The company that blew HS2’s £45 billion budget has another problem growing further north

High Speed Two Limited, the state-owned company whose flagship project saw cost estimates balloon from £45 billion to as much as £66 billion, is now producing the cost estimates for Britain’s next mega-railway.

It’s safe to say that MPs are not convinced and there are already questions brewing around funding and deliverables.

In a report published on 1 July, the House of Commons Committee of Public Accounts warned there was “a clear risk” that the Department for Transport cannot deliver Northern Powerhouse Rail within the £45 billion funding cap set by Treasury.

It specifically singled out HS2 Ltd’s role in the programme as a factor that heightened that risk.

The company has been handed responsibility for developing the (largely) new line between Liverpool and Manchester, the centrepiece of the programme’s second phase.

This week it was confitrmed that HS2 would have been rated “poor value for money” if its true cost had been clear when ministers gave the final go-ahead in 2020, the National Audit Office has revealed.

In a report published on Monday (29 June), the spending watchdog set out the benefit–cost ratio the Department for Transport (DfT) would have arrived at in 2020 had it known the railway would cost what it now expects: between 0.3 and 0.4.

Anything below 1 means a project returns less than it costs, and DfT’s own guidance files that range under “poor value for money”. On those numbers, the case for building HS2 at all would have collapsed.

In a wonderful bit of irony, Treasury has now capped Northern Powerhouse Rail at £45 billion – the exact figure HS2 Phase 1 was supposed to cost before its budget collapsed.

Why HS2 Ltd got the job anyway

When MPs asked the Department why it had appointed a company with a track record of poor cost estimation, officials said it was a point of pragmatism.

HS2 Ltd already holds much of the engineering expertise on that section of the route, along with experience of the hybrid Bill process needed to get the line through Parliament.

The Department said it had created a ringfenced unit inside the company to handle the Northern Powerhouse Rail work, with its own Managing Director, and a separate sub-committee providing oversight. This arrangement is specifically designed to insulate the new programme from what officials described as the ongoing “reset” of HS2 Phase 1.

Perhaps understandably, the committee remains unconvinced and has set a deadline for the project. Within six months, the Department must write to MPs explaining what it is doing to ensure HS2 Ltd’s plans and cost estimates for phase 2 are realistic.

A cap set before anyone knew the cost

Perhaps one of the biggest indicators of the problems behind these mega-developments is that nobody can yet say whether £45 billion is enough, because the programme it is supposed to fund has not been designed.

The Treasury set the cap based on early estimated cost ranges and an assessment of long-term affordability, before the route alignment, outputs or delivery model had been settled.

However, MPs said they were unclear how the figure was determined and questioned how robust it would prove. Again, £45 billion was the figure HS2 Phase 1 was supposed to cost before its budget collapsed, and it seems quite unlikely that a completely different route will come to the exact same costing.

This figure becomes more understandable when considering how the government is actually doing its budgeting – the £45 billion is not a cost estimate but a ceiling, and the railway must now be scoped to fit inside it.

Officials could not, however, set out a plan for managing spending, controlling costs or deciding what gets cut if pressures emerge.

This is something we are now seeing with HS2. The cross-Pennine improvements that deliver the programme’s full east-west connectivity. If phases 1 and 2 eat the budget, as HS2’s early phases did, it is the final leg that pays.

Despite all this, the department insisted it had learned from the past, telling MPs it was applying a structured set of lessons from HS2, Crossrail and other major projects – including not fixing the delivery model or cost estimates too early.

But a government Internal Audit Agency review in January 2026 found the Department’s project teams were not consistently applying the lessons it had identified. Perhaps not something that we need a full blown review on.

For a programme expected to run for two decades and cost tens of billions, the committee’s conclusion was pointed – it was the absence of robust governance in HS2’s early years that caused the problems from which that project has never recovered.

Northern Powerhouse Rail is now in its early years, and it’s already all feeling a bit unserious.

Now read: How HS2 has become too expensive to stop