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Sunk and disorderly

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The April 2020 HS2 phase one Full Business Case (FBC) treated £5.6 billion of expenditure to December 2019 as sunk, the Department for Transport has confirmed.

DfT: HS2 sunk costs assumed as £5,600 million, May 2020

As that expenditure was factored out for the purposes of preparing the April 2020 FBC, it would seem reasonable to conclude that

CYN2020_04 = CYN2019_08 – SUNC2019_12

where CYN2020_04 is the Y network cost as estimated in the April 2020 FBC,

CYN2019_08 is the Y network cost as estimated in the HS2 Chairman’s Stocktake (August 2019),

and SUNC2019_12 are those HS2 costs incurred up to December 2019 declared as sunk for the April 2020 FBC.

HS2 Chairman's Stocktake, 2019, Table 4

The HS2 Chairman’s Stocktake stated that CYN2019_08 was between £72.1 billion and £78.4 billion.

Using the Stocktake lowest estimate of £72.1 billion, one would expect the updated April 2020 cost to be £66.5 billion.

( CYN2020_04 = 72.1 – 5.6 = 66.5 ).

Using the Stocktake highest estimate of £78.4 billion, one would expect the updated April 2020 cost to be £72.8 billion.

( CYN2020_04 = 78.4 – 5.6 = 72.8 ).

Table 2.9 of the April 2020 HS2 Full Business Case

However, item 4 in Table 2.9 of the April 2020 FBC gives CYN2020_04 as £78.2 billion.

So, after deducting £5.6 billion of sunk costs, the official cost of the Y network is, er, £0.2 billion lower than the highest estimate in the Chairman’s Stocktake.

(All of the above figures are based on year 2015 prices.)

Written by beleben

May 24, 2020 at 11:54 am

Posted in HS2

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