Busway scheme hit by cash hole

The controversial £89.2 million project, which will link the two towns via a guided bus route, is receiving the majority of its funding – £80.2million – from central government.

But Luton Borough Council has to make up the shortfall on the project itself, and currently needs to find £5.4 million.

If it cannot, both Luton and Central Bedfordshire Council will be jointly liable for the shortfall.

The £5.4million includes £3million due to Luton Borough Council through a Section 106 agreement, a mechanism by which a developer contributes to local infrastructure when it takes on a site.

This cash is coming from development on the old Vauxhall site, Napier Park, which has yet to get underway, and the council’s head of engineering and transportation, Mehmood Khan, has said that “given the current financial environment this cannot be assumed to be guaranteed funding”.

In addition, the project completion date is slipping, and the Department for Transport has said it will now not fund a ‘risk layer’ to cover rising costs.

Originally due for completion in late 2012, the busway will now not be up and running until spring 2013.

A spokesman for Luton Borough Council said yesterday that officers were currently in discussions with the Department for Transport about “re-profiling” the costs of the scheme to central government and the two councils.

Lib Dem group leader David Franks said finance managers at the council had been “worried about it for some time”.

He said: “If there is a contingency plan I certainly haven’t seen one.

“If there’s nothing happening at the old Vauxhall site then there’s clearly going to be no contribution to the busway.

“There are signs that the busway is certainly heading for being over budget – no-one can remember the last time Luton Borough Council didn’t go over-budget on a major capital project.”

Cllr Franks said he was also unsure of the decision to hire BAM Nuttall, the same contractors responsible for a busway scheme in Cambridge, which is due to finally open this weekend after a two-year delay.

The councillor who has taken the lead on the Luton-Dunstable Busway, Labour’s Roy Davis, said the council was “closely managing” all elements of the scheme.

He said: “We fully expect there will be challenges to overcome along the way on a major engineering project of this scale.

“Nonetheless we are satisfied the Luton-Dunstable Busway is making excellent progress and, when complete, that it will make a major difference to people’s lifestyles and improve bus journey times and congestion issues currently experienced across the conurbation.”

A spokesman for Luton Borough Council said it and Central Bedfordshire Council were continuing to seek third party funding contributions and had a ‘Value Engineering Programme’ that should offer additional savings on the busway.

She added: “While the DfT have stated that they will not fund the ‘risk layer’ to cover any general cost over-runs, any specific risks that have been costed are included within the DfT funding profile.

“Should the Value Engineering process and other initiatives to drive down costs be projected to be insufficient, then the councils will review what other options are available to them.”