Transport

Investigation: The Department for Transport’s funding of the Garden Bridge

The Department for Transport agreed to make a £30m grant towards construction of the Garden Bridge despite its concerns over value for money. The NAO’s review does not assess the value for money of the project as a whole.

Garden Bridge

The National Audit Office has today published its findings from its investigation into the Department for Transport’s grant of £30 million towards the construction of the Garden Bridge, the proposed pedestrian bridge and garden spanning the River Thames in central London. Transport for London (TfL) agreed to also contribute £30 million towards the scheme. The remaining £125 million is to be funded from private donations. Design, build and maintenance of the Bridge is the responsibility of the Garden Bridge Trust (the Trust), a registered charity set up specifically for this purpose.

The investigation looks at the Department’s initial decision to provide grant funding to the Trust. It also considers the Department’s decision to increase, on three occasions, the amount of its £30 million contribution that it was willing to commit to before construction started on the project. The NAO’s review does not assess the value for money of the project as a whole. It is limited to the portion of funding provided by the Department. The NAO is not the auditor of TfL or the Trust.

The key findings of this investigation are as follows:

  • The initial funding commitments to the Garden Bridge (the Bridge) project were made by the former Chancellor of the Exchequer to the former Mayor of London, without the involvement of the Department for Transport (the Department). In his 2013 Autumn Statement, the Chancellor announced that the government would contribute £30 million towards construction of the Bridge. This was subject to a number of conditions including the provision of a satisfactory business case. The Mayor was to contribute a further £30 million as part of a funding package to provide £60 million of public funding towards the project. The remainder, then estimated at £115 million, was to come from private sources. The Chancellor nominated the Department to administer the government’s contribution.
  • 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 but agreed to make the £30 million contribution in spite of its concerns. It chose to provide the contribution through an increase in its block grant to TfL which left the Department with limited oversight of its support to the Trust. This arrangement simplified the Trust’s access to public funding through a single source. It also made TfL responsible for assuring and overseeing all of the £60 million public funding and for ensuring value for money for taxpayers’ investment.
  • The Department sought to protect taxpayers’ money by imposing a cap on the amount of its funding that could be used for pre-construction activity. In a letter to the Mayor in November 2014, the Department stipulated that a maximum of £8.2 million could be spent on pre-construction works. Money spent before construction has started is at greater risk than money spent once a project is certain to go ahead.
  • It subsequently relaxed this requirement on three separate occasions despite considerable uncertainty as to whether the Bridge would be built. In June 2015, the Department agreed to increase the cap to £9.95 million; by another £3.5 million in February 2016 and then in May 2016 Ministers agreed, following a Direction to the Accounting Officer, to underwrite cancellation liabilities of up to £15 million for a limited period until September 2016, bringing the Department’s total exposure to pre-construction losses to £28.5 million. The Trust had not yet secured the land on the South Bank for the Bridge’s south landing. In August 2016 the Department subsequently extended its guarantee period indefinitely but reduced the amount it was willing to underwrite to £9 million. This reduced the Department’s total exposure from £28.5 million to £22.5 million and put more of the risk onto private donors.
  • There remains a significant risk that the project will not go ahead. The Trust has still not secured the land on the South Bank for the Bridge’s south landing which has affected the timetable. The main contractor has been put on standby and construction is now expected to begin in the spring of 2017, approximately 18 months later than planned. In terms of risks to affordability, the Department’s internal audit report identified a funding gap between the project’s cost and levels of private investment of as much as £75 million.
  • The Department now stands to lose a maximum of £22.5 million of its £30 million grant, should the project not be able to proceed. This consists of £13.5 million in costs so far to complete pre-construction activity, and a further £9 million of cancellation liabilities.
  • If the project continues, it is possible that the government will be approached for extra funding should the Trust face a funding shortfall. The project has faced cost increases and delays to the schedule. 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.

 

October 2016


Publication details:

ISBN: 9781786040770 [Buy a copy]

HC: 722, 2016-17

Work In Progress