The financial mess that is the Cairngorm mountain railway could end up costing taxpayers a massive £50 million to clean up, according to internal government documents obtained by the Sunday Herald.
The growing prospect that ministers will be asked to pay the bill for dismantling and removing the controversial funicular from the mountain near Aviemore has been described as “daunting” and “scary” by Scottish government officials.
The documents also reveal how the company that ran the funicular was on the verge of going bust before it was taken over by the government agency, Highlands and Islands Enterprise (HIE), in May - and how this fact was hidden from the public by HIE at the time.
When the funicular railway was originally given planning consent in 1997, a legal condition was imposed obliging HIE to remove the entire facility and reinstate the land. This would come into force if the funicular was closed for more than two years.
Since then, as the funicular has tried to weather a series of worsening financial crises, the risk of closure has loomed ever larger. The prospect was confronted in private correspondence between HIE and the Scottish government in May this year.
HIE disclosed that it had estimated the total cost of reinstatement at between £30 and £50 million. This is much higher than the figure of £6 million previously mentioned by the government’s Forestry Commission, which had also investigated taking over the funicular.
The estimate was high, HIE explained in a memo to government, because much of the equipment might have to be carried out by helicopter in order to avoid damaging Cairngorm’s sensitive mountain habitat. Helicopters had had to be brought in during construction, causing “cost escalations”.
In an email on 1 May, one government official expressed concern about throwing “good money after bad” on the funicular. “The prospect of a £30m bill for removal is pretty scary in financial and reputational terms,” he said.
HIE has released more than 250 pages of memos and correspondence about its take-over of the funicular earlier this year. The documents were requested by the Sunday Herald under freedom of information legislation.
For the first time they uncover the full story of how close the funicular company, Cairngorm Mountain Limited (CML), came to bankruptcy. According to a confidential report to HIE from the accountants KPMG, the company was approaching a crisis last autumn.
CML had made “significant losses”, KPMG reported. “Recent balance sheets showed that CML was substantially insolvent, and that on an earnings basis, there was no prospect of that position changing.”
Because of a drop in the number of visitors, the company made a loss of £167,000 in the year to 30 April 2007, and then a further £193,000 loss between 1 May and 26 August 2007. CML’s total liabilities at the end of April 2007 stood at £6.3 million.
Allowing the company to go into insolvency “would appear to present all parties with a scenario which would be problematic in terms of potentially damaging PR, and political problems”, KPMG warned.
Despite a good skiing season last winter, the crisis at CML came to a head in the spring, so an urgent HIE take-over was proposed. An emergency meeting of CML directors on 8 May was told that the company’s bank account had been “frozen”.
The minutes of the meeting recorded: “HIE believed that failure to agree in the short term could result in the company having to go into receivership. The company and HIE want to avoid this at all costs.”
None of this was explained at the time. A draft HIE briefing advised officials to answer “no” if asked by the media whether the HIE take-over was “to avert Cairngorm funicular railway going bust”.
HIE argued last week that this was not misleading as there had been no risk of the railway itself going bust, as opposed to the company that ran it. But the government agency was still accused of “media manipulation” by Dave Morris, director of Ramblers’ Association Scotland and a veteran opponent of the funicular.
“HIE’s credibility is melting away faster than a snow bed in a Cairngorm corrie,” he said. “Government ministers must act to resolve this environmental and financial disaster at the heart of the Cairngorms National Park.”
Roy Turnbull, vice-convener of the Badenoch and Strathspey Conservation Group, added: “We and other critics of the funicular consistently argued that it was likely to be an economic disaster, as indeed it is proving.”