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Taxpayers set to fund HS2 tunnel under London despite Sunak pledge

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High Speed 2 is set to get the green light to dig a 4.5-mile tunnel under central London within weeks, with the government expected to release over £1bn of taxpayer cash for the work, according to Whitehall and industry figures.

The cash injection would end uncertainty over whether the high-speed railway line will reach its planned central London terminus at Euston but raise questions about Rishi Sunak’s pledge to shift costs to the private sector.

In October, the UK prime minister announced a plan to save £6.5bn from the redevelopment of the Euston terminus and tunnel link by handing responsibility to a new public-private development corporation.

Sunak unveiled the plan as he junked the entirety of HS2’s northern leg because it was running tens of billions of pounds over budget. His decision turned a line conceived as a grand project connecting England’s south and north into a truncated high speed route between London and the midlands.

The tunnelling needed to bring HS2 into the centre of London has remained an area of uncertainty even after Sunak’s decisive and controversial reshaping of the £67bn rail project. Ministers had paused the Euston terminus redevelopment in March 2023 over cost concerns.

The government is expected to soon give final approval for work to begin tunnelling the final 4.5 miles from the west London rail interchange at Old Oak Common to Euston, the Whitehall and industry figures said.

Taxpayers would fund upfront the over £1bn cost of the tunnel under the plans due to be signed off by ministers, they added. The price tag is accounted for by HS2 in 2019 prices as the rail project has not revised its costings to account for inflation since then. Tunnel boring machines are due to start work in 2025.

Sir John Armitt, chair of the National Infrastructure Commission, had warned in an interview with the Financial Times last November that despite Sunak’s plans, the public would have to pay for the tunnel to Euston.

“At the end of the day the government will need to be ready to fund the core civil engineering for the final miles of the project,” he said.

One Whitehall official insisted the government still hoped to recoup the costs of the tunnelling but said the savings Sunak envisaged would come much later, once the wider Euston redevelopment is completed.

Another official said “alternative funding” mechanisms could ultimately pay for the tunnelling, which could include a retrospective levy on developers.

“Essentially Euston’s redevelopment is being made possible by private sector capital, and that applies for work going forwards but it also applies to work going back in time,” they said.

Under Sunak’s plan, private developers are meant to pay for the HS2 station at Euston and tunnelling to Old Oak Common. In exchange, they would get to build profitable houses, offices and shops at Euston.

In November, Dame Bernadette Kelly, the top civil servant at the Department for Transport, told MPs the private sector would “ideally fund the station approaches and we are also looking for private funding to cover the whole cost of running from Old Oak Common to Euston”.

The transport department said it remained committed to “a privately financed Euston station as previously set out, helping to deliver value for money for taxpayers”.

“There is already extensive support and interest from the private sector to invest — and we will set out full details in due course,” a spokesperson added. HS2 Limited, the public body running the rail project, declined to comment

Parliament’s public accounts committee recently warned the transport department against further delays to building HS2 all the way to Euston, saying it would “incur much greater costs from stopping and restarting work” rather than proceeding. 

A consortium of Skanska, Costain and Strabag was given a £3bn contract in 2020 — now worth £4bn in today’s money — to tunnel from Ruislip in outer London all the way to Euston — a distance of over 13 miles.

Tunnelling has already begun between West Ruislip to Old Oak Common. HS2 is not expected to start running trains until between 2029 and 2033.

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