Since April 2012, Philip Rutnam has been the permanent secretary – that is, the head – of the UK Department for Transport (DfT). In that capacity, he’s also the “accounting officer”, responsible for ensuring that the department achieves good value for money.
If he’s worried that a project will cost too much money, or provide too little benefit, he’s entitled to write to his minister to request direction. In this way he can both formally set out his concerns, and – let’s be honest about this – make sure it’s not his fault if it all goes tits up.
The reason I mention all this is because, last May, Philip Rutnam did just that. The letter in question concerns London’s proposed Garden Bridge, which will be a much loved addition to the skyline or an embarrassing waste of time and money, depending on whose side you’re on.
Rutnam begins his letter by explaining why he’s writing it in the first place, and how the Garden Bridge came to be DfT’s problem. Chancellor George Osborne promised to commit £30m to the project in December 2013, “subject to there being a satisfactory business case for the project”.
Rutnam makes clear he was always cynical – “After examining the business case for the project in summer 2014, my judgment was that the transport benefits of the project were limited and came with a relatively high level of risk to value for money”. But, he adds “on the balance of probabilities I considered that this risk was acceptable”.
The problem is that the risk kept increasing, because the amount of money DfT had to make available before construction started – money that would, if the project collapsed, be lost – kept on increasing, too. Why? Because the Garden Bridge Trust (GBT), the charity running the scheme, asked for it. Here’s the relevant passage:
One important control on the DfT’s contribution is a cap on the amount that can be spent prior to construction. This was originally set at £8.2m, but it has since twice been agreed to increase the cap following requests from the Garden Bridge Trust, and it now stands at a little under £13.5m.
The Trust has now asked for a further increase in its permitted preconstruction spending of up to £15m (across DfT and Tfl combined). This is to underwrite the potential cancellation liabilities that it now will face if the project does not proceed. The Trustees have been advised that under charity law they could become personally liable for the Trust’s unmet financial obligations if they have failed to manage risk prudently.
So – to protect the GBT’s trustees, the trust asked DfT and Transport for London (TfL) to underwrite their liabilities. Except that TfL then asked to be excused, too:
Following recent discussions with the Mayor of London, DfT has been asked to increase its pre-construction exposure by up to £15m to underwrite the potential cancellation liabilities.
And, Rutnam warned, for all sorts of reasons – GBT’s failure to acquire land on the South Bank, the need to raise another £40m in private donations – “the probability of these liabilities materialising is not negligible”.
The result:
If we increase our pre-construction commitment as requested and the bridge does not proceed, there would be cancellation costs to the public sector of up to £15m. This is in addition to sunk costs of around £13.5m committed by DfT and £22m by TfL. In this scenario, around 90% of the cost of the cancelled bridge would have been provided by the public sector funders, and DfT specifically would have provided up to a half of the total amount spent. In my judgment, this represents 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.
Look past the civil service jargon, and this is quietly damning. Rutnam is saying exactly what the Garden Bridge’s critics have been saying since the project began: that, even though its transport benefits are limited, the cost of the project was falling disproportionately on the taxpayer.
And yet, ministers decided the project would still go ahead. Go figure.
We approached the Garden Bridge Trust for comment. It said it couldn’t comment on internal government communications.
This morning, the National Audit Office, a government spending watchdog, published its long-awaited report on the project. It found that there is significant risk the bridge would never be built, and the DfT stood to lose as much as £22.5m if that happened.
And if the project isn’t cancelled?
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.
The Garden Bridge Trust is commenting on this one. Here’s the first paragraphs of its statement:
The Garden Bridge is a visionary project, connecting the South Bank with the North Bank, Covent Garden, the city and beyond. It is the first of its kind, a pedestrian walkway through a garden of 270 trees, hedging, shrubs and plants. It is an asset funded primarily by the private sector and bequeathed to London, enabling 9,000 commuters each weekday to cross the Thames without having to share a Bridge with traffic. It will be a fantastic place for people to visit for free, 365 days a year.
It is right that there is scrutiny of the project because it involves public money and transparency is good for us at an uncertain time.
Draw your own conclusions.
Jonn Elledge is the editor of CityMetric. He is on Twitter, far too much, as @jonnelledge.
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