HS2’s new boss has laid the blame for massive phase 1 budget overruns on the Government’s decision to let cost-plus contracts for main civil works.

Incoming executive chairman Sir Jon Thompson said that 89% of the cost increase from 2020 till now was down to these contracts alone.

He said the decision had tied his hands preventing him from pulling levers on contractors to rein back costs.

The latest projected cost for HS2 Main Works Civils Contracts is £21.8bn to £23.4bn, a cost hike of £6.1bn.

The latest estimate still at 2019 prices will not take into recent rampant cost inflation across the industry and the Government has now demanded a new cost estimate at today’s prices.

Sir Jon, who has been in post as executive chairman since Thurston stepped down in September, criticised the procurement decision as he was cross-examined by the Public Account Committee yesterday.

He said: “We have to be upfront with you now, the Government decision to let cost-plus contracts where there are very few incentives or penalties around them does not provide me with any real levers on them those contractors to do better in relation to schedule and costs because they receive a marginal reduction in their fee.

“If they spend 100% more than what was agreed they only get 1% reduction in their fee.”

“I can attempt to see if we can reset that in some way, but we are where we are.

The decisions was made for all the right reasons I assume back in 2019 about these contracts but these contracts do not provide me with very much leverage.”

Sir Jon also warned that extra cost pressures loomed with plans to connect HS2 to the West Coast Mainline through a major redesign at the Handsacre junction, already a choke point on the route.

This would need to be expanded requiring extra land and incurring extra cost.

At the same time, the PAC was told that the Department of Transport and HS2 were presently at odds about the final budget for Phase one with the DfT setting a £45bn-£54bn price range and HS2 estimating £49bn – £57bn.

HS2 is planning to tighten management controls on budgets with the appointment in January of a Chief Railway Officer for the project to integrate all elements of phase one working alongside a new chief executive replacement for Mark Thurston.