£70m bill for failed Merseytram project

Jan 17 2008 by David Bartlett, Liverpool Daily Post

The full financial cost of the collapsed Merseytram project is revealed today, as David Bartlett reports

IT WAS meant to be a shining example of the cosmopolitan 21st-century European city that Liverpool is striving to be.

But, as a report today reveals, Merseytram has punched a £70m black hole in the finances of the region’s passenger transport authority.

Included in that spending was £28m on consultants, £15m on moving utilities, and £17m on design and management costs.

Repaying that debt is now an almost £5m annual noose around the neck of Merseytravel, which promoted the project.

But, as the report states, if the tram plan is put back on track and goes ahead, some of the money will not have been wasted.

Talks are already under way on Merseyside and with the Government about reviving the trams.

District auditor Judith Tench has made a series of findings and recommendations she believes would have seen less money wasted on the scheme, and possibly abandoned earlier on cost grounds.

The report comes a day after Merseytravel chief executive Neil Scales was made chairman of the Passenger Transport Executive Group, which represents the six English Passenger Transport Executives.

In her Public Interest Report (PIR), Ms Tench concludes that:

Merseytravel did not pay suff- icient attention to managing risk and should not have committed resources at the rate it did;

Merseytravel did not have adequate financial reporting and monitoring arrangements to demonstrate that money spent on the scheme represented value for money;

Merseytravel did not engage sufficiently with all the councils in the area;

There was limited opportunity for challenge and too much reliance was placed on too few individuals;

The expenditure on the scheme was “not so unreasonable” as to be unlawful.

A number of recommendations for improvements were made, and Merseytravel will have to draw up an action plan detailing how they are to be implemented.

Merseytram was scrapped in November, 2005, after then Transport Secretary Alistair Darling refused to hand over the £170m the Government had committed to Line One between Liverpool city centre and Kirkby.

The report reveals that £1.3m was spent fighting that decision in the High Court, and £900,000 went on tram tracks.

According to Merseytravel, £230,000 has been spent on the report published today, for which it will have to foot the bill.

Last night, Merseytravel chief executive Neil Scales said he did not wish to comment about the report until the passenger transport authority considered it next month.

But he released a letter sent in response to a draft version of the Audit Commission’s report, in which he said Merseytravel did not agree with all the findings, but had already started to implement a number of the recommendations.

He said the results of the report were the benefit of hindsight and blamed former Liverpool City Council chief executive Sir David Henshaw and a small group of “rogue” officers for being “actively engaged in hindering” Merseytram.

He wrote: “It is now known that, at a critical point in the life of the scheme, David Henshaw was secretly, and without the knowledge of that council or its members, passing inaccurate information to the DfT which was critical of the scheme.”

Last night, Sir David said: “I welcome the report. It confirms all the concerns I had: the lack of transparency, effective governance, and risk management which was leading Merseyside into a scheme without fully understanding the consequences of it.

“It’s very disappointing that such a report had to be issued to draw attention to these issues.

“It vindicates the advice I was giving to the council.”

The report only focused on Merseytravel, and did not comment on the involvement of other bodies that led to the Department for Transport decision to withdraw financial support. A key part of the report concentrates on governance, and appears to suggest that the actions of Mr Scales were not properly scrutinised.

“. . . given the various roles of its chief executive, Merseyside Passenger Transport Authority should also have done more to ensure it had access to appropriately independent advice – independent project assurance would have been one way of doing this.”

But it also praises his “entrepreneurial vision” and the high level of confidence and trust he has from the authority.

Chairman of Merseytravel Cllr Mark Dowd describes Mr Scales as “the best in the business with a strong track record of delivery”.

“In these circumstances, it remained important that [the authority] had effective arrangements in place to hold officers – and consultants employed by them – to account through effective challenge and scrutiny.”

Ms Tench states that Mr Scales spent money early on in the scheme in an effort to reduce the risk of cost increases later.

It also states that as the organisation is small, it is inevitable that specialist consultants would need to be brought in.

Mr Scales’s letter rejects Ms Tench’s suggestion that the governance arrangements are not fit for purpose.

He urged the Audit Commission not to publish the report as a PIR (seen as a serious move and often reserved for instances of wrongdoing or impropriety) as it could jeopardise the prospect of the scheme being revived.

Last night a spokesman for Liverpool City Council said: “We welcome the findings of the report, which correctly outlines the complexity of what was a very challenging project.

“It is apparent that mistakes were made and that relations between Merseytravel and the districts may not always have been conducive to delivering the scheme.

“However, relationships between all parties have improved since the events outlined in the report and are now very positive and strong.”

Roger Harrison, project director from the consortium Keolis, that would have built the scheme, last night said: “The private sector partners were always confident that there was a strong business case underpinning Merseytram and the project would be delivered on time and well within budget.

“We would be fully committed to reviving the project.

“If we are granted a second chance, we must grab it.”

What was spent, when, and what went wrong along the way > > >