The Garden Bridge, a pedestrian crossing across the Thames in central London, has long been mired in controversy. With the London Mayor, Sadiq Khan, a vocal critic during his election campaign, he subsequently commissioned a review of the project, led by Margaret Hodge MP in September 2016. As part of the review, Hodge has worked with the Public Accounts Committee (PAC), who asked HM Treasury to publish its analysis of the Garden Bridge business case last year.
The Treasury last week published its analysis, and it raises three troubling issues about project decision making:
A solution in search of a problem?
Infrastructure investments work best as part of an overarching strategy, where individual projects address clear problems. Much like the ongoing dispute over High Speed 2's objectives, there has been confusion over what the project is for. Without this clear understanding of purpose, it will be difficult for the Government to determine whether the project represents good value for money for the taxpayer.
The ‘strategic case’ for the bridge – the rationale for undertaking the project – has too many objectives, including improving pedestrian connectivity across the Thames; supporting economic development; and supporting London’s tourist economy.
It is further unclear how the Garden Bridge fits with wider industrial strategy, especially given the Government’s new-found emphasis on productivity-enhancing infrastructure. There is an argument to be made that the strategic case should be revised in light of these wider national objectives.
It is not clear if Transport for London fully factored in uncertainty.
Decision makers need to have a good handle on uncertainty and risk in projects in order to make effective investments – and it is not clear that Transport for London did.
The majority of quantified benefits rely on assumptions about increases in property values which are notoriously difficult to forecast with any degree of accuracy. More concerning, these calculations are based on a methodology which risks double-counting the benefits. This is because the projected increase in property values may simply represent some of the additional business revenue streams modelled in a separate section of the business case.
The business case used dubious cost and benefit modelling.
The Treasury rightly draw attention to the fact that the projected benefits from tourism and increases in construction exports are dubious, with the evidence for both very weak. Worryingly, the case for tourism appears to ignore existing government research which suggests that previous interventions to increase tourism spending through Visit England only brought in 25-50% genuinely new tourism revenue.
Whether the Garden Bridge will ultimately prove to be an effective investment remains open to question, although the Treasury concludes that the overall case for the project is now weaker than it was in 2014. Given that the Garden Bridge business case was produced in line with standard government guidance, this adds fuel to the fire of existing concerns about the way the Government makes decisions on infrastructure.
It is, however, welcome that the Treasury has published a summary of its reasons for approving new projects at an earlier stage. Greater transparency is one reform which should help expose and improve dubious infrastructure decision making.
UPDATE 28 APRIL 2017: The project has since effectively been scrapped, after London Mayor Sadiq Khan refused to provide financial guarantees for the operation and maintenance of the bridge. Given the increasing likelihood of greater taxpayer contributions, it is encouraging that the Mayor refused to provide guarantees. Poor-quality infrastructure projects should not be allowed to progress to construction.
This summer, we will publish the first report in a programme of work looking at the way in which the Government makes decisions about infrastructure. The first report will focus on several recent infrastructure decisions, to illustrate some of the main problems in UK infrastructure decision-making.