MSPs heard yesterday that Highlands and Islands Enterprise (HIE) was so keen to develop the Cairngorm funicular project that it did so without proper regard for the cost and the risk to taxpayers’ money. When the railway opened in 2001, the project was nearly £5million over budget and so far funding has exceeded planned spending by £12million with another £4million being committed by HIE to maintain the railway over the next 3 to 4 years.
The Scottish Parliament’s public audit committee has just published report into the project which is highly critical of the role of HIE, previously the Auditor General had raised concerns that HIE had ignored financial risks when planning the project. Although the building of the railway was heavily subsidised by public money it was expected that it would be operated by the private sector and be financially sustainable. However HIE stepped in to take over the financing and operating of the railway in 2008 following spiralling debts accumulated by the operators, CairnGorm Mountain Ltd (CML). The total cost of the project to date has been £26.75million, with £23million coming from the public sector. HIE plans to retain ownership of the railway for the next 3 or 4 years and then seek either a private operator or private buyer.
The Committee said HIE failed properly to evaluate a number of significant risks, including the viability of CML and the possibility of a decline in skier numbers, at the outset of the project. After more potential problems arose before construction started, the Committee said HIE failed to review and adjust the business case. The Committee’s report recommends that HIE put in place a new business model based on actual financial performance information and must have rigorous controls in place. MSPs raised concerns about the open-ended nature of HIE’s financial committment to the project. Although some groups who campaigned against the project on conservation grounds, such as Ramblers Scotland, have called for no further public spending on the scheme, under the terms of the orignal European funding agreement, substantial amounts of European money would have to be repaid if the railway ceases to operate within its first 25 years of operation. HIE have stated that it is committed to a financially sustainable business model which enables the resort to continue increasing its contribution to the local, regional and national economy. Ironically the Cairngorm ski resort has had one of its best winters, with great snowfall and increased visitor numbers.