Interest on guided busway loan costing council £2million per year

Guided bus

Guided bus - Credit: Archant

MORE than £2million per year is being spent paying the interest on a loan the county council took out to cover the overspend on the guided busway.

Cambridgeshire County Council borrowed £64.2m to pay for the additional costs of the guideway project, which was not only 50 per cent over the £116.7m budget but also delivered two years late, opening in August 2011.

The county, under the terms of the contract, had to pay busway contractor BAM Nuttall the money and then claim back the overspend, a legal process that is likely to be fought out in the High Court next year.

But the cost of servicing the loan is currently falling on the county council – although CCC has always been confident of not just reclaiming the overspend, but also the costs incurred in taking out a multi-million pound loan.

Killian Bourke, leader of the Liberal Democrat opposition on CCC, said: “Servicing that debt has so far cost the council more than £6million in interest payments.

“However, this figure merely covers the interest. The total amount being spent is significantly higher.”

Cllr Bourke added that money could be being spent on frontline services but Cllr Ian Bates, cabinet member for growth and planning, said: “We remain confident that we will recover the costs of the construction of the busway from BAM, including the cost of any interest charges.

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“There is nothing new in the claims by Cllr Bourke and he has made them before. The cost of interest on the borrowing for the construction of the busway has been built into the county council’s base budget calculations and will have no impact on the provision of frontline services.

“We have also been charging BAM Nuttall interest at a higher rate than the cost of the borrowing from the original date when the payment became due in May 2011 after the completion of the busway – this charge is accruing at a rate of £10,000 a day from that date.”

He added that it was “unfortunate that BAM Nuttall has chosen not to honour the terms of the contract and that the council has been left with no option but to take legal action to recover the money that is due”.

The 25km-long busway had been due to open in 2009.

The council started charging BAM £10,000 for every day it went over the due date, in particular citing six defects which prevented the authority from accepting the handover of the new route.

However, BAM questioned those defects and claimed it was actually entitled to money from the council, due to alleged failings in the management of the project.

Cllr Bourke said: “At a time when the funding environment for local government is already challenging, this fiasco is proving to be a very significant extra burden on the county council’s finances.

“This is money that could be being used to protect vital front line services. Combined with the millions of pounds being taken out of the Local Transport Plan, this would be enough to stop the cuts to our bus services.”