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Thursday24 August 2017

NAO report blasts Garden Bridge finances

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Investigation says scheme is £75m short of what it needs

An investigation by the National Audit Office (NAO) has estimated that there is a £75 million funding gap between the Garden Bridge’s estimated costs and private investment.

The auditor also found that the Department of Transport is likely to lose £22.5 million of taxpayers money if the Thomas Heatherwick designed project does not go ahead. This financial exposure consists of £13.5 million of costs to date and a further £9 million in cancellation fees.

“There remains a signifcant risk that the project will not go ahead,” the auditor said primarily because the Garden Bridge Trust has still not secured the required land on the South Bank despite aiming to start construction next spring, 18 months later than planned.

Cost estimates for the scheme have also risen from £158 million outlined in the original business case to £185 million this August according to the chairman of the Garden Bridge Trust, Lord Mervyn Davies, which has also placed French contractor Bouygues on standby having awarded the firm the build contract in April 2015.

The auditor concluded that the Trust is also likely to come to the government cap in hand again if it cannot plug its funding shortfall.

“The pattern of behaviour outlined in this report is one in which the Trust has repeatedly approached the government to release more of its funding for pre-construction activities when it encounters challenges. The department, in turn, has agreed to the Trust’s requests,” the NAO said.

The NAO’s investigation into the Garden Bridge’s funding centred on the decision by the DfT to grant £30 million of funding for the construction of the bridge and the subsequent decisions on three separate occasions to increase the funding prior to construction starting on the project – where civil servants twice advised ministers against doing so.

George Osborne in his then role as chancellor announced as part of the 2013 Autumn Statement that the government would commit this money to support the development and construction of the Garden Bridge. The chancellor subsequently nominated DfT as the source for the government’s funding of the project subject to a satisfactory business case being made for the project.

The Department of Transport agreed to fund the Garden Bridge project despite misgivings having deicded that the project represented “poor value for money” the NAO said

A cap was imposed of £8.2 million on the amount of money to be spent from the government funds during pre-construction as another protection for the taxpayer. This cap was breached on three occasions despite increasing uncertainty surrounding the project after request form the Garden Bridge Trust.

Recently installed transport secretary Chris Grayling reduced the amount the capped amount in August by £6 million to £9 million.

In a statement, the Garden Bridge Trust said: “We are working hard to conclude the necessary land deals required for the building of the South Landing which has been a complex process with local challenges and negotiations which have taken time to resolve.

“78% of the project cost will be raised privately. The Trust confirmed in July that it has £56 million to raise. It has received an investment from government of £60 million which was always intended to kick start private investment. Of this £60 million investment, £20 million is being treated as a loan and around the same amount will be repaid to Treasury in VAT. This means the public investment will sit at around £20 million in line with the cost of the Millennium Bridge.

“The Trust has not and is not asking for additional funding. We are grateful for the support of both the government and the Mayor of London as we embark on raising the final private funding.”

 

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Readers' comments (13)

  • 'The Trust has not and is not asking for additional funding' - debatable. What about 'will not ask in the future' - not mentioned and highly unlikely! Let's stop the rot here, and refund the taxpayer, who seems to be the only one to have coughed up so far, from all those private funds which are claimed to have been raised.

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  • IT ALL COMES BACK TO BORIS, FRIENDS, AND FRIENDS OF FRIENDS (Mayor, TfL, TfL Director, Consultants, Key Personalities etc., all caught so far up in a big fantasy, it became too late to turn back), SO SAYS THE NAO Summary - Extracts Below:

    Its time now for an Audit of Friends, Friends of Friends, and Comrade Boris.

    "2. In its assessment of the business case, the Department concluded that there was a significant risk that the Bridge could represent poor value for money.
    3 The Department agreed to make the £30 million investment in spite of its concerns about the value for money of the Bridge.
    4 Providing the funding through the TfL grant left the Department with limited oversight of its support to the Trust. The Greater London Authority (GLA) Transport grant is not ring-fenced and does not require TfL to provide a detailed breakdown of how it spends this funding.

    The Department relied on regular meetings with officials from TfL and the Trust for oversight of its £30 million contribution

    "10 Since June 2016, the Department has received written monthly updates from the Trust on the status of the project and the steps being taken to address the main risks. These reports have included a narrative update on the way the Trust has managed key risks and some have contained a risk register. They have not contained standard project performance information such as progress against schedule and budget, nor have they contained information on the Trust’s progress against fundraising targets (paragraph 3.26)"

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  • "The chancellor subsequently nominated DfT as the source for the government’s funding of the project subject to a satisfactory business case being made for the project."
    But the business case was never satisfactory, as DfT's own statement demonstrates, and Dan Anderson's study of the business plan has proved.

    If the GBT have secured £69m in private funds, then why have they been going to DfT asking for the release of public funds above the agreed cap - three times?

    If the current level of funds is capped @ £9m, and GBT are unable to fund further ongoing costs from other sources, then DfT should not be on the line for a further £13.5m in the event of cancellation. Cancellation fees are GBT's problem if they fail or are unable to keep their side of the funding agreement.

    GBT's comparison with the Milenium Bridge is disingenuous. Presumably there were VAT receipts from the 20m this bridge cost the taxpayer too, as well as huge and measurable receipts resulting its role in connection the Tate Modern, Globe Theatre etc etc. to the city.

    When will this disaster end?

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  • I have to echo Robert's key point, if not his inability to read.

    >"Department of Transport is likely to lose...£9 million in cancellation fees"

    Why? How on earth did they get into that position?

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  • SomeoneStoleMyNick

    I look forward to Margaret Hodges' investigation of all these matters. The NAO Report will be a useful contribution.

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  • Looks like the whole rotten edifice is slipping inexorably below the surface of the Thames leaving a political farce, a financial black hole for the taxpayer and swirling clouds of highly suspect procurement in its wake.

    Hopefully Margaret Hodge can deliver the coup de grâce ...

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  • Why did the new mayor lend his support ???

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  • SomeoneStoleMyNick

    He SAID he was lending his support. Sadiq Khan is a politician.

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  • Think Sadiq should cancel it and blame it on Boris whilst he has the chance. Maybe he has a less messy way...

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  • SomeoneStoleMyNick

    Several people here are going to end up in front of the Public Accounts Committee. Should make interesting viewing.

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