. We would wait until Royal Assent and then start building the company, but that leads to it being concertina-ed.

Mr Burrowes

What is the cost of that concertina effect?

David Prout

If you left setting up the company until after Royal Assent you would defer the benefits and you would be in danger of rushing at it after Royal Assent.

Mr Burrowes

I appreciate that. What is the up-front cost of bringing it together at this stage?

David Prout

Do you mean what is the cost of starting to build the company?

Mr Burrowes

What is the additional cost of front-loading that element of the project rather than waiting for it to happen?

David Prout

There is no additional cost. It is all within the £21.4 billion envelope.

Stephen Phillips

There must be an additional cost. For example, you are currently paying a chief executive of the construction company who, on your evidence, you would not normally have been paying until after Royal Assent had been granted.

David Prout

That is so that we can deliver the project on time in 2026.

Mr Burrowes

I appreciate your rationale, but there must be a cost element to that.

David Prout

You are bringing spend forward, but you are bringing benefits forward as well.

Mr Burrowes

I appreciate that, but I am just asking what that spend is that you have brought forward.

David Prout

I have not done a calculation of what spend is being brought forward, because everything that we are spending is within the envelope that was set in SR10.

Philip Rutnam

The general lesson—we have talked about this lesson before in this Committee in other contexts—is that modest amounts of money spent up front in the right way can save very large amounts of money from being mis-spent later. What we are trying to do on HS2 is to apply exactly the lessons that are referred to in this Report on, say, the Thameslink programme, which is a good programme but which was begun before the second phase had been properly thought through. Result—three years’ delay in order to reset the programme.

Mr Burrowes

I am not in any way suggesting that you are going beyond the envelope, or anything like that. I am just trying to ask what that up-front spend is, so that everyone can judge when we come back to it in time, as no doubt we will, that it has been such good value for money. It would be useful to know now.

Philip Rutnam

I am not sure that it can be identified discretely like that, but it will be a modest amount associated with gearing the company up so that it can be a proper client. It has to be done at some time, and it is being done now. Can I give another example of the kind that David was alluding to? On the Crossrail project, only after Royal Assent to the Crossrail Bill, which took three years, was a proper set of legal agreements put in place between the Government—in that case, Transport for London—as the sponsors of the programme and Crossrail Ltd, the delivery vehicle. That was known as the development agreement, and there were lots of ancillary documents. We are putting in place the development agreement between the Government and HS2 Ltd now. It is a legal document to set out respective roles and responsibilities as the foundation of our holding them to account. So things that we are applying in real time to HS2, taking lessons from previous projects, I think are quite a number.

Chair

On the envelope, which is another interesting thing, it went up from £33 billion to £42 billion. I am right, aren’t I?

David Prout

That is correct, yes.

Chair

And in that figure is a £14.4 billion contingency?

David Prout

Yes.

Chair

Have you completed the detailed costings on phase 1?

David Prout

Yes. They are not the most detailed level of costings that we will get to, but we have a good understanding of the costs. They were reviewed most recently by David Higgins when he came in between January and March.

Chair

What does that mean? Are they robust?

David Prout

Yes.

Chair

And have you completed the detailed costings on phase 2?

David Prout

No, because we have not taken decisions on phase 2 yet.

Chair

On phase 1, are you eating into the contingency already?

David Prout

We have used up a small amount of contingency in meeting costs associated with the Select Committee and concessions made to petitioners.

Chair

You were talking about £21 billion. If I get this right, it is £42 billion—£21 billion on phase 1, but take off the £14.4 billion which is contingency, so you should not be spending more than £14 billion or £15 billion on phase 1, crudely?

David Prout

Correct.

Chair

Your detailed costing figures at the moment are within that envelope of about £15 billion to £16 billion—

David Prout

The spot costs are within that. You then add contingency on top of that. One of the reasons, if you remember, when we put up the budget in SR13 was that we went from a P50 level of certainty in terms of our contingency to a P95 level of certainty.

Chair

I don’t know what P50 and P95 mean.

David Prout

P50 is a 50% chance of coming in on budget. P95 is a 95% chance of coming in on budget.

Chair

So you have got 95% certainty that you will come within £15 billion?

David Prout

No, within £21.4 billion for phase 1.

Chair

So you will use the contingency?

David Prout

You are likely to use a large chunk of the contingency, yes. Crossrail is using a large chunk of its contingency.

Chair

I know, but this was a particularly generous contingency. The figure went up from £33 billion to £42 billion.

David Prout

As David Higgins said when he issued his report in March, it is adequate but not generous.

Chair

I think he was used to the Olympic-style contingency, which I thought was excessively generous.

David Prout

It is not an overly generous contingency, but as I say—

Chair

£14.2 billion of £42 billion. That sounds very generous to me.

David Prout

But it is a quantified risk assessment—

Chair

Are you telling the Committee—Mr Rutnam, you are the accounting officer for this—that, given the level we are at and the detailed costings, because this is all about planning properly, on phase 1 there will be enough money to complete the entire project, the important thing for me being phase 2, within the envelope set by the Chancellor?

Philip Rutnam

That is indeed absolutely the intention.

Chair

The whole project will be completed within that envelope.

Philip Rutnam

That is absolutely the intention. Obviously, phase 1—

Chair

It is the intention. Are you confident you will achieve that?

Philip Rutnam

Phase 1 is at a more advanced stage than phase 2, but we fully expect to achieve that across both phases.

David Prout

For phase 1 we have a fully costed programme that comes in at £21.4 billion—

Chair

I keep worrying about the £21.4 billion. You are using the contingency within your calculations of how much it will cost.

David Prout

Yes.

Chair

I have never seen a major project of this sort come in at the sort of figure that is set before it has even gone out to contract. You are saying to me absolutely confidently that although we are using all the contingency, we will come in within £21 billion.

David Prout

That is why we have set the contingency at the P95 level—a 95% chance of coming in on budget. That is what accounted for between £4 billion and £5 billion of the uplift in the summer of 2013, so we went from a P50 contingency to a P95 contingency. That is one of the things that pushed the costs up in 2013, so we can say with a 95% degree of certainty that we will come in on budget.

Sir Amyas Morse

May I ask for a tiny bit more detail? If I have got this straight, estimating that you are going to have a 95% level of confidence about costs now means that you have a kind of snake of what it might come out at, but within that you reckon you can be sure of achieving that ceiling at the top end of the probability. It could be lower. Is that right? David Prout: Yes, it could.

Sir Amyas Morse

What you are saying is simply that that’s the top end of the probability range. So you are not assuming that you will spend that much; you are simply saying that that is the range.

David Prout

Yes.

Sir Amyas Morse

I wanted to say that for clarity. I have a more specific question that I am genuinely interested in. Since you have been looking at the costs of this, how does the inflation rate on your projects costs here—I am used to finding funny little local inflation rates in defence and other areas—compare in terms of growth with what you might find is a general rate of inflation? Is it faster? I am not leading you anywhere; I am just interested in knowing what the answer is.

David Prout

We use the Treasury’s inflation rates.

Sir Amyas Morse

I know you do for projection, but I am asking you about the period you have been looking at cross-growth. Does it tend to give you confidence about that, or do you think you have a rail inflation rate that tends to run a bit higher? What do you think?

David Prout

It depends on the overall economic circumstances. Crossrail benefited when it went out to the market.

Sir Amyas Morse

This is not a trap. We generally find in some areas of Government activity, despite the general level of inflation, prices actually go up fast.

Chair

Especially in construction.

David Prout

It can do, and one thing the Chancellor has asked David Higgins to do, which he is working on at the moment, is to go all over the world—

Chair

Lucky him.

David Prout

Not him personally—to understand the different construction techniques they have used to bring in this kind of project at a lower cost per kilometre.

Chair

I have a final question, then I will go to Nick on this because I am much more sceptical of your costings. For example, from my reading in preparation for today, I understand that the HS2 route crosses more than 100 water courses with a degree of flooding risk attached. Have you fully assessed the impact of that on your costings?

David Prout

Yes. We have planned to a 1000-year flood risk assessment.

Chair

For all these areas of flood risk?

David Prout

Yes.

Chair

So you are sitting here in front of us telling us that the whole of HS2 will be built, as planned, in the Chancellor’s envelope of £50 billion?

David Prout

That is what I am saying.

Chair

I don’t believe it.

Austin Mitchell

Come back—we’ll see you in 2034.

Nick Smith

I am interested in the issue of this transport infrastructure investment and employment in surrounding areas. That is because my constituency is 25 miles from the major jobs market, down the M4 corridor in south Wales in Newport and Cardiff, so I need to get my constituents down there as soon as. Listening to your reply earlier to Mr Bacon about HS2 before HS3, I just did not find it convincing. I am in favour of HS2—I think it is a good thing—as I am in favour of HS3. However, given that the south-east is bubbling and has massive housing inflation, and all the rest of it, I just think that if the two projects had been considered in the round at the time—two separate fag packets, perhaps—maybe there could have been a debate about the best place and the best time to spend that amount of money. I do not remember that debate at the time and I think there is an issue about very large scale public procurement projects such as this and sensible consideration about priorities. Given the slowness in the delivery of the valleys electrification, I sometimes think that areas such as mine are being left behind because of very good business lobbying, particularly in the south of the country. Having said that, I am interested in how you are developing your analysis and management and promotion of good economic benefits around these proposals. The NAO Report—paragraph 16 on page 9—recommends a single organisation being responsible for delivering wider benefits. The example given is that Ebbsfleet was built as part of HS1, and do you know what? It was supposed to be a great place for economic regeneration, and that has not happened. What happened there? What are you going to do for future investment to make sure that we do not have any more Ebbsfleets around the country and that there are wider economic benefits, please? Lots in there, I know.

Philip Rutnam

I shall comment on that, then David might want to add something. We are very seized of this issue. As you know, HS1 is, I think, a big success story in relation to regeneration at King’s Cross and Stratford. It is, to some extent, at Ashford as well—less so, at the moment, in respect of Ebbsfleet. The Government are bringing forward proposals for an urban development corporation at Ebbsfleet.

Nick Smith

Way late.

Philip Rutnam

But we would all like to have seen regeneration much earlier. We are seized of that issue on HS2. There was a growth taskforce chaired by Lord Deighton, which reported earlier this year and came up with a bundle of recommendations, including about regeneration and the need—essentially—for a more active approach, to make sure that regeneration happens. We are in the midst of coming to, I hope, some conclusions about how to take those recommendations forward.

Chair

Give us a hint there, because I think this is a really important area. We are not trying to get into anything confidential, but given that a great justification of HS2 is the economic benefits and given, again, that the record shows we did not achieve them in HS1, what are you doing? What will be different, Philip?

Philip Rutnam

Announcements have not been made. The Deighton recommendation was that—

Chair

Ah! Give us a clue.

Philip Rutnam

It was that a single national body should take responsibility—not for doing all the regeneration but for promoting, encouraging and facilitating the regeneration around station sites. I will hand over to David, who has been working very closely on this, to see what he can add.

David Prout

Lord Deighton came up with four groups of recommendations: getting the station places ready; getting the network ready; getting people’s skills ready; and getting business ready to compete for the HS2 contracts. He made 19 recommendations; the Government accepted 18 of them. As far as the regeneration recommendations are concerned, I think there were two most important ones. The first was around the importance of thorough preparation by the local places for the arrival of the new infrastructures. One of the great bits of learning from all the continental experience of high-speed rail is that local places have to plan for it up front so that, when the station is being built, they are already starting to build new infrastructure and new buildings around the station to make the most of high-speed rail when it arrives. Local places have to plan for that and put it in their local development frameworks.

Chair

Who pays for that? Is that in the £50 billion?

David Prout

It is a local authority duty.

Chair

With no money?

David Prout

They have funding for local development frameworks. Planning for their area is one of their duties, but the Department has made some funding available to help them with that.

Chair

Which Department? Yours?

David Prout

Yes. We have made £2.5 million available to Birmingham—

Nick Smith

Was that £2.5 million?

David Prout

Yes, £2.5 million, not £2.5 billion.

Nick Smith

That is my point.

David Prout

We made £2.5 million available to Solihull and Birmingham to help them plan for the areas around the two station sites. The second thing that we are looking at is how we can put in place an organisation of some kind that can work with local places on stuff like land assembly and specialist planning around the stations to drive the regeneration faster. We have not yet reached conclusions on that, but we are advising Ministers at the moment.

Chair

By whom will that be funded?

David Prout

It will be funded by the Government.

Nick Smith

So I have thorough preparation, an organisation to help with land assembly and one other organisation. That feels a bit thin from this side of the table.

David Prout

There are questions about whether we want to go further, and we are working across Departments, particularly with DCLG, on whether we need to go further. The Government has put in place an urban development corporation at Ebbsfleet that has a bunch of special powers and additional funding. The Mayor is consulting on a mayoral development corporation at Old Oak Common, and he has put in place a new director for that mayoral development corporation. There is a question about whether such additional structures are required, for example, in Solihull and Birmingham, but the first port of call has to be the local authority, which has all the powers that an urban development corporation would have. The question is whether the local authority can use those powers adequately to plan around the stations.

Mr Bacon

In retrospect, do you think that with High Speed 1 it would have been better to have done some of this work earlier? Is that essentially one of the lessons that you are talking about?

David Prout

Yes, of course. That is what we are doing on HS2. We have learned the lesson that we need to be working with the local authorities at this stage to get the places ready for the arrival of the stations. That just wasn’t done at Ebbsfleet. Some things were done at Ebbsfleet, and there is a bridge over the railway line at Ebbsfleet waiting for the roads to be built around it. There was some planning at Ebbsfleet, but not enough.

Mr Bacon

You still haven’t really dealt with Mr Smith’s follow-up to my question on the decision to go with HS2 before HS3. Although, Mr Rutnam, you have said that there is enormous pressure on the north-south axis, which has grown enormously and which you need to alleviate, the point Mr Smith was making is that if there were investment elsewhere, it might take off that pressure because it would alter people’s travel patterns and investment decisions. If, for the sake of argument, Mr Smith’s constituency were much better connected and much easier to get to, there would be corresponding effects on people’s willingness to invest in Mr Smith’s constituency. This is not a zero-sum game, is it? There are effects from having done things, yet we do not seem to have heard an explanation from you about why an evaluation of what would be done east-west, HS3, did not come earlier.

Philip Rutnam

Perhaps I will try again. In prioritising the decisions that they have made, the Government have been responding to the fact that the greatest single source of pressure on the national rail system, considered as a national system, is north-south connectivity, especially around the west coast main line, which to all practical intents and purposes is now full, certainly in terms of train cars. The west coast main line is the single most important artery in the country’s rail system, and arguably in the country’s transport system. It connects a high proportion of our biggest cities and carries a very high proportion of the country’s rail freight. At the southern end, it is also a key commuting artery into London. All those different users, because it is a multi-user railway line, will benefit from the investment proposed in HS2. The prioritisation decision, from a transport perspective, is responding to the fact that it is the single greatest source of pressure in the long term. It is not the only source of pressure; there are many other projects, such as HS3, that the Government are taking forward as well.

Mr Bacon

I see Mr Phillips itching to come in. I have two quick questions first. One, if I get you right, you are basically saying that, because of what you have just said, addressing the issue of capacity was absolutely essential; there really isn’t any choice about it. That is basically your position.

Philip Rutnam

If we want to ensure that the country’s rail system, two decades hence, 2026 and beyond, has the kind of capacity needed to meet the demand of the population and economic growth that we foresee, then HS2 is the very large investment needed to respond to that. That is all I am saying. You are right that that is about capacity.

Mr Bacon

Why, then, did the Department not talk about capacity to start with, but instead talk about speed?

Philip Rutnam

I think that the Department may have talked more about speed—

Mr Bacon

The whole case was about speed.

Philip Rutnam

No, that is not true. If you look, as I have done, at the documents and the statements made by Ministers and issued by the Department then, they talked very clearly about both capacity and speed; journey times as well as capacity. What we have learned, and what we have discussed before, is, in terms of the strategic case for the project, for us to put those long-term arguments about the need to have a transport system that has the capacity to respond to population and economic growth and to facilitate further economic growth front and centre.

Mr Bacon

Another quick east-west question. I heard someone recently—a Treasury Minister, I think—talking about an evaluation going on of upgrading the line between Oxford and Cambridge to make it much quicker. Can you tell us where that currently sits?

Philip Rutnam

It is the east-west rail project. Clare, do you want to speak about that?

Clare Moriarty

Part of our current investment programme is around east-west rail, starting with the Oxford to Bicester end of that line, which is currently being upgraded to make it dual track, and then extending that through, initially to Bedford. There is a more significant challenge in the last bit from Bedford to Cambridge because much of the original track has been built over so it is not a question of simply reinstating lines. That is one of the significant elements of our current investment programme.

Mr Bacon

Hang on, I want to pursue that. The proposal, then, is eventually to get it to Cambridge if you can, but you would have to go around the original route because it has been built on. Is that what you are saying?

Clare Moriarty

There is work going on to look at options. Whereas for the more western sections it has been possible to reinstate lines on the existing tracks—

Mr Bacon

Does the work include an evaluation of continuing on from Oxford, through Cambridge to Norwich?

Clare Moriarty

As far as I know, it doesn’t at the moment, but there is a lot of work also going on around routes from London to Norwich in particular.

Mr Bacon

I am not talking about London; I am talking about Oxford, through Cambridge to Norwich. The thing that particularly interests me is Cambridge through Norwich. Do you know where the largest concentration of food and plant scientists on the planet is?

Clare Moriarty

It is probably in Cambridge.

Mr Bacon

No, it is Norwich. It is not probably Cambridge—it is Norwich, and that is my point. The fact that you don’t know that worries me slightly, but I hope you will go away and investigate it. There are biotech incubators going on in Norwich. By the way, and Mr Gallaher will know this, you have put £26 million into the John Innes centre to improve the internal connectivity and to ensure that people are talking to each other in the Norwich research park, which we very much welcome. However, the point is that you can have an established business in Norwich near the incubator where the rent is much lower than you would pay for even an incubator in Cambridge because Cambridge is so over heated. The obvious thing to do economically is to extend the quality of the connection between Cambridge and Norwich, particularly the Norwich research park. I would encourage you to go away and get your colleagues to look at that because the economic benefits are colossal. You may know that the A11, which, admittedly, is a road network, had a benefit to cost ratio of more than 20:1.

Chair

That was a very good—

Mr Bacon

You mentioned Barking and Dagenham. The only difference that I can see is that that was your constituency.

Chair

That was because they took a decision on priorities.

John Pugh

Can we start with fundamentals? Years and years ago I went to the fundamentals of the whole railway scheme, and they said that you always need to have a business case. I asked what a good business case looks like, and I was not given too clear an answer. I was quite encouraged when I read in the Report that your way of doing cost-benefit ratios is well regarded internationally. The Report says somewhere that you have a “clearly-defined method”. Does that mean that any third party coming along and looking at these schemes later on can check with some clarity and transparency that the business case has been met or not and that the cost-benefit ratio is either spot on or far away?

Philip Rutnam

Yes, that should be possible.

David Prout

There is even a handy guide for local authorities that explains our methodology. My 17-year-old daughter was reading that as part of her economics—

John Pugh

Your 17-year-old daughter understood it.

David Prout

Yes, she did. It is now extremely transparently set out and the guide was published earlier this year.

John Pugh

One thing that the NAO Report says is rather difficult to grasp in railways is the interdependencies. It cites the instance of Thameslink being built and the carriages not being there or not being ready. We have a similar example now with the Todmorden curve being open and there not being any trains to run on it. Do you believe you are in a better position to grasp these interdependencies than you ever were and, if so, why?

Clare Moriarty

It is certainly something that we are building our capability on at the moment. Any bit of rail investment is likely to have three elements—

Chair

Sorry to stop you, Clare, but what does that actually mean? We know why we need interdependencies working, and we know that it has been a failure in the past. In this attempt to look forward, we want to know what you are actually doing to make it better.

Clare Moriarty

Okay. I am setting up a specific team within the Rail Executive to manage interdependencies so that I have one set of people not charged with delivering things, but specifically charged with ensuring that we understand—

John Pugh

They are watching the knock-on consequences of project development.

Clare Moriarty

Exactly. If something happens in a bit of the infrastructure that will have consequences for rolling stock, they are looking at that. They are looking at how we ensure that we deliver the benefits of that through franchising. That is a team that started being set up in April. It has an increasing number of people so that we can have a team for each of the major parts of the country. Their entire mission and purpose is to ensure that we join those things up. Anyone who sees a change happening in their part of the programme needs to come and talk to these people so that we can understand how individual bits knock on and the broader picture. There are some wide cross-cutting themes such as driver training. Lots of different projects create a need for further driver training. If we look at that in individual pockets, we will not understand the totality of what we need to do.

John Pugh

Just following that a little—this may not seem immediately related—do you agree with David Higgins, who said in this building last week that there is no reason why HS3 should not proceed at the same time, if not slightly before HS2, because they are different sorts of beasts? One requires a hybrid Bill; the other does not. Do you agree that both can, in a sense, be progressed together and that we do not need to wait for one to finish to start the other?

Clare Moriarty

It comes down to the work that needs to be done, as Philip was saying, to understand what the options are around High Speed 3. A lot of very practical work needs to be done to look at different options, different routes and costs and benefits.

John Pugh

But broadly speaking, you are not disagreeing with it.

Clare Moriarty

I do not think I could sensibly give you an answer until we have done slightly more of the work.

John Pugh

I was just wondering in terms of interdependencies whether, should HS3 progress in a particular way and you see some of the effects and you revise your cost-benefit analysis as you go along, that will have an impact on the cost-benefit analysis for HS2. In other words, there might be less need for HS2 emerging as you develop HS3.

Clare Moriarty

There is always the potential for—

John Pugh

The NAO says that you should keep under review the cost-benefit analysis, does it not?

Clare Moriarty

Yes. There is always the potential for changes in one project to impact the cost-benefit analysis of another, just as changes in the economy will also cause us to revisit and review the benefit-cost ratio.

John Pugh

In terms of progressing HS2 and HS3 together, there will be an enormous drawdown on the skills of the nation, won’t there? Frankly, we probably do not have them. Have you got them in the Department? Have you any capacity within your Department to manage progress on HS3 and HS2 simultaneously?

Philip Rutnam

We are absolutely seized of the need to make sure we have that capacity in the Department. I have been in the Department for two years and a bit, and in that time I have made sure, recognising the challenge, that we have significantly grown our capacity in the HS2 group and in the rail executive.

John Pugh

I notice that none of you has a civil engineering background. Am I right in thinking that?

Philip Rutnam

That is correct, yes.

John Pugh

But you are hiring people who have the appropriate civil engineering background?

Philip Rutnam

We have some people with civil engineering backgrounds. We have many other people with many other skills which are equally pertinent: skills in project and programme management, finance and transport planning, and skills as generalist civil servants.

John Pugh

With this awesome prospect in front of you, are you recruiting more people who can manage two really big projects at the same time?

Philip Rutnam

Yes. There is a range of skills I am interested in expanding within the Department, but the skills I am most interested in expanding are those needed to be a really effective sponsor or client of big projects—including HS2 but also, prospectively, HS3.

Chair

What does that mean, Mr Rutnam?

Philip Rutnam

That means the sorts of skill that people have who are really good at project and programme management and who have practical experience of projects and programmes—yes, successful ones, but perhaps also less successful ones, because there is no better source of experience than things that did not go quite to plan. It means people with good commercial understanding, and people with good stakeholder skills and the ability to understand how another party sees something. That is a range of skills, but we are not usually building things directly ourselves. We are a client and sponsor.

John Pugh

Clare, if you are keeping an eye on the interdependencies, can you say at the moment which skills the nation most needs, or currently most lacks, in order to accomplish this very big forward-looking railway agenda?

Clare Moriarty

The single major area of skills is signalling. If you look across the totality of all our infrastructure projects, signalling is the scarcest resource.

Q108Chair

Out of interest, on your answer, are you recruiting outside or inside?

Philip Rutnam

We do both.

Q109Chair

And what have you done in the last six months? Or something—give me a time. I just pulled that out of a hat.

Philip Rutnam

I will ask my colleagues to add, but in the last six months we have made a permanent appointment of a franchising director to be responsible for franchising—

Q110Chair

No. Presumably you have recruited for all those skills, which we think are really important; I concur with your description of them. But are you getting them from inside and growing them inside, or are you getting them from outside? They are not just the top bods that you have banged on about.

Philip Rutnam

Okay. I will ask my colleagues to comment.

Clare Moriarty

To be honest, I think it is a complete mixture. We have a lot of people coming into the rail executive at the moment. The last time I sat down with our new entrants, they were a mixture of people from within the Department, elsewhere in Whitehall and from—

Q111Chair

But these are young new graduates, a couple of whom we saw when we went around Crossrail. They will be in and out of the project. I did not feel 100% confident that they could provide you with the sort of procurer skills that you described.

Clare Moriarty

I think it is a mixture, to be honest. We have people coming in with quite a lot of experience from the rail industry. We have people coming in from other related sectors.

Q112Chair

Yes, but they are new people.

Philip Rutnam

Not all of them. I meet every new starter in the central Department. In the last two weeks alone, I think I have met one reasonably senior person who has come out of Network Rail—a very capable individual at project manager-type level—and another very experienced person who has come out of a train operating company. I am also really keen to grow talent from within the civil service to give people at an array of different levels the ability to work on programmes like this. Recently, for example, we started our own fast-track scheme, called the commercial fast-track scheme, to hire new graduates. We took in 10 or nine, I think, in the autumn and will give them experience over three years or so of various different parts of the Department’s work as sponsor and client of big programmes. We also expect them to acquire a qualification. We are doing a variety of things.

John Pugh

I am a former member of the Crossrail Hybrid Bill Committee, so I am slightly embittered. You must factor that into my question. [Interruption.] I know; I was given a clock at the end of it. On page 32, the NAO Report says “The Department also entered negotiations with individual organisations”—this was Crossrail—“but did not secure all the contributions that it initially expected, in part due to regulatory decisions. It may have to contribute an extra £160 million.” Elsewhere in the Report, it says that the Department has to be more responsive to unexpected events. Was this an unexpected event? Who did not contribute, and why?

Clare Moriarty

In the planning that was done, there was an expectation of a figure from Heathrow airport, which was always subject to regulatory approval by the Civil Aviation Authority. As that process worked its way through, with their business case, the amount that the CAA eventually determined was £70 million. The Department had made provision in its planning for the eventuality that the CAA might not approve the contribution—

John Pugh

So you were ready for that, but nonetheless Heathrow did not cough up with all that you expected.

Clare Moriarty

The amount eventually approved was less than the amount that we had originally hoped for.

Mrs McGuire

Since everybody else has talked about their own geographical patch, I am going to ask you some questions about the extension, or the potential work being done, on the Scottish end of HS2. There has been significant pressure, I think, as you have been aware, about whether or not Scotland should have been included in this long-term visionary strategy that Ms Moriarty talked about. I understand that the Department is currently in discussions with the Scottish Government on extending. I wonder whether anybody could give us an update on where we are with that and what the impact will be on costs.

David Prout

That work is ongoing at the moment. I think that the fact that—

Chair

I hate those phrases. Just tell us the truth.

David Prout

The fact that it was commissioned is in the public domain and the commission is recorded in the remit letters to HS2 Ltd. Our teams have been discussing it with Scottish Government officials. We are not yet ready to put advice to Ministers, but I should think we will be ready in the foreseeable future. I think it is a few months off.

Chair

So it is going on at present and you are ready in the foreseeable future. Just try telling us something a little bit more direct; you will endear yourself to this Committee by doing that.

Mrs McGuire

When was the report commissioned? I understand that it was anticipated earlier this year—as a matter of fact, I think it was at the beginning of this year—so perhaps you could advise the Committee when the report was actually anticipated. I remind you that I have access to a press report here.

David Prout

I just cannot remember when it was commissioned.

Mrs McGuire

The press report says it was on 10 November.

David Prout

We were hoping to have results from it before the summer. The problems are actually a lot more complicated and difficult than we were anticipating. It is a very long way between the north end of HS2 and Scotland. To build a high-speed rail line the whole way would be extremely costly. We are looking at strategic interventions to reduce the travel time to—I think the target is below three hours, from Glasgow to London.

Mrs McGuire

Having said that, it is not just about Scotland. It links into some of the questions that my colleagues asked earlier. It is also about the north of the country. So it is not just across the border. If I can advise you, according to the Scottish newspapers, UK Ministers today appeared to have made some announcement about the report.

David Prout

Today?

Mrs McGuire

Yes, well, unless this is not 10 November 2014; it certainly was today. I have my good friend here to say—it is about the commitment to have HS2 to Scotland. As I say, it is not just about the Scottish economy, given the fact that one of the benefits of HS2—I think it is in the NAO report—is that it should be an engine for growth. However, surely if a strategic vision is being taken about engines for growth, it should have included a Scottish dimension from the beginning, as well as other parts of the north of England.

David Prout

And Scotland will benefit from HS2 from the moment that phase 1 of HS2 opens.

Mrs McGuire

Yes, I know that it will take half an hour off the journey time—I know the script.

David Prout

I think I am right in saying that when phase 2 is open, journey times to Glasgow will be down to just over three-and-a-half hours, and the aim of the study that we are doing with the Scottish Government is to bring it down to under three hours.

Mrs McGuire

What joint work is the Department currently doing with the Scottish Government on the possibilities—not just in the foreseeable future, but what joint work is currently being undertaken?

David Prout

There is quite a detailed options assessment, which is being worked up by engineers at HS2 Ltd in consultation with my team and the Scottish Government.

Mrs McGuire

So that is current.

David Prout

That is ongoing at the moment.

Mrs McGuire

When did you say we anticipate the report—in the foreseeable future?

David Prout

I said in the foreseeable future, but I don’t think it will be before Christmas—in fact, I know it won’t be before Christmas.

Mrs McGuire

That is only five weeks away—so not before Christmas, but might we expect it after Christmas?

Chair

After Christmas, there is a whole new year.

David Prout

We have to put advice to Ministers on the issue.

Chair

When are you putting advice?

David Prout

When the study is concluded.

Stephen Phillips

In due course?

Chair

You must have a plan. We understand that Ministers may take it to and fro, but saying, “When it is ready” just isn’t good enough. It doesn’t work on this Committee—it might work elsewhere, but it doesn’t work here. Tell us when you are going to put advice to Ministers.

David Prout

I don’t have a date.

Chair

Well, that is pretty shocking.

Stephen Phillips

When do you estimate?

David Prout

I have not touched base with my team on that in preparation for this meeting.

Chair

Okay, well you can write to us.

Stephen Phillips

Well, let’s run it up the flagpole and salute it. When would it be? What is your best guess?

Chair

When are you putting advice to Ministers? That is what we are asking.

Philip Rutnam

I don’t think we want to give you guesses. We will write to you following this meeting.

Chair

With a date, or a month.

Philip Rutnam

With whatever we can say, both about the substance of where the work has got to and the plans for taking it forward.

Austin Mitchell

Talking of jobs, what proportion of the high-speed rolling stock for HS2 and HS3 will be made in this country, and what proportion will be imported?

Philip Rutnam

Work on the rolling stock for High Speed 2 is still at a very early stage. HS2 Ltd will go through a proper planning process and procurement process for the rolling stock. That procurement process will be open and will comply with European Union rules, which we talked about the last time I was here.

Austin Mitchell

You said you could not stipulate for British production.