Why continuing Phase One is the biggest ill conceived gamble with taxpayers’ money

by: Stephen Cresswell

I was sacked for blowing the whistle on costs at HS2. The Sunday Times ran the story; the Employment Tribunal found in my favour; HS2 Ltd admitted it had excluded me from the project for questioning costs. The Telegraph ran the story under the headline that it shows our political system is broken. Plenty will agree with this, but the point I want to make here is not about what went wrong in the past. It is about what is still going wrong right now.

HS2 was posited as an ‘engine for growth’. The underlying logic was straightforward: reduce journey times between London, Birmingham, Manchester and Leeds, and economic activity will follow. One role of government is to make things easier for business — and faster transport links are one of the ways to do that. The HS2 business case depended on the full Y network, yet all the northern sections in Phase 2 have been cancelled and there is no proper plan or funding for Euston station.

“The scale of benefits that can be realised by the HS2 programme is reduced, as the majority of the original benefits were associated with the delivery of Phase 2.”

— NAO, HS2: Update Following Cancellation of Phase 2 (July 2024)

“If you step back, as it were, and look at the totality of benefits and of costs as if you were starting on day 1 with Phase 1, it would not achieve value for money.”

— DfT Permanent Secretary Dame Bernadette Kelly, evidence to Public Accounts Committee (2023)

However there is an even more fundamental problem in that HS2 assumed a way of working and travelling that may cease to exist, something that would be problematic even if HS2 were being built in full, on time and on budget. We are living through a technological transformation that will make the world vastly different in terms of how we work, how we travel, and how economic value is created. Elon Musk has stated that AI will replace all human jobs, and that working will become “optional.” The World Economic Forum’s Future of Jobs Report 2025 projects that job creation and destruction will cover 22 per cent of roles. McKinsey estimates that up to 30 per cent of current hours worked could be automated by 2030, accelerated by generative AI. Brian Roemmele has argued that we are approximately 5,000 working days from the effective end of work as we know it — driven by the convergence of AI, robotics, and automation.

You may or may not agree with these predictions, but here is what is not reasonably debatable: the world of work is bound to change drastically. The patterns of travel that HS2’s business case depends upon — rush hour commuting, regular business travel between major cities, weekend leisure patterns — are all likely to be disrupted. People may still travel, of course. But the business case assumptions of growth in predictable, high-volume, peak-hour flows is highly questionable.

Phase One is now expected to open no earlier than 2036, with 2039 looking more likely. Consider the timeline. If the technology expert analysis is right, the effective end of traditional work patterns arrives before 2039 or 2040. The railway may literally open at, or past, the point where the travel patterns it was designed to serve have entirely disappeared. Even if the travel demand is still there in 2039, advances in robotics, materials, AI management and energy generation mean that HS2 might well be built for a fraction of the time and money needed today. It might become feasible to tunnel the entire route, avoiding the blight on the environment and people’s lives created by the current project. This might even be as part of a truly national underground network.

When faced with such massive uncertainty about how the future will unfold it makes more sense to take a portfolio approach and retain flexibility and optionality. Make investments that can be redeployed if circumstances change. Avoid committing irreversibly to a single outcome when the range of possible futures is wide. Instead, by continuing with HS2, the government has gone for an all-eggs-in-one-basket approach: a fixed link between London and Birmingham, A bet on a single mode of transport, on a single route, designed to last until the year 2156.

The 2025 Spending Review reveals the extraordinary scale of this commitment. The government is currently borrowing £7 billion per year to fund Phase 1 construction — roughly comparable to the capital investment in the entire road network.

HS2 forecast that 138,000 passengers would travel between Old Oak Common and Birmingham each day when Phase 1 opened. At 140 miles per journey, that equates to around 19 million passenger-miles per day. The UK road network, by comparison, carries roughly 1.4 billion passenger-miles per day — more than seventy times as much. The road network is flexible, distributed, and adaptable, with benefits that can be realised in the near term; whilst HS2 is none of these things. Does this pass even a basic sniff test as a use of public money?

The current Transport Secretary, Heidi Alexander, has described HS2 as “a litany of failure” and vowed to “call time on years of mismanagement.” Yet her response has been to ‘reset’ the project delivery and keep building. Very little has been said publicly whether Phase One makes strategic sense now that the network it was designed to enable has been cancelled. That silence speaks volumes about a political system that finds it easier to pour good money after bad than to admit a mistake.

Underlying all of this is a more fundamental issue. Effective governance and risk management requires basic levels of integrity and competence. The UK government and central civil service, based on my experience and on the evidence of HS2, lacks both. Even if profound technological change were not on the cards, the HS2 business case has been demolished by scope reductions, cost escalations, and the cancellation of the complementary ‘Y’ network — and yet the project continues. It continues even though the UK has record government debt, high borrowing costs and near zero economic growth. The Navy recently struggled to deploy a single £1bn Type 45 destroyer; a vessel costing one seventh of the annual spend on HS2.

This broken political system has resulted in a massive amount of resource being inappropriately directed. The money committed to HS2 could have funded a portfolio of regional transport and connectivity investments — road improvements, digital infrastructure, regional rail upgrades, autonomous vehicle corridors, remote working hubs — any combination of which could be scaled up, scaled down, or redeployed as the future becomes clearer. Alternatively, it could have been left in the economy to facilitate growth. This would be a sound portfolio strategy for a highly uncertain future. Instead, we got the opposite – in effect our broken political system has borrowed tens of billions of other people’s money, walked into a casino and placed everything on a single number. It is past time to stop work on this monumental fiasco of a project. Mothballing this project is the minimum credible step a government could take to demonstrate it is even capable of moving towards repair

The TaxPayers' Alliance

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