Public Accounts Committee Submission to the Garden Bridge Project Review
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Dame Margaret Hodge MP Further to the announcement of the review of the Garden Bridge project please find enclosed our submission to this review. This is the chain of evidence we’ve considered around the project and the Department for Transport grant. The Public Accounts Committee has taken no formal position but we are concerned about the risk to taxpayers’ money. Yours sincerely Meg Hillier MP Chair, Committee of Public Accounts The Committee of Public Accounts and the issue of the Garden Bridge The Committee of Public Accounts has engaged with the matter of the Garden Bridge on several occasions this Parliament. The Committee believes that the detail of this engagement will be useful to the review of the Garden Bridge. Letter from the Leader of Lambeth Council [6 October 2015] The Chair received a letter from Cllr Lib Peck concerned about the mounting costs of the Garden Bridge on the public purse. This was timely as the NAO were already looking into the project. Letter from Comptroller and Auditor General [16 November 2015] The Comptroller and Auditor General’s office reported back to the Committee on their findings from their inquiry into the Department for Transport grant awarded to the scheme. The concerns raised in this, were not about the scheme as a policy but the manner in which it was being conducted. The Department risked seeing no substantial benefits for their investment, should the project fail, and the high degree of uncertainty meant there would be a real risk to achieving value for money. While the Department was aware of the concerns it decided, under pressure, to award the grant.1 Permanent Secretary of the Department for Transport [2 December 2015] Our first opportunity to ask questions about the project came soon after, when the Permanent Secretary for the Department for Transport, Philip Rutnam, came before the Committee. Mr Rutnam was at pains to assure us that the Department was keeping a close eye on expenditure and while £30m was awarded, he acknowledged that slightly less than £10m had already been spent.2 Letter from Comptroller and Auditor General [1 June 2016] The Comptroller and Auditor General wrote to Kate Hoey MP (1 June 21016) confirming that the NAO was investigating the grant by the Department for Transport to the project but had no authority to halt a project while it carried out an investigation. He also wrote to my Committee (22 June 2016) with full details of the ministerial direction sought by Mr Rutnam from the Secretary of State. Mr Rutnam was concerned about the amount of money that could be spent ahead of construction. He was especially concerned about agreements that the public purse should underwrite the project if it was cancelled. The risk of the £15m underwritten being paid out was “not negligible”. He pointed out that, if the project failed that £15m would be added to sunk costs of £13m from the Department and £22m from TfL which would mean that 90% of the losses would be public money. In his opinion, this represented “a disproportionate level of exposure for the Exchequer to the risk of failure on a charity-led project that was intended to be funded largely by private donations”.3 The Business case [26 July 2016] Newsnight reported on the project and said that the bridge would be closed up to 12 nights a year for private events (to collect revenue). I was also aware of a third party analysis of the business case. That analysis concluded that “the basic business model is flawed and the 1 Letter included 2 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-accounts- committee/reform-of-the-rail-franchising-programme/oral/25414.html, included as Annex 1 3 Letter included Business Plan targets are optimistic at best, but more likely unachievable”. The analysis suggested that there was a fundamental flaw in the business plan as it relied on almost 70% of projected income coming from voluntary donations, significantly higher than the 10-30% voluntary donation income received by cultural attractions such as the Tate, V&A and Science Museum. The business case also depended on a guarantee from the GLA to cover operating costs in perpetuity to gain planning permission which potentially removes the incentive for donors and sponsors to give as the ultimate responsibility to pay the costs would lie with the taxpayer.4 Permanent Secretary of HM Treasury [17 October 2016] My Committee then took the opportunity to question the permanent secretary of the Treasury on the issue, with particular reference to the responsibility for expenditure and whether the Treasury was involved in the detail of the expenditure when the commitment was made and the Ministerial Direction made. The permanent secretary was unable to provide absolute confirmation but provided us with a commitment to undertake an analysis of the decision and the business case.5 We will forward you the detail of that assessment when it arrives with the Committee. 4 https://www.pdf-archive.com/2016/07/19/garden-bridge-business-plan-report-dan-anderson/garden- bridge-business-plan-report-dan-anderson.pdf 5 http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-accounts- committee/spending-performance-and-departmental-plans/oral/41247.html, attached as Annex 2. Annex 1 – Oral Evidence with Philip Rutnam Q119 Chair: Okay. Before we finish, I just want to ask Mr Rutnam about the garden bridge. The Department for Transport passported £30 million to Transport for London, but with some assurances attached. I’m not sure if that meant you could claw it back if there was a problem. Philip Rutnam: In certain circumstances, yes. Q120 Chair: So how do you feel the garden bridge is going? Are you worried about that £30 million of taxpayers’ money? Philip Rutnam: We continue to keep a very close eye on the garden bridge project. We were pleased to see the progress that was made between the London borough of Lambeth and the Garden Bridge Trust. Transport for London played an important role in helping to facilitate that outcome, and we were pleased to see that. Of course, a lot more needs to happen in relation to the garden bridge. They still need to get to the point of awarding their principal construction contract. If my memory serves me, there were—at least a couple of weeks ago—some outstanding land purchase issues, not with Lambeth, on the south bank. So we continue to keep a close eye on it. I know you have had some advice on this from the National Audit Office, which was in touch with us, so you will be familiar with the sorts of issues we considered before implementing the Chancellor’s decision that the bridge trust should be awarded £30 million by TfL. Q121 Chair: Is that taxpayers’ money safe if something goes wrong? Philip Rutnam: Thus far, only a proportion of that has actually been spent. We, of course, continue to keep a close eye on this. Q122 Chair: Can you tell us what proportion has been spent? Philip Rutnam: From memory, it is a little under £10 million. Q123 Chair: So about a third. Philip Rutnam: Part of the approach was to make sure the project could make progress, but our liability at this phase of the project is capped quite firmly. Q124 Chair: At the £30 million? Philip Rutnam: No. I believe at under £10 million. Perhaps I could write to you. Would that be helpful? Q125 Chair: Could you please write to us with an update? Philip Rutnam: Just to reassure you that we keep a very close eye on this important and valuable project. Q126 Chair: That £30 million may be small fry in the context of the hundreds of millions we are dealing with, but— Philip Rutnam: These are significant amounts of money. Chair: My colleague from Berwick, who has had to leave, told me that £5 million would do very nicely for a few major infrastructure projects in her constituency, so perhaps it is relative. Annex 2 – Oral evidence with Tom Scholar Q1 Chair: Welcome to today’s Public Accounts Committee on 17 October 2016. We are here to look at how the Government plan and monitor delivering value for money. Tom Scholar is the permanent secretary at the Treasury and Julian Kelly is the director general for public spending and finance at the Treasury. I gave you prior notice, Mr Scholar, that we wanted to ask some quick questions about the garden bridge project and the Department of Health accounts. As you are here, it seems an opportune time and saves you coming back a second time. So I hope you are happy with that. If not, you are here, anyway. First, on the garden bridge, can you outline to us the assurances that you received in the Treasury before committing £30 million of central Government money to the project? Tom Scholar: I think the decision was taken some years ago, in 2013. My understanding is that the decision was taken following a thorough analysis of the business case by the Department for Transport; obviously, that was also discussed with the Treasury. Again, my understanding is that the business case showed there was a range of benefits that could be delivered by this project, and there was a reasonable prospect of proceeding successfully with it and the project delivering value for money. On that basis, the project was approved. Q2 Chair: Four conditions were set. To aid everyone’s memory, one was the business case. The Mayor of London matched the funding from Transport for London, which it is not in our remit to look at, although the Mayor has now set up a commission under Margaret Hodge MP to look at that.