New HS2 budget to blow £33bn hole in public finances
The government will need to find as much as £33bn in additional cash from tax and spending measures or from other departments to fund its revamped plans to deliver HS2.
According to a Morning Wire analysis, the Department for Transport’s updated proposals for the rail line require between £18bn and £33bn of additional public money at the end of the current spending review period.
On Tuesday, transport secretary Heidi Alexander told MPs that the entire HS2 project is now on course to cost the taxpayer as much as £102bn, after the megaproject was struck by a slew of managerial missteps and rising input costs.
She branded the line – set to run between London and Birmingham, an “over-specced folly” – during a fiery update to parliament in which she accused her Conservative predecessors of needlessly gold-plating the controversial project.
The first trains will not run before 2036 at the earliest under the fresh plans, with services not reaching central London until at least 2040. The new timeline means the project’s construction is now on course to last more than a quarter of a century, in what has become a poster child for Britain’s poor track record at delivering major infrastructure.
HS2 piles pressure on public finances
The update constituted HS2’s sixth major reset in just 13 years and followed a root and branch review commissioned by the Labour party when it entered government in 2024. The report, dubbed the Stewart Review, accused top brass in government and the arm’s-length HS2 Ltd of a historic “litany of failures”, which allowed management of the rail line to “spiral out of control”.
Officials now expect the railway line to cost as much as £36bn more than the previous official estimate, piling further pressure on the already threadbare public purse.
According to people familiar with the matter, HS2 has already spent £44bn of public money throughout its 17-year existence. Ministers have also allocated £25bn of additional taxpayer cash for the project as part of last year’s spending review.
But the updated budget unveiled by Alexander on Tuesday, means that there is now between £18bn and £33bn that will either have to come out of additional spending or fresh tax and spending measures. It could also come from taxpayer money that could have been allocated for other cash-strapped departments or Department for Transport projects.
Government officials say the Treasury’s current spending envelope, which accounts for all public spending until 2029-30, covers all of the funding required by HS2 until the end of the decade. Funding beyond then will be set at future reviews, either requiring trade-offs with other areas of government spending or tax hikes . Morning Wire understands ministers will not look to issue more debt that would threaten the UK’s fiscal rules in order to make up the shortfall.
The figures underscore the strain the £100bn megaproject will continue to place on the public finances well into the next decade, despite its scope being drastically stripped back by previous governments. It was initially slated to run trains from London to Manchester and Leeds via Birmingham, but the route between Birmingham and Leeds was cancelled by Boris Johnson in 2021. Johnson’s successor, Rishi Sunak, then axed the Manchester leg two years later.
The Department for Transport declined to comment.