Meg Hillier MP Chair, Committee of Public Accounts

Transcription

1 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

2 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 included as Annex 1 3 Letter included

3 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 attached as Annex 2.

4 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.

5 Annex 2 Oral evidence with Tom Scholar Q1 Chair: Welcome to today s Public Accounts Committee on 17 October 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 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. Also, TfL would fund the bridge s ongoing maintenance, and the Mayor would cover cost overruns or shortfalls in funding. So the Treasury satisfied itself that the business case was satisfactory, which you say was one of the criteria. Tom Scholar: The Department for Transport, as the Department responsible for the expenditure, took the lead in that assessment, but the Treasury was sufficiently satisfied that it agreed to allocate the money to the Department. Chair: So you were satisfied with that, but given that only one of those four conditions the matched funding was actually met, why do you think it was approved in the end? Did the Treasury have sight of it at that point, or had you by then passed it over to the Department for Transport to make the decision? Tom Scholar: I am not completely familiar with the entire decision-making process at the time. Chair: I should say for the record that you only recently became permanent secretary of the Treasury in the summer. Tom Scholar: Indeed. The decision was made some years ago. What I have outlined to you is my understanding of the decision-making process at the time. Q3 Chair: As we understand it, the decision was very much between the Chancellor and the then Mayor of London, so the Treasury was very much in the driving seat. Do you agree that that is a fair comment? Tom Scholar: It was Department for Transport expenditure. The Secretary of State signed it off and the Department signed it off, so it was a collective decision, but clearly the Chancellor and the Treasury made the money available. Q4 Chair: One of the questions that has arisen is why the Department for Transport dealt with it, given that it is not really a transport project but a project for a bridge. I suppose that is the bit that is potentially transport, but it is not a thoroughfare. You can t even take bicycles over it; it is a pedestrian

6 bridge. Why was the Department for Transport chosen as the Department to administer the grant funding and the guarantees? Tom Scholar: I think for the reason you give: it is a bridge, and that comes within the remit of the Department for Transport. Of course, the implementation of it the actual spending of the money has been delegated by the Department to Transport for London, under various oversight and control arrangements. Q5 Chair: Is that partly why it was Department for Transport because it was going to be administered through Transport for London s budget? Tom Scholar: I am not sure which way round that goes, but since it is a bridge, I think the decision was taken that its primary purpose is transport-related. Q6 Chair: Okay. Note to everyone: bridges always come under the Department for Transport. I have to remember that for the future. I want to be really clear about something, because people have raised a lot of questions with us about this expenditure, although it is relatively small for both the Treasury and this Committee. Is there any promise of further loans or guarantees by the Government for the garden bridge? Tom Scholar: I am not aware of any such proposals. We have of course seen the Report by the National Audit Office, which raises lots of important issues that the Government need to consider very carefully. They will do that, and they will give their response in due course. Q7 Chair: Okay. We look forward to receiving that Treasury minute. There has been some discussion about the underwriting of trustees liabilities. Is there any plan for the Government to extend the underwriting of trustees liabilities? Tom Scholar: Again, I am not aware of any such proposals or plans. Q8 Chair: If it gets the go-ahead, will the running costs be funded by the taxpayer? Do you have any input into that? Tom Scholar: No. The commitment, as I understand it, is to the construction costs, with the guarantee that you referred to as well. That is the total public exposure, or the total Government exposure. Q9 Chair: Going back to the business case, I appreciate that the Department for Transport was the sponsoring Department, but as the spending watchdog within Government the Treasury surely had some sight of this. In the business case, the Garden Bridge Trust said that about 70% of the cost would come from donations. I am referring to a report about the operational viability of the garden bridge a review of the draft operations and maintenance business plan from March 2016 by someone called Dan Anderson, a director at Fourth Street. It was published in July this year. I don t know whether you are aware of this document. Tom Scholar: I have not seen the document, no. Q10 Chair: Okay. I can pass a copy to you. Let me quote from the relevant part. It is talking about getting 70% of the benefit from donations from the private sector. On page 5 of the report, it says: All the same, it is worth noting that while voluntary income represents between 10% and 30% of total income at cultural attractions like Tate, V&A, Science Museum, Kew and the Royal Parks, it amounts to almost 70% of projected income for the Garden Bridge. On the face of it, do you think that makes a good business case for the Government to let taxpayers money be spent on?

7 Tom Scholar: I should say that I have not done a study of the business case approved at the time. I am very happy to do so, but I am not in a position today to give a detailed commentary on what was decided back in Q11 Chair: But on the face of it, if it had been you in the hot seat at the time and you had seen those figures, would you have gone back and asked some questions? You may not have been involved, but the Treasury certainly was. Tom Scholar: I am very sure that the Treasury did ask questions and scrutinise it. As I said, I am happy to go back and review the evidence at the time. I am sure the Treasury and the Department for Transport had good reasons at the time for reaching the decision that they did. Chair: We will come to the ministerial direction in a minute, but I will let Kevin Foster come in on this issue. Q12 Kevin Foster: Mr Scholar, a moment ago in response to a question about maintenance you said that the taxpayer is only liable for the construction cost. Who is liable for the ongoing maintenance of this bridge, if it is built? Tom Scholar: Again, I can just tell you what my understanding is, and I will check the position afterwards. Chair: We recognise that you are not the biggest expert on the garden bridge. Tom Scholar: My understanding is that the trust is responsible for that. Q13 Kevin Foster: Given that the likely length of time for bridge maintenance is in decades rather than years, what would happen if the trust was unable in future years to raise cash? Tom Scholar: There is a guarantee, which the Chair referred to a few moments ago, that relates to the possible cancellation costs in the event that the project does not go ahead. Q14 Kevin Foster: Let us assume it is built. It would then need ongoing maintenance. If the trust was not able to fund that, given that we are talking about decades of maintenance, who would the liability fall to for a bridge over the Thames? Tom Scholar: I think in that case the responsibility would fall to Transport for London, as the authority with the responsibility for implementing this. Q15 Chair: We are straying into the area of the commission set up by the Mayor of London. Finally on this point, I want to ask about ministerial direction. There have been 10 ministerial directions since January 2015, which roughly fall into the following categories. Five are ones you could argue about but which are reasonable political decisions by a Government for example, maintaining steelworks apprentices. They needed directions, but you can see the rationale. A couple were interestingly timed just ahead of the election, but I will not go into those because it is not pertinent to today s discussion. Three related to money going to what we might call favoured causes, or where there is perhaps a particular connection between some part of Government and the organisation. Richard Heaton, the permanent secretary at the Cabinet Office then, asked for a ministerial direction on Kids Company in June John Manzoni, one of our witnesses in the next panel, called for one on Cabinet Office special advisers severance pay. In October this year, the Department for Transport finally asked for one on the garden bridge. Given that the garden bridge is five times the Kids Company spending and about 15 times what was spent on special advisers severance pay, can you shed any light on why it took so long for a decision to be made to call for a ministerial direction on this amount of money? Tom Scholar: Let me do my best. It is first and foremost a question for the accounting officer concerned, but my understanding is that it was only at the point of reassessing the state of the

8 project earlier this year that the value for money concerns had reached the stage at which the accounting officer felt the direction was necessary. There had been earlier assessments, right at the start of the project, and subsequently where it was felt that on balance there was a sufficient prospect of delivering value for money, but on re-examining the case earlier this year, the accounting officer felt that that was no longer the case and took his concerns to the Secretary of State. Q16 Chair: When ministerial directions are sought on the basis of value for money, do the permanent secretaries talk to you in the Treasury about that? Tom Scholar: There is no requirement for them to do so; I think they quite often do. I should say that in my time in this position, since the beginning of July, I have not had any such conversations, but it is always open to a Department to talk to the Treasury, whether to the permanent secretary or to the Treasury Officer of Accounts and his staff. Q17 Chair: I have highlighted three examples there. When you have something like the Kids Company one, for example, does the Treasury look at that and see if there are any lessons that should be learned by accounting officers across the piece and send out any guidance or advice? Tom Scholar: Yes, a lot of work was done after the Kids Company episode, and the Cabinet Office has drawn up some new and tighter guidance for the allocation of grant money throughout Government. That has been sent round and is now in operation. Q18 Chair: Obviously I know the Department for Transport is not your Department, but do you know if that had any impact on the decision by the permanent secretary at the Department for Transport? Tom Scholar: I do not know the answer to that. Q19 Chair: Okay. As a Department, are you planning to look at the ministerial direction for the garden bridge, to see if there are any other lessons to be learned? Tom Scholar: The Treasury Officer of Accounts and his team always take a close interest in any directions that are provided, since they will raise issues that are relevant to our responsibilities under managing public money and the guidance we are responsible for. Q20 Chair: So you and the Treasury Officer of Accounts are looking at that now? Perhaps the Treasury Officer of Accounts might be able to shed some light on this? Richard Brown: I think that this direction was very unusual, in that it was to cover the costs and expenditure that would occur if the thing did not go ahead. If you looked at the balance between what the Government were getting and what resources they were putting in, in this case they would have been getting absolutely nothing and committing to quite significant expenditure. That was a rather unusual situation. Q21 Chair: Thank you. Mr Scholar, do you have anything to add on this subject? It is probably the last time we are going to discuss it as a Committee. Tom Scholar: Just to repeat what I said earlier: the Government will be studying the NAO Report very carefully and responding in due course. Q22 Chair: Okay. Thank you. I know the Assembly Members at City Hall are very interested in this, so I am sure it won t go away, but from our point of view I think we are now nearly done and we will see what the commission comes up with.

9 Helping the nation spend wisely Comptroller and Auditor General Sir Amyas Morse KCB Meg Hillier MP Committee of Public Accounts House of Commons LONDON SW1A 0AA Telephone Facsimile Reference GF/1302/15 Date 22 June 2016 GARDEN BRIDGE MINISTERIAL DIRECTION I would like to draw your attention to the attached recent exchange between the Accounting Officer of the Department for Transport and the Secretary of State for Transport, regarding the Department s financial support for the Garden Bridge project. The Accounting Officer, Philip Rutnam, requested and has now received a direction from the Secretary of State to increase the Department s pre construction commitment to the project by up to 15 million. I know you are familiar with the Garden Bridge, a project led by the Garden Bridge Trust, a charity, working with Transport for London (TfL). In his letter to the Secretary of State, Philip Rutnam sets out the brief history of the Department s commitment to the Garden Bridge project. In essence the Chancellor, through the Department, committed to provide funding of 30 million for the Garden Bridge project from central government funds. This is matched by funding of 30 million from TfL s budget. The remaining funding to meet an expected total project cost of around 175 million is due to be raised from private sources. You will recall receiving correspondence from Ms Cheung, which we looked into in November In our letter to you in November 2015 (full copy included at Appendix 3) we highlighted the following concerns: a b c the Department is particularly at risk in respect of the pre construction commitment to the project, should the project fail; the Value for Money case for the project is subject to a high degree of uncertainty; and the Department identified these concerns, but was nevertheless content to make the grant. As the Accounting Officer sets out in his letter to the Secretary of State (Appendix 1) one of the controls on the Departments exposure to financial risk has been the cap on the amount of the Department s 30 million grant that can be spent prior to construction. The cap was originally set at 8.2 million and has since been increased to 13.2 million. You will recall that you took the opportunity to question Philip Rutnam about the Department s grant to Garden Bridge at the rail franchising PAC session in December. Mr. Rutnam subsequently wrote to you on 12 February 2016 to inform you of the increase in the pre construction cap to 13.2 million, following the letting of the main construction contract. (To be clear, at this point and also at time of writing construction had not commenced; letting the contractor has allowed the contractor to begin the necessary preliminay work.) At the time, Mr. Rutnam remained satisfied that the increase in the cap represented value for money Buckingham Palace Road, Victoria, London SW1W 9SP Cert No ISO 14001

10 The Department has now been asked to increase its pre-construction commitment by a further 15 million to underwrite the Garden Bridge Trust s potential cancellation liabilities if the project does not proceed. (This would remain within the Department s 30 million overall grant to the project but take the Department s total preconstruction commitment to the project to 28.2 million which would substantially increase the risk that the Department s grant cannot be recovered if the project does not proceed. As Accounting Officer, Philip is concerned that this would expose the Department to a disproportionate level of financial risk for a project which was intended would be delivered by a charitable trust and funded largely by the private sector. On 25 May 2016 the Secretary of State for Transport, Patrick McLoughlin MP formally directed (Appendix 2) Philip Rutnam to increase the Department s pre construction commitment to the Garden Bridget project by up to 15 million. In doing so, he cites wider reasons for continuing to support the project, including the tourism benefits. He also justifies the increase in the Department s commitment on the grounds that without it, there is a higher likelihood that the project would be cancelled by the trustees, leading to a write off of 35 million of public funds spent to date. From a value for money perspective, we would share the Accounting Officer s concerns about advancing further funds where there is diminishing confidence in the project proceeding, not withstanding that there are sunk costs. It therefore is appropriate that in considering his responsibilities under Managing Public Money the Accounting Officer did not consider sunk costs in his assessment of the risks to value for money presented by further financial commitment to the project. In our view, the Accounting Officer's action in seeking such a direction is appropriate and he has followed HM Treasury's own guidance as set out in Managing Public Money. Our letter of November 15 (Appendix 3) set out the work we have so far done to examine the controls around the portion of the grant to the Garden Bridge Trust given by the Department for Transport. Given the ongoing public and parliamentary attention which the Garden Bridge project continues to attract we propose carrying out some additional work, looking at how the Department has exercised control over its grant for the project since then and publishing our findings in a factual investigation in September this year. It may be helpful to reiterate that, as TfL holds the overall project responsibility, we believe the London Assembly and GLA oversight committee continue to be best placed to exercise scrutiny over the stewardship of the project as a whole. The Committee may wish to to consider whether it wishes to take evidence from the Accounting Officer once we have published our investigation. I would also ask you to note that the correspondence between the the Accounting Officer and Secretary of State is marked as commercially confidential. We understand that this is due to sensitivities around negotiations to secure land for the southern landing of the bridge, which are due to conclude in July. Sir Amyas has written to Philp Rutnam to request that the direction be made public as soon as is possible upon conclusion of the current negotiations. Ali Morgan Private Secretary to the Comptroller and Auditor General

11 Appendix 1 Philip Rutnam (Permanent Secretary / Transport) to Patrick McLoughlin (Secretary of State / Transport) seeking ministerial direction

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13 Appendix 2 Patrick McLoughlin (Secretary of State / Transport) to Philip Rutnam (Permanent Secretary / Transport) confirming ministerial direction

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15 Appendix 3 Copy of previous correspondence: C&AG to Meg Hillier MP 16 November 2015 You will be aware of our previous correspondence on the proposed Garden Bridge in London, which raised two issues the review of the procurement of the Garden Bridge design services, and a more general concern over the value for money of the project. Your reply set out the limits of the Committee s remit given the London Assembly s role in scrutinising Mayoral and Transport for London (TfL) expenditure, but noted your request that the NAO examine the Department for Transport s rationale for its 30 million contribution. I am now in a position to report the results of our inquiries, on behalf of the Comptroller and Auditor General (C&AG). As requested, we have restricted our work to the value for money issues arising from the Department s grant. To be clear, we have specifically omitted from our scope concerns over the procurement process for the bridge design, which have been subject to an internal audit by TfL and are within the remit of the London Assembly and Greater London Authority (GLA) Oversight Committee. Our report is based on inquiries with the Department, documents provided by them, and reports made available publicly by TfL. Our review has identified the following areas of concern over the value for money case for the Department s 30 million grant. (A timeline of the relevant events is reproduced at Annex A.) 1. Should the project fail, the Department is at risk of having obtained no substantial benefits in return for its grant, particularly in respect of the 10m earmarked for pre-contract works. The Garden Bridge is expected to be predominantly financed through private donations. However, public money was transferred at an early stage in order to allow expenditure on pre-contract award activities (including design) with a view to kick-starting fundraising efforts. While this rationale is clear, the timing puts the public sector (including the Department) at a higher risk than private finance sources of funding proving abortive. This risk is especially high during the pre-contract-award period, to which 10m of the DfT grant attaches. This is because the Garden Bridge Trust is only required to demonstrate prior to the construction phase that it has secured, or is able to secure, a sufficient level of funding to cover the costs of construction. Following this point, the Department remains at risk, should assurances obtained from the Trust over private financing fail to materialise in full. The Department inform us that they have taken steps to mitigate this risk, for example in holding regular meetings with the Trust and TfL to monitor progress. These are sensible steps, although the return on the Department s grant remains highly sensitive to the success of fundraising efforts which it can only lightly influence. 2. The value for money case for the project and therefore the grant is subject to a high degree of uncertainty. From our high-level review of the business case, we concur with the Department s analysis that the benefits assessed are difficult to predict accurately. This means that the benefit-cost ratio (BCR) is subject to a high degree of uncertainty. The most significant economic benefits predicted arise from: a projected one-off 84.1m increase in local property values; and annual benefits, assessed over 60 years, for attracting inward investment ( 6.1m p.a.) and stimulating business ( 13.5m p.a.). These indirect benefits are inherently difficult to measure. The Department s own investment appraisal assessed TfL s estimate of a BCR of 5.8 as the most optimistic scenario in a possible range, with less positive outcomes as low as This needs to be taken in the context of significant inherent estimation uncertainty, as well as the DfT s view that TfL s business case did not adequately capture some of the benefits. However, it is important to note that the results would not in normal circumstances suggest a compelling value for money case. We acknowledge this uncertainty was reflected in the Department s conclusions by presenting a value for money range, and acknowledge the lack of evidence available to form a more confident assessment. 3. The Department identified these concerns, amongst others, but was content to make the grant. 1 A BCR over 1 represents an excess of benefits over costs; a BCR between 0 and 1, the reverse; and a negative BCR arises where

16 While there are both substantive and pragmatic reasons for TfL bearing primary accountability for the value for money case, in our view the mechanism used does not supersede the responsibility of the Accounting Officer (AO) to ensure that where money is expressly provided for a specific project, value for money is ensured. In this context, the range of possible outcomes assessed by DfT did not preclude a positive BCR, so the evidence does not support a conclusion that the AO breached his responsibilities. However, it must be noted that the Department s own quantitative analysis suggested that there may or may not be a net benefit and, especially once concerns around deliverability were taken account of, the project might well not have met the Department s normal threshold for allocating its finite funds. In this context it is important to recognise the wider context, particularly: i. the initial funding commitments were made by the Chancellor to the Mayor of London, without the Department s involvement; and ii. the Department was under pressure to make a quick decision in light of the need to complete the project (if it was to go ahead) before Thames Tideway Tunnel construction began. These unorthodox factors appear to have contributed understandably to the Department s willingness to proceed; however, they do not mitigate the substantive value for money risks which the Department has elected to tolerate by making the grant. Next steps I hope this analysis is helpful and welcome your views on next steps. I note that the substantive value for money issues (numbered 1 and 2 above) are shared at Mayoral level; in the context of project responsibility resting with TfL, a legitimate option would therefore be to recognise the continuing scrutiny of the London Assembly and the GLA Oversight Committee and to take no further action other than to simply report our findings to those correspondents (including Members) who have previously contacted you on this issue. We would be happy to provide a draft letter along those lines, but are open to your views and happy to provide further verbal/written briefing. Please let me know how you would like to proceed and whether we can be of further help. Ali Morgan Private Secretary to the Comptroller and Auditor General there is a net disbenefit to the economy as a whole which arises here because under some modelled scenarios, the private sector costs of contributing to the scheme outweigh the positive benefits forecast.

17 Annex A Key features and timeline of the garden bridge project The Garden Bridge is to be funded principally by the Garden Bridge Trust, a charity, with contributions of 30m from TfL directly and 30m from the Department for Transport (via an increase in the TfL block grant). The total project cost is forecast at around 180m, leaving around 120m to be sourced from private financing (including donations). The Government first announced funding of 30m to the Garden Bridge in December 2013 in HM Treasury s National Infrastructure Plan 2. Correspondence between the Chancellor and Mayor confirmed that this funding was contingent on a number of conditions, including that a business case is provided in line with Government investment appraisal guidance and that the value for money requirements are met. TfL prepared a Strategic Outline Business Case 3 on behalf of the Trust in May This assessed a benefit / cost ratio (BCR) for the Garden Bridge of 5.8, assuming a public contribution limited to 60 million. This business case was reviewed by the Department s Board Investment and Commercial Committee (BICC) in July The committee drew on its own investment appraisal function s detailed written review of the business case, which identified a number of concerns. The key concerns were: the uncertainty of the value for money case, particularly on the point of the extent to which the benefits expected would be achieved; the viability of the overall project both on the point of whether suitable bids would be received for design and construction, and in terms of whether the Trust could raise the private financing required; and the narrow build window (since the work would have to complete before the start of the Thames Tideway Tunnel project in 2018). The committee noted these weaknesses, but noted that this was an unorthodox project and that, under the funding mechanism proposed of increasing TfL s block grant, TfL would be primarily accountable for value for the management and governance of the investment. In light of this and the results of the value for money analysis, a ministerial direction was not sought. The advice to ministers made clear, however, that any conditions agreed with the Mayor would in no way have the effect of releasing the Department from its general obligations relating to managing public money in respect of the 30 million. Officials then briefed the Secretary of State for Transport on the concerns identified, and proposed to vary the grant to TfL in by the full 30m, enabling TfL to provide funding on a phased drawdown basis, subject to the Trust fulfilling milestones and conditions to be agreed in a future funding agreement. The Secretary of State then wrote to the Mayor in November 2014 to confirm that the TfL grant for had been redetermined to provide an additional 30m, subject to a number of conditions concerning controls over expenditure and project monitoring. A maximum of 8.2m was to be spent on pre-construction activities. The 30m was paid over in the same month. In June 2015, the Trust requested an increase of 3.5m on the portion of the funding available for preconstruction activities. As a result, the amount of the DfT grant earmarked for this work increased by the Department s share of the increase, from 8.2 to 10.0m. The funding agreement between TfL and the Trust for the full 60m was signed in July 2015, enabling drawdown of the grant following the completion of relevant milestones. The agreement explicitly states that the Trust is responsible for cost overruns and ongoing maintenance