Scrapping London’s garden bridge could cost DfT over £22m, says NAO

11 Oct 16

The Department for Transport stands to lose around £22.5m, should the proposed Thames Garden Bridge be cancelled, the National Audit Office has found.

Publishing findings from its investigation into the department’s grant of £30m toward the construction of the Garden Bridge. Among its conclusions, it said there was “a significant risk the project will not go ahead”.

The Garden Bridge is a proposed new pedestrian bridge and garden spanning the River Thames in London from the top of Temple underground station to the South Bank and scheduled to open in 2019. Design, building and maintenance of the bridge is the responsibility of the Garden Bridge Trust, a registered charity set up specifically for the purpose of the scheme.

The NAO did not assess the value for money of the project as a whole, nor did it consider Transport for London’s contribution of £30m, which falls outside the NAO’s jurisdiction.

In the 2013 Autumn Statement, then chancellor George Osborne confirmed the government would contribute £30m toward the construction of the bridge, subject to a number of conditions and the submission of a satisfactory business case. The chancellor nominated the DfT to administer the government’s contribution.

Although the business case was received, the DfT concluded that there was a significant risk that the bridge could represent poor value for money. However, despite these concerns, it agreed to authorise the £30m contribution through an increase in its block grant to TfL.

This decision left the department with limited oversight of its support for the project, the auditors said. Also, it simplified the trust’s access to public funding through a single source, and made TfL responsible for assuring and overseeing all of the £60m public funding and for ensuring value for money for taxpayers.

However, the department did seek to protect taxpayers’ money by imposing a cap of £8.2m on the amount of its funding that could be used for pre-construction activity. Money spent before construction has started is thought to be at greater risk than once the project is certain to go ahead.

The department then relaxed this requirement on three occasions in the face of considerable uncertainly that the bridge would actually be built. In August 2016, the department extended indefinitely a guarantee period to underwrite cancellation liabilities, to a limit of £9m. This reduced the department’s total exposure to £22.5m and put more of the risk onto private donors.

However, there is still a significant risk the project will not go ahead, according to the auditors. The trust has still not secured the land on the South Bank where the bridge is supposed to land. Therefore, the main contractor has been put on standby and construction is now anticipated to start in spring next year – around 18 months later than planned.

In terms of affordability, an internal audit completed by the DfT found that a funding gap between the project’s cost and levels of private investment needed could be as much as £75m.

The department now stands to lose a maximum of £22.5m of its £30m grant, should the project not be able to proceed. This consists of £13.5m in costs so far to complete pre-construction activity, and a further £9m of cancellation liabilities.

It also said that, given the history of the project, it was likely the government would be approached for extra funding, should the trust face a funding shortfall. Up to now, it said, the department has agreed to all the trust’s requests. 

Responding to the report, Meg Hillier, chair of the Public Accounts Committee, said she was concerned at the pattern of funding so far. “It worries me that whenever the Garden Bridge Trust runs into financial trouble, the Department for Transport releases more taxpayers’ money before construction has even started,” she said.

“If the project collapses, taxpayers stand to lose £22.5m. If it goes ahead, who is going to pick up the bill to maintain it?”

Hillier added that she hoped the government had “learned its lesson from the Kids Company fiasco, when for years it bailed out the charitable trust every time it came begging”.

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