The NAO has warned that DfT does not always recognise the limitations of its own analysis

Rail decisions made 'using unrealistic analysis'

Decisions on major rail projects like HS2 have sometimes been made "using unrealistic analysis", the government’s spending watchdog has said.

The Department for Transport (DfT) did not query why its original analysis that HS2 would bring £2.40 benefit for every £1 spent was higher than for other projects, according to a report from the National Audit Office (NAO) released today.

It added that the DfT later identified that errors meant some benefits had been counted twice and that the ratio had now been changed to a benefit of £1.40 for every £1 spent.

The report said the DfT "does not always recognise the limitations of its analysis nor scrutinise outputs to make sure they make sense".

It said: "This means that its analysis has been open to challenge and, in some cases, decisions have been made using unrealistic analysis."

The NAO also said the department's economic assumptions needed to reflect changes in real-life behaviour and that the DfT was slow to take into account potentially significant changes to passenger behaviour in its initial economic analysis for HS2.

It said: "It (the DfT) has subsequently revised its business case to include new evidence on the value of business travellers' time and has a programme of further research to understand how passenger behaviour has changed now that new technology is available, such as laptops, tablets and Internet connections on trains."

Programme management capacity and skills need to be developed at the DfT, according to the NAO, which pointed out that on the cross-London Crossrail scheme the department did not secure all the contributions it initially expected and it might have to contribute an extra £160m.

The report went on: "On HS2 there remains uncertainty as to how much private sector contribution the Treasury is seeking and for which elements it would wish others to pay. The department needs a better understanding of the wider benefits transport investment brings, through evaluation, to negotiate larger contributions for future programmes."

The report comes just days after Prime Minister David Cameron said he was a "passionate" believer in high-speed rail and that going ahead with HS2 was the right thing to do.

He was speaking as he endorsed plans by HS2 Ltd chairman Sir David Higgins on the second phase of the £50bn HS2 project and also plans for an HS3 to improve east-west rail journeys across northern England that could cost around £7bn.

Mick Cash, general secretary of the RMT transport union, said: "Due to the continuing shambles at the DfT, and a chronic shortage of core in-house skills, a whole army of consultants, analysts, accountants and other private operators are making a killing out of essential rail projects that are absolutely key to meeting the continuing surge in demand for rail travel.

"From delays to upgrades and electrification, the chaotic approach to urgent fleet replacement and the general slow progress which make the words 'high speed' sound like a sick joke, Britain's railways have been left in the slow lane while other parts of Europe race ahead."

A Department for Transport spokeswoman said: "We welcome the NAO's findings about improvements in our sponsorship of major rail infrastructure programmes as part of our long-term economic plan.

"There are no new findings in this report. Our own checking processes uncovered these errors a number of years ago. We have been completely open about these and included them in the revised economic case for HS2, which is robust."

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