Birmingham City Council and Network Rail have agreed to cover the cost of any budget over-run from the £600 million refurbishment of New Street Station – effectively leaving both organisations open to unlimited additional payments.
The two leading partners in the high-profile Gateway scheme signed legal documents last month promising to bear any unforeseen financial risks.
The deal is understood to have been one of the conditions laid down by the government in return for approving funding for the project.
News of the agreement emerged during the public inquiry into the council’s proposal to compulsorily purchase the 20-acre New Street site.
Planning inspector Philip Major, who is chairing the inquiry, questioned the robustness of costings for the revamped station.
He wanted to know how, since only outline planning permission has been granted and detailed design work won’t be approved until later in the year, the council and Network Rail could be so sure that the new station could be delivered within the agreed budget.
Mr Major said: “There is no physical piece of paper which says this is the design and we can start building it. Everything could change.
“You have outline permission and as such you don’t know, do you, what the final scheme is actually going to be like?”
Gateway project director Robert Flavell told the inquiry it was unlikely that the application for detailed planning permission would involve any radical changes from the outline stage.
Mr Flavell added: “We have a scheme that has been approved by all of the funding partners. All that is happening at the moment is that the real detail is being developed.
“The form and concept of the scheme is unlikely to change significantly.”
He said allowances for inflation during the five-year construction period and “significant contingency assumptions” had been included in the cost estimates.
But he conceded that, in the event of exceeding the budget, the Gateway project would get no more government money.
Mr Flavell added: “The ultimate position is that the funding sources are fixed and the city council and Network Rail have agreed to bear the risk.
“For every one pound more that it costs, the council and Network Rail have agreed to pay for it.”
It also emerged that the council has agreed to borrow money to buy part of the Pallasades shopping centre required for the new station.
The likely cost was not revealed, but the council intends to sell its asset when Gateway is completed and repay the loan.
Mr Flavell said the wider economic benefits to Birmingham city centre from an improved New Street could total £1 billion by 2018.
The figure includes £620 million from private sector office development and £200 million from improved property values and regeneration schemes triggered by the lure of Birmingham’s new, modern station.