Page 92
89
Printed for the Cabinet. March 1951
CONFIDENTIAL
C.P. (51) 84
15th March, 1951
Copy No.
31
..
CABINET
FESTIVAL OF BRITAIN: FESTIVAL GARDENS COMPANY
MEMORANDUM BY THE SECRETARY OF STATE FOR FOREIGN AFFAIRS
Festival Gardens Limited has exhausted its cash resources and requires imme- diately a substantial loan if it is to complete that part of the Festival scheme.
Ministers decided that a Company should be formed to prepare and manage the Gardens and the Amusement Park. The Chairman of the Company is Sin Henry French, the other members being Lord Latham, Mr. I. J. Hayward (Leader of the Council) and Mr. D. H. Daines (Chairman of the Finance Committee), of the London County Council, Sir Giles Loder, Sir Arthur Elvin, Major Joseph and Mr. Gwilliam Hill, representing the National Amusements Council, four represen- tatives of the Festival Office (the Department in general charge of the Festival), the Clerk of the L.C.C., and the Managing Director, Mr. Crainford.
2. In June 1949 the Festival Office took a figure of £770,000 as required to cover the cost of construction and preparation and the running costs for the year for which the Gardens were to be open. This was divided roughly into:-
(a) Company's share of work on site and constructional expenditure and other overheads before opening
(b) Running expenses for one year
(c) Demolition and reinstatement
(Other construction work was then intended to be carried out by sponsors of features at their own expense.)
The estimated revenue was £670,000.
£
500,000
170,000
100,000
Accordingly financial provision was made by the Festival of Britain (Supple- mentary Provisions) Act, 1949, for a loan of £570,000 from the Exchequer and £200,000 from the London County Council, who stipulated that their loss should not exceed £40,000.
The Exchequer money passes through the Festival Office. Interest is charged on the whole loan. At that stage a loss of £100,000 was assumed.
3. After the Company had come into being the scheme was somewhat altered and in particular it was decided that the gross expenditure and revenue figures should include certain items which the previous estimate had assumed would be provided entirely by sponsors. In June 1950 the Company estimated a total cost of £1,100,000 with a revenue of £1 million. By spacing their payments for work done against revenue the Company expected to be able to finance the additional cost without additional loan capital.
4. By November 1950 the estimate of outgoings had gone up to £1,625,000 divided roughly:-
(a) Capital expenditure on site and construction (b) Other pre-opening expenditure
(c) Running expenses for one year (d) Demolition and reinstatement:
(e) Contingencies587
40300
...
...
...
£
1,060,000
100,000
220,000
90,000
Page 59289 587
2 F
The expected revenue was reduced by over £200,000, when Parliament decided A againstull Sunday opening. Despite increased charges ingevenue estimate was kept at £1 million, involving at that stage a loss of about £572,000. This raised the question whether the Company would be able to manage without a further loan capital, and the Company on 1st January, 1951, confirmed to me that it could do so.
5. On 6th March, in answer to a Written Question, and basing myself on the latest figures supplied by the Company, I said that expenditure on the Gardens was proving to be in excess of earlier estimates, owing to the general rise in costs and wages, the bad weather, and labour disputes but that (although it was not possible to obtain a firm final estimate) I understood that the total expenditure was likely to be about £1,625,000. The revenue was expected to be £1,053,000, with an expected loss on six months? operation of £572,000.met by and B
6. Two days later at the Public Accounts Committee the Chairman of the Company stated that a closer examination of the contractors' costs (which had been completed at a meeting of the Company's Finance Committee that morning) made it plain that the outstanding expenditure would be much larger than had been realised.
7. An immediate review was made by the Treasury. It now appears on the most recent figures given by the Company with proper authority that the total cost will be approximately £2,458,000:-
This will be divided:
(a) Capital cost on site and construction.
(b) Other pre-opening costs
(c) Running costs
(d) Demolition and reinstatement
(e) Contingencies
£
1,625,000
250,000
376,000
90,000
117,000
8. On these figures, and on the present assumption that the Gardens will be open for only six months, the expected loss may be as much as £1 million. Much the greater part of this increase is due to the fact that the Quantity Surveyors have come to a point where they are certifying for payment contractors' bills for amounts vastly larger than were provided in the estimates or were anticipated up to the present month. The reasons for this increase include:-
(i) recourse to uneconomic methods of catching up with arrears;
(ii) the continuing very wet state of the site, which severely hampers outdoor
operations;
(iii) the constant loss of time from labour troubles; and
(iv) the cost of avoiding further labour troubles.
9. These latest estimates raise two major financial difficulties. The higher the total of the contractors' costs the larger the sum must be paid for work in progress in order, among other things, that the contractor can continue to pay wages. The Company has run so short of cash that it will not be able to meet necessary cash disbursements for more than about another week.
The second difficulty is the complete unreality of the loan structure against present costs. It is absurd to continue any longer the statutory limit of £770,000 on the loans that will be made to the Company against contractors' costs of £1,625,000 (the coincidence between the present estimate of the contractors' costs and the previous estimate of total costs is purely incidental).
10. After consultation with the Chancellor and on the figures given to me by the Company's Office, I am satisfied that a further loan of £1 million must be made to the Company. This will involve legislation to amend the Festival of Britain (Supplementary Provisions) Act, 1949.
I must take the earliest opportunity to correct the false impression which I unwittingly gave to the House about the total cost. At the same time I must indicate the need for this further large loan capital and state the intention of the Government to introduce legislation for this purpose at the earliest possible date. When that has been done, the Chancellor agrees that arrangements for an advance against the ultimate loan of £1 million should be made to the Company to enable them to carry on.
11. This is a very sorry business. I am not satisfied about the contract and its supervision and I propose to institute a thorough enquiry into this aspect of the
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