HS2 pushed government to keep ‘unjust’ compensation rules for ousted locals
Bosses at HS2 pushed the government to keep an obscure law that enabled it to pay millions less in compensation to residents and businesses forced from their homes during construction, City PM can reveal.
Internal documents obtained via FOI show how HS2 understood the arcane clause would cause “significant distress” and destroy jobs and livelihoods, but argued it should be maintained anyway.
The recommendation was made to bring down the cost of compensating those impacted by the railway project’s notorious use of Compulsory Purchase Orders (CPO), powers that enable it to evict landowners and tenants in its direct path without consent.
It came despite an admission that abolishing the clause would not make a “material” difference to HS2’s overall property acquisition budget, saving around £19.5m.
The anomaly known in legal circles as the Bishopsgate principle means those with unprotected or minor tenancies, typically small businesses, are likely to receive significantly less “disturbance” compensation than those with longer, more fixed agreements.
The government stepped in with a legislative amendment in 2017, but the changes were not retrospective, leading experts to warn of a two-tier compensation system at HS2.
Currently, those impacted by Phase 1 between London and Birmingham are still subject to the controversial clause, whereas those affected by Phase 2 are not.
Persisting with Bishopsgate for claimants between London and Birmingham would cause “significant distress and lead to acrimonious discussions as HS2 seeks to obtain possession in a compressed timescale,” an internal assessment brought by HS2’s head of acquisitions, Michael Eckett, read.
It also considered paying “minimal compensation” would mean some businesses may not be able to afford to relocate and would be “forced to extinguish with the loss of jobs.”
HS2 compensation claims
One redacted example noted by officials included a business that would need to spend around £3m relocating heavy equipment and specialist facilities.
Given the minimal compensation expected under current rules, HS2 determined it would not be able to “afford that expenditure and the jobs of around 20 people will be lost with all the reputational damage that will stem from this.”
The document formed part of a consultation delivered by HS2 Ltd, the arms-length body overseeing the project. It was ultimately passed to the Department for Transport (DfT) and its Property Approvals Group.
Internal estimates for the cost of abolishing Bishopsgate pale in comparison to HS2’s entire budget, which has ballooned over the last decade.
The total cost of the embattled railway line was initially supposed to be around £33bn, but it is now expected to reach more than £80bn even despite the cancellation of the Manchester leg.
The document concluded: “HS2 Ltd recognises the current law and understands the consequences this could have for businesses, but this needs to be balanced against the interest of the taxpayer and need to spend public money appropriately.”
The Bishopsgate principle
The Bishopsgate principle was first established following a Lands Tribunal case in 2004.
Executives also appeared concerned that amending the clause for HS2 would lead to broader litigation seeking to overturn the initial Lands Tribunal ruling, given the money at stake.
“HS2 is also cognisant of the precedent risk of deciding not to operate the law in this case
and the consequences this could have in other circumstances where aspects of the compensation code do not provide perceived fairness for those affected by public works,” the document said.
Jonathan Scott-Smith, a chartered surveyor specialising in compulsory purchase and compensation, told City PM it was “unfortunate” that Bishopsgate hadn’t been abolished across the whole project.
“The government has already accepted that the Bishopsgate principle established by a 2004 Tribunal case could be unjust, so I would urge the DfT to reconsider this and do the decent thing and apply it to Phase 1 – if that isn’t too late,” he said.
A spokesperson for HS2 said: “We acquire land and property on behalf of the Transport Secretary and must comply with the law in how compensation is applied at all times.”
A Department for Transport spokesperson said: “We’re committed to delivering the best value for taxpayers with HS2.
“When property is acquired, we provide full compensation as required by law.”