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Thursday, December 30, 2004

A Scandal of Secrecy and Collusion

Why have we paid GBP 93 million for a GBP 15 million bridge?

by George Monbiot

Published in the Guardian (December 28 2004)

One of the ways in which the government can avoid the freedom of information laws, which come into force at the end of this week, is to classify public business as private business. Under the act, information can be withheld from the public if its disclosure would "prejudice the commercial interests of any person". <1> Wherever the government has entered into partnership with a private company, it can argue that it would damage the company's interests if it told us what it was doing. So unless there is a public inquiry, we might never discover why a bridge that should have cost no more than GBP 25 million to build has now cost GBP 93 million.

Last week the people of the island of Skye won a remarkable victory. For nine years they had been fighting for the removal of the tolls on the bridge to the mainland. The bridge, built at the behest of the Conservative government, was Britain's first privately financed public project. Under the Private Finance Initiative, public works such as roads, bridges, schools and hospitals are built and run by private companies, then rented back to the government. Because, the government claims, private companies are more efficient than the public sector, Private Finance Initiative schemes cost less.

On the day the bridge was opened (October 16 1995), the government stopped the ferry service it ran between Skye and the mainland, thus granting the consortium that built the bridge a monopoly; there was no other means of getting on and off the island. <2> The consortium was able to charge the islanders what are believed to be the highest tolls per mile of road in the world. They rose to GBP 5.70 each way for a one-mile crossing. (After massive public pressure, the Labour government gave the residents a discount, but only if they bought tickets in books of twenty.) After nine years of what was to have been a 27-year contract, the companies that built the bridge have reaped GBP 33 million from motorists. <3>

This is bad enough. But before the bridge was built, the government threw in GBP 13 million of sweeteners. Desperate to make its showcase project work, it spent GBP 6 million on building the approach roads (a few hundred metres of tarmac); <4> another GBP 3 million on hiring consultants and buying land; and a further GBP 4 million as "compensation" to the consortium for the costs of construction delays and design changes (which, if you believe the government's claims about "risk transfer", should have been carried by the consortium itself). <5>

The European Investment Bank lent a further GBP 13 million to help finance the bridge. This loan breached the bank's own investment criteria. The bank's purpose is to fund projects that boost the livelihoods of people in the less developed parts of Europe. It is legally bound to lend money only when "funds are not available from other sources on reasonable terms" <6> and to support only those schemes that do not "distort competition". <7> The tolls have damaged people's livelihoods by discouraging tourists. Private investors, who know a good thing when they see it, were falling over themselves to buy a stake in the project. <8> The closure of the ferry service on the day the bridge opened did not distort competition: it eliminated it.

The discount for books of twenty tickets was financed by the government, not the consortium. So to help reduce the cost of the tolls (which would not have been levied at all had the bridge been built at public expense), the government has paid a further GBP 7.6 million. <9> Now the tolls are being removed and the contract is being bought back from the companies by the Scottish executive at a cost of GBP 27 million.

The bridge, in other words, appears to have cost the public GBP 93.6 million. If we accept the consortium's account of how much it cost to build - GBP 25 million - we have paid for it 3.7 times. Even this could be an underestimate: independent engineers suggest that it shouldn't have cost more than GBP 15 million. <10>

So what was in the contract? I have no idea, and nor does anyone who was not involved in negotiating it. Though it was giving away our money, though there was no possible security argument for keeping it secret, both the Tory and Labour governments have hidden the contract behind the excuse of "commercial confidentiality". Unless an inventive challenge can be launched, governments will continue to do so, using the loophole in the act.

The lesson of the Skye bridge fiasco is obvious. If we are not allowed to see what's being done in our name, there's a pretty good chance we are being ripped off.

www.monbiot.com

References:

1. Freedom of Information Act 2000. Part II, section 42.

2. For a fuller account of the Skye Bridge story, see George Monbiot, 2000. Captive State: the corporate takeover of Britain. Macmillan, London.

3. David Ross, 22nd December 2004. Tolls end on the bridge over troubled water. The Herald.

4. GBP 6 million is the figure cited in the tender document by Scottish Office Roads Directorate/JMP Consultants, 1989: A Bridge to Skye - Information for prospective tenderers (RD15) and in the Scottish Office, May 1992 report of the public inquiry into the Skye Bridge Crossing, section 8, paragraph 31. The website of the Miller Group, which built the bridge, claimed in February 1999 that the cost may have been GBP 7 million (http://www.miller.co.uk). An earlier report by JMP Consultants (1988, Report to the Highland Council: Skye Bridge Revised Traffic and Economic Feasibility Report - RD12) suggests that the total cost of land and approach roads should have been GBP 1,640,600.

5. Skye and Kyle Against Tolls, 1997. Project Report 1; Skye and Kyle Against Tolls Press Release 16th October 1998. Eilean Ban Hand-Over: Who Got the Missing GBP 200,000?; House of Commons Committee of Public Accounts, 1998: Forty-second Report. The Skye Bridge. Minutes of Evidence, page 18.

6. European Investment Bank statute, article 18(1), cited in Skye and Kyle Against Tolls, 1997. Project Report 2.

7: Article 130 of the Treaty of Rome, cited in Skye and Kyle Against Tolls, 1997. Project Report 2.

8. The bridge ended up 70% over-financed. Skye and Kyle Against Tolls, 1997. Project Report 2.

9. David Ross, ibid.

10. A civil engineer who studied the bridge told me it should not have cost more than GBP 12 million. The Scotsman's analysis suggests GBP 15 million.

http://www.monbiot.com/archives/2004/12/29/a-scandal-of-secrecy-and-collusion/

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Bill Totten http://www.ashisuto.co.jp/english/

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