COMMONS

Eurotunnel settlement costs the taxpayer dear

10 July 2019
  • Transport’s rushed procurement of ferry freight capacity has cost the taxpayer £85 million 
  • UK preparations for leaving the EU on 31 October risk running out of time
  • Public benefits from the £33 million settlement with Eurotunnel amount to little more than window dressing

Report summary

Departments have faced an unprecedented challenge in preparing for the UK’s exit from the EU.

Since we last reported on the Brexit preparations the date for the UK leaving has moved to 31 October 2019.  Prior to the previous planned departure date of 29 March 2019 we had raised concerns with a number of departments about the rate of progress with the preparations. With little lead time left the Department for Transport undertook a rushed and risky procurement of additional ferry capacity which opened it to a court challenge from Eurotunnel, which had been excluded from the procurement, and which culminated in an out-of-court settlement costing £33 million.  Coupled with the £51.4 million cost of cancelling the contracts with the ferry operators, the total cost of this procurement to the taxpayer stands at around £85 million.

The Department must learn from this episode and use its time well should it be required to re-procure ferry capacity ahead of the new October deadline. We are however concerned that Departments appear to be waiting for clear instructions on what they should now plan for on Brexit.  We acknowledge that without political certainty it is challenging but the government needs to inject direction into departments’ preparations for leaving the EU with a deal, without a deal or any delay as a matter of urgency.

Chair's comments

“In just four months’ time, on 31 October, the UK is expected to leave the EU yet momentum appears to have slowed in Whitehall. Departments must urgently step up their preparations and ensure that the country is ready.

“The taxpayer has been landed with a £85m bill with very little to show for it following the rushed procurement of ferry freight capacity. This £33m Eurotunnel settlement comes on top of the money paid to cancel the ill-fated ferries deal.

“Public benefits from the settlement with Eurotunnel amount to little more than window dressing. The Department needs to keep a close eye and ensure that Eurotunnel deliver what is promised.” 

Conclusions and recommendations

Momentum appears to have slowed in Whitehall, with preparations for the UK leaving the EU on 31 October not happening quickly enough. The Department for Transport says that its immediate arrangements for leaving the EU were stood down after April and that it was reviewing the “sensible course to take to step those up again”. The task of planning for October will differ from the plans that were made for March. The Department says that work is being done across government to determine what the risk is to the flow of goods across the short channel crossings if the UK leaves the EU with no deal in place on 31 October 2019 and what action is required by departments. This work needs to be completed quickly, as it will shape what freight capacity the Department for Transport may need to procure and for what length of time, and the Cabinet Office tells us that a decision on ferry procurement needs to be made imminently. The Cabinet Office accepts that preparations for leaving the EU have been scaled back in Whitehall since March, and says that Departments stand ready to ramp up their work again. It is confident that the civil service will be ready by 31 October. But we remain concerned that departments’ preparations are being left too late. The window for decision-making for any departure on 31 October is short and key deadlines for decisions are passing every day.

Recommendation: The Government must ensure that departments urgently step up their preparations on the assumption that the UK could be leaving the EU on 31 October and be ready to implement them.

The Department for Transport’s rushed procurement of ferry freight capacity resulted in it taking excessive risks and has cost the taxpayer an extra £33 million on top of the £51.4 million it paid to cancel the contracts. The compressed procurement timetable for getting ferry capacity in place for 29 March resulted in a flawed process and exposed the Department to a risk of being challenged.  As a result, when Eurotunnel, which had not been invited to bid, challenged the procurement the Department was forced to pay £33 million as part of an out-of-court settlement. Following the extension of the date for EU Exit to 31 October the Department has now cancelled its contracts with the ferry operators, at a cost of £51.4 million, bringing the total cost of this procurement to the taxpayer, including the settlement with Eurotunnel, to around £85 million. The Department recognises that it needs to learn from this flawed procurement. However, there is a real risk that the short time left before 31 October will force the Department into further high-risk procurements, which it wants to avoid. Given the lead time needed to put ferry capacity in place, which the Department says can take a minimum of three months, any new procurement process would need to begin very soon.

“Recommendation: The Department for Transport should set out within weeks what it has learnt from this procurement to ensure it does not expose the taxpayer to unnecessary risk and excessive cost in the future and particularly in its preparations for 31 October.”

We are not convinced that the Department has secured any additional benefit from its £33 million settlement with Eurotunnel. The Department’s settlement with Eurotunnel includes an obligation for Eurotunnel to commit at least £33 million on projects relating to infrastructure at the Channel Tunnel site, including security and border preparedness measures. The Department told us that it wanted to ensure that in return for the £33 million settlement Eurotunnel made investments that had a public value. This appears little more than window dressing, as Eurotunnel has said that it would have committed at least £33 million on these types of projects irrespective of the settlement. The Department will monitor how Eurotunnel commits the £33 million and told us that it expects to claw back expenditure that does meet the terms of the settlement.

Recommendation: The Department should report back on how Eurotunnel commits the £33 million and what these projects will deliver.

Further information

Image: Creative Commons

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