Treasury Minister Chris Thomas says the reinstatement of the Douglas horse tramway is unlikely to cost the £3m figure currently being discussed.
Answering questions in Tynwald, Mr Thomas said that contingency levels on capital projects over the past four years have generally ranged between zero and 10%, depending on the nature and complexity of each scheme.
However, he defended the use of a 50% optimism bias applied to the horse tram business case, stating that this reflected guidance from Treasury and was not unusual at early stages of project development.
“The level applied by the client department for capital and infrastructure projects over the last four years has generally ranged between nought zero and 10% depending on the nature, complexity, and stage of the project,” Mr Thomas said.
“Optimism bias reflects a tendency for early project estimates to be overly optimistic in terms of cost, time, and risk. To address this, an evidence-based uplift is applied to initial estimates to provide a more realistic funding position.”
Why?
The minister faced repeated questioning over why the horse tram project had attracted a higher contingency than other schemes.
Jason Moorhouse MHK asked why Treasury’s usual scepticism led to contingencies between nought and 10%, but had “gone so wild” in this case.
Mr Thomas responded that it was not Treasury’s role to set costs, stating: “It’s not for the Treasury Minister to get involved in the actual cost, the actual planning, the actual implementation, the actual risk assessment of the horse tram project any more than it would be for somewhere like Castle Rushen High School.”
He cited HM Treasury guidance which suggests rail projects require higher early stage uplifts of up to 66%.
“Horse tram projects – I imagine given that there are only six others or five others in the world, it must be quite hard to understand the risks of mixing horse trams and traffic and those sorts of things. I don’t know enough about it,” he admitted.
Business Case Delay
The minister expressed frustration that no business case had been submitted to Treasury between 2020 and 2026.
“It is disappointing that between 2020 and 2026 no business case was submitted to Treasury for the horse tram reinstatement. That’s regrettable. I was involved for a year of that, six years, but that’s regrettable, and that’s where we are.”
Mr Thomas emphasised that the Department of Infrastructure must take the lead in finalising costs.
“Differently from what people are suggesting, the costs for the horse tram are likely only to go one way, and that is down during the course of this process,” he said.
“A financial motion will come as soon as the financial motion can be prepared inside financial regulations, and it will be much lower than £3m, it seems.”
Treasury Concurrence
Dr Michelle Haywood pressed the minister on why Treasury had not yet given concurrence to the project, given that he had indicated support and suggested funding could be found.
Mr Thomas explained: “Because the project hasn’t been properly worked through in terms of how exactly it’s going to be implemented.”
He added: “Treasury would have brought a financial motion to Tynwald if directed by Council of Ministers to do that, but I do think Council of Ministers and everybody in this place respects the risks around projects and the risks around waiving financial regulations.”
The minister confirmed that no financing for the project is currently included in the Pink Book, despite statements to the contrary.
Julie Edge MHK asked whether Treasury had considered that the track could be used for other trams beyond horse-drawn vehicles. Mr Thomas acknowledged the track was purchased secondhand from Mersey Rail and could accommodate other vehicles.