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Garden Bridge could cost £22 million more than forecast

Garden bridge collage
  • 6 Comments

The Garden Bridge could cost taxpayers £22 million more than anticipated because the charity behind it may be able to legally claw back VAT, a tax expert has claimed

The £185 million Heatherwick-designed scheme was backed in May last year by London mayor Sadiq Khan on the basis that the project would cost taxpayers twice as much to cancel as it would to complete it. This financial calculation was based on repayment of a £20 million loan to TfL over a 50-year period plus a £22 million VAT payment to the Treasury following completion of the bridge.

If the Garden Bridge Trust were able to claw back the VAT, that £22 million sum would not return to the public purse as anticipated.

Graham Elliott, technical adviser to the Charity Tax Group, which represents 500 member charities, said a recent legal case suggested that the Garden Bridge Trust, the registered charity developing the scheme, might be able to reclaim the VAT in full.

He suggested the trust might benefit from a tax tribunal’s recent decision to allow Durham Cathedral, a charity, to reclaim a proportion of the £6,720.25 it paid in VAT when it carried out works to Prebends Bridge over the River Wear, a decision left unchallenged by HMRC.

‘The Durham case might suggest that an organisation which built a free attraction like the Garden Bridge could reclaim VAT in full if the attraction also has a commercial taxable use,’ Elliott told the AJ.

‘If this stance were to survive any further legal challenge, the hire of the bridge by third parties and retail offer planned by the Garden Bridge Trust could be significant in this regard.’

The Durham Cathedral decision followed a 2015 European Court of Justice decision on VAT known as ‘Sveda’. Elliott said that if the trust did attempt to reclaim VAT, he would expect this to be challenged in the courts by HMRC.

‘We don’t know what the outcome of that would be, because the European Court of Justice’s Sveda case was not over a charity but a commercial organisation,’ he said.

In late 2013, supporters of the bridge including Thomas Heatherwick, TfL boss Peter Hendy and mayor Boris Johnson reportedly lobbied then chancellor George Osborne to exempt the then £150 million project from VAT.

Kate Hoey, the MP for Vauxhall, said the implications of the Durham Cathedral case were ‘hugely worrying’.

She added: ‘I and many other elected representatives in London are concerned that the financial projections for the Garden Bridge to all intents and purposes are “smoke and mirrors”.

‘On a number of occasions I, Bishops Ward councillors Jen Mosley and Kevin Craig and GLA representatives from across the political spectrum have flagged up to the mayor of London our concerns that he will not be able to meet his commitment to not provide further taxpayer funding to the Garden Bridge. Our concerns are exacerbated by this latest ruling.’

I have always been dubious of the argument put forward by the mayor that consideration must be given to the VAT

Lib Dem London Assembly member Caroline Pidgeon said: ‘I have always been dubious of the argument put forward by the mayor that consideration must be given to the VAT that will supposedly be paid by the Garden Bridge Trust.

‘Even if the VAT is paid, the money does not come to City Hall. The mayor should spend less time speculating over potential VAT payments and instead concentrate on what really matters.

‘If he is truly concerned to protect taxpayers, he should refuse to offer a permanent financial guarantee to the Garden Bridge Trust.’

At the time of Sadiq Khan’s announcement last May, he said £37.7 million of public money had been spent on the project. Since then, the cost is understood to have risen, with Labour London Assembly member Tom Copley suggesting in a written question to the mayor last week that the bill now stands at £50.5 million.

Responding to the news on VAT, Copley said: ‘Whatever advice the mayor has received up to this point, it’s time he put this failing project out of its misery.

‘With every passing month, new information emerges that leaves an ever-growing question mark hanging over the economic health of the Garden Bridge. No more public expenditure should go on a project that is so obviously on borrowed time.’

A spokesperson for the mayor of London declined to comment directly on the question of VAT.

‘The mayor’s position is widely on the record,’ the spokesperson said. ‘He is supportive of the project but is clear that no more of Londoners’ taxes for which he is responsible will go into the Garden Bridge.

‘The Garden Bridge Trust is responsible for raising the necessary funds and delivering the bridge.’

The trust and the Department for Transport both declined to comment.

  • 6 Comments

Readers' comments (6)

  • worth remembering perhaps, for cost comparison purposes, that the only other proposed bridge to span the Thames so far this millennium that has planning consent only needs another £16m to be completed. The 'Cremorne (Diamond Jubilee) Bridge':
    •is needed and called for in the London Plan, TfL's plan, Wandsworth and H&F plans and has consent
    •Piles are already in the ground in Battersea (procured through a S106 agreement with housing developer Barratt London);
    •Once fully funded the bridge can be delivered within 18 months (N.B. This is seasonally dependent on river works to avoid fish spawning season);
    •Its design and the construction works to date have cost zero in public funds
    •The TfL cost plan and Wandworth's independent business case shows the construction cost at £26m plus risk - representing high value in term of the cost:benifet ratio;
    •Wandsworth Council have around £11m assigned to the construction of the bridge in future CIL monies and have agreed to adopt the completed bridge
    •Wandsworth Council are undertaking Topographical surveys, boreholes, UXO surveys, Multibeam side scan survey etc etc.

    in short - its real, is progressing and will make a hugely positive difference to those that live in the area...

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  • Brace yourselves for fresh trumpeting in favour of the Garden Bridge from the Evening Standard, London's monopoly newspaper. When still Chancellor, Its incoming editor George Osborne showered huge sums of public money on his friends' project, helping also to ensure that it escaped proper scrutiny. The mystery is why Sadiq Khan seems so committed to featherbedding the bridge, when anyone can see that the whole affair is as bent as a forged pound coin.

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  • First, always sad to hear mutual exclusivity being trotted out as an argument against inspirational ideas. Because you build one bridge it doesn't mean you can't (or shouldn't) build another. Second, the idea that charities -- uniquely -- should have to pay VAT on new construction is a scandal that needs ending, and hopefully this may be the project that brings about appropriate change. Finally, there is a simple way to recoup costs and pay for upkeep of the Garden Bridge: make users pay by Oyster Card. This project is a hybrid, both destination and crossing, and requires an imaginative funding regime. It won't get one from the dullards and drearies who spend all their time moaning about it. Let tourists and visitors pay!

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  • Is Paul Finch angling for a job on the Evening Standard?

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  • Paul Raises some interesting points. I know more than most about point 1 - others may respond on 2 and 3.

    Firstly, my comment made no reference to the 2, or indeed 5 currently proposed Thames crossing being mutually exclusive. They serve different purposes and have varying degrees of support and merit. I also agreed that if the Garden Bridge is to go ahead then why not charge visitors to use it to lower the cost to the public purse. However that is potential future funding.

    My comment above was made for comparison with regard to the known cost of a contemporary river crossing and also to bang the drum about what is going to be great new addition to Battersea & Fulham. Granted, it is not a fair cost comparison with say a tourist attraction, theme park or a new green space. This is because all of the £50m of public money which has been spent to date on the GB is dedicated transport funds.

    New transport links are prioritised and identified in many ways, but in London projects like this generally come about through the London Plan or a Borough Council's Local Plans. TfL, guided by the political direction of the Mayor then prioritise their spending. Transport money allocated by the mayor (who is head of TfL) in this way is limited.

    The GBT and Joanna Lumley have stated that the bridge is not a transport project, it is a park that coincidentally has some small transport benefit. It is true therefore that if the money had been spent on the Diamond Jubilee Bridge, or the Ham/Twickenham bridge or the Nine Elms or Rotherhithe Bridge then more transport benefit from the limited pot of transport funds would have been procured. With this in mind there clearly is a mutual exclusivity - but only because of the way the GB has used transport funds.

    Of course there is room in the world for inspirational and unique destinations, new tourist attractions and great viewpoints and parks. I cant imagine a world without a desire to create a framework for the moments of beauty. To suggest that those opposed to the garden bridge are dullards ignores the important point of principle that has made the Garden Bridge so controversial. The point is that the GB skipped around and over all the usual checks and balances that any project using £60m of transport funding normally goes through, including sustainability checks that usually accompany capital grants from the DfT. The project was able to do this because those behind it are socially connected to the people in positions of authority - this has been well covered by the mainstream press and noted at Parliament.

    With this in mind, even if Heatherwick is a genius and the Garden Bridge is the greatest design since the Clifton Suspension Bridge then the project is tainted by 'chumocracy'. It represents not a great British sense of positivity and adventure, but an old school 'Jobs for the boys' mentality or as noted by Tom Copley AM 'a very British form of Cronyism'.

    If the GB is built I hope it is a total success and all the 'drearies' are wrong about overcrowding the South Bank and the GBT relying on £3.5m of public money per annum for maintenance. However, to me, because of the procurement and the huge environmental damage it will do, it will always stand as a monument to what I had previously hoped was an outdated phrase - 'its not what you know, its who you know'.

    With regard to our 6 years of pro-bono effort on the Diamond Jubilee Bridge - this is not wasted energy - it will be built whatever the fate of the Garden Bridge turns out to be.

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  • Well said, Chris Medland.

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