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Economy / Jobs

It could take London's Garden Bridge 50 years to repay the money the state is loaning it

So yesterday, as you’ll know, being dedicated CityMetric readers, we ran a silly story in which New Statesman politics correspondent Stephen Bush imagined how a serious paper of record would cover London and its mayor’s adorably casual attitude towards public money if it were an African city.

This article was, very obviously, a joke – but facts are sacred, so when the Garden Bridge Trust (GBT), the charity promoting a new bridge across the Thames in central London, asked us to clarify some of the figures used in the piece, we agreed. Even though, as we may have mentioned, the article was a joke.

However, I have some questions about the clarification – I’m not sure I entirely accept claims it was a “correction” – so I thought (lucky you) I would explore them further.

Here’s the offending passage of Stephen’s article:

The cost of the Garden Bridge… has skyrocketed over the years. The taxpayer will now end up paying out £60m into its construction, and close to an additional £4m towards its upkeep.

And here’s what the GBT’s head of communications told us in an email:

The Bridge will not cost the British taxpayer £60m. £30m of public money has been received from the Department for Transport and £30m from Transport for London, but £20m of this will be repayable over a period of time. 

The public will not be paying for £4m a year for maintenance costs either.  Maintenance costs are estimated at £2m a year and will be paid for by the Garden Bridge Trust who have a business plan to raise money through the hosting of private events for the costs.

Couple of points to explore here. Let’s start with the upfront cost. The GBT took issue with the fact that we wrote that “the taxpayer will now end up paying out £60m into its construction”.

But our original statement is pretty much true: the state will pay £60m into its construction. Yes, half of it will come via a public agency, TfL, which has sources of income unconnected with taxes – so, if you squint, the word “taxpayer” is perhaps misleading. But this nonetheless feels like the GBT is nitpicking our exact phrasing to distract from the fact that £60m of public money is very definitely going into this thing.

At least, initially. A third of that cost, the GBT says, is in the form of a loan “repayable over a period of time”. That, arguably, reduces the public liability on this scheme quite substantially.

Except we asked how long that “period of time” was. Here’s the answer:

The period of time is 50 years.

That’s an important bit, so just in case you missed it:

The period of time is 50 years.

Fifty years. That is longer than any mortgage you’d be able to get. It’s longer than any currently available US treasury bond. Remarkably little debt is sold with a term that long.

And for very good reason, too. Anything could happen in half a century. In 50 years time, London could be a radioactive ghost town. The whole place could be underwater. What’s more, by the time 2066 rolls round, £20m will probably be about the amount it costs to buy a small shoebox in zone 2. This is a very, very long time to be repaying the cost of the bridge.

So even if that £20m may not technically public capital funding, it’s a long-term public subsidy that looks remarkably similar to it. I’m not sure that “part of it is a loan, actually” is quite the killer riposte to questions about financing that the people behind the Garden Bridge seem to think it is.

One last thing. We said the bridge would cost the taxpayer £4m a year to maintain. The GBT says it’ll be £2m, and not paid by the state, but by money raised by closing the bridge for private events (12 days a year) and through various other forms of sponsorship.

That looks optimistic to me (those revenues will presumably have to go towards re-paying that loan, too); and once the bridge is there, it’s not as if the state is going to let it fall down again thanks to lack of funds. But nonetheless, since the GBT clearly knows more about its business plan than I do, I’m happy to accept that, on that at least, we were just wrong. Sorry.

All of this, however feels like quibbling over details while ignoring the broader issue, which is this:

Why the bloody hell are we paying for it in the first place?

When it arrives, the Garden Bridge will very probably be lovely. I’m sure that, within mere months of its opening, people will be so used to its being there that the idea of having to walk for 10 minutes via Blackfriars or Waterloo to cross the river will seem faintly absurd. Once it’s there, people will love it.

But there is a concept in economics called “opportunity cost”: by spending £60m on this, the state will no longer be able to spend £60m on other things.

Why, when TfL is under pressure to become more self-sufficient and we are still, officially, in the midst of austerity, is this the thing we’re choosing to spend scarce public money on?  Why, if there’s such private sector enthusiasm for the project, won’t the private sector just pay for the fucking thing?

Or, to quote occasional CityMetric contributor Ed Jefferson:

 

 

Quite.
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