A NEW REPORT from the National Audit Office has praised the Department for Transport for the way it handled the letting of the 30-year concession to operate HS1.

The NAO warns that lower-than-expected passenger numbers may expose taxpayers to some risk, but also admits that some of the benefits, particularly those connected with regeneration, cannot be calculated for the time being. This has prompted the MP who chairs the Public Accounts Committee to claim that the High Speed project was based on 'dodgy assumptions'.

The report, 'The sale of HS1', describes how the letting of the concession, which runs until 2040, was negotiated by the Department for Transport.

It says:'The Department and LCR [London & Continental Railways] handled the sale of HS1 Limited well and achieved higher-than-expected sale proceeds. At £2,048 million, the winning bid was higher than LCR’s estimates ... which were in the range £1,300 million to £1,900 million. The winning bid offered only the third highest net proceeds but was within £23 million of the top bid and had no conditions that might delay completing the sale.'

But the report has some reservations about the fact that passenger figures have been well below predictions, saying: 'In 2011, there were 9.7 million journeys on Eurostar services. Actual numbers, however, between 2007 and 2011 have been, on average, one third of the level that LCR forecast in 1995 for its bid. While forecasting has improved since the project started, numbers were also around 30 per cent below the Department’s 1998 forecasts, before it guaranteed the project debt.'

A further 8.4 million passengers used Southeastern's High Speed services in 2011, and the NAO concludes that the other benefits of building the line are set to more than balance the books.

It says the total cost to taxpayers, allowing for concession revenues, was £10.2 billion. On the other side of the ledger, it has identified £7 billion in journey time saving benefits alone, and concedes that other gains, particularly those connected with regeneration at sites such as King's Cross and Stratford, will become clearer over time.

It also points out that the project contributed to the success of London's Olympics bid.

Margaret Hodge, who chairs the House of Commons Public Accounts Committee, said: "I am yet to be convinced that HS1 will prove to be value for money. Yet again we hear that value for money will depend on uncertain benefits which have not been quantified. We will want the Department to do all it can to realise the benefits and turn this sorry story round. 

"Compared to the staggering mismanagement of the West Coast Main Line upgrade, the Department did relatively well with the construction of HS1. But that is damning with very faint praise indeed. It’s a sad state of affairs when it comes as no surprise that HS1 was based on dodgy assumptions and bad planning."