Page last updated at 11:27 GMT, Wednesday, 3 March 2010

Cairngorms funicular costs criticised

CairnGorm Mountain funicular railway
HIE took over the railway and CairnGorm ski resort in 2008

A public agency's failure to take account of risks to the running of a mountain railway led to "spiralling" costs, MSPs have said.

The Scottish Parliament's audit committee reviewed Highlands and Islands Enterprise's (HIE) spending on the Cairngorms' funicular railway.

In its report, the committee said threats such as warmer winters' effect on skiing were not taken in account.

HIE said it recognised the MSPs' criticism of earlier decisions.

In a statement, the committee said: "The enterprise body's failure to take account of the risks was a key factor which led to spiralling construction and running costs."

We find it unacceptable that HIE did not review its business case before construction began
Hugh Henry MSP

HIE, which took over the funicular and CairnGorm Mountain ski resort in 2008, has provided £19.42m towards the £26m cost of building and running the railway.

Over the next three to four years, HIE is to spend up to £4m on maintaining the funicular.

HIE said the investment would bring the site up to a standard that would attract a new operator from the private sector.

It has also proposed introducing charges at a car park serving the railway.

About 400,000 people used the car park last year, according to HIE.

It said half of those visitors used the funicular.

Audit committee convener Hugh Henry said MSPs were critical of the agency's part in the project, from its inception to its current involvement.

He said: "We find it unacceptable that HIE did not review its business case before construction began to ensure that the project was proceeding on a realistic basis and the risks to public funds were minimised."

Mr Henry added: "The committee remains concerned about HIE's apparently open-ended financial commitment to the funicular.

"The potential for HIE to conclude its operational responsibility for the funicular hinges on its ability to transform the business and we therefore urge HIE to ensure that its future business plan for the facility is founded on accurate performance information and that rigorous financial control measures are adopted."

'Most successful'

HIE acting chief executive Sandy Brady said the design and construction of a funicular railway at high altitude in an environmentally sensitive area was a "unique and complex" project which had never been attempted before in Scotland.

He said: "Highlands and Islands Enterprise recognises the committee's criticism of earlier decisions surrounding the development of the funicular railway.

"While the agency adhered to Scottish Executive guidelines at the time, we accept that good practice in project appraisal and management has improved significantly since the early 1990s."

Mr Brady added: "CairnGorm has to date this season attracted 84,000 skiers and is on course for the most successful year since the funicular opened. VisitScotland calculates the most common spend per head for skiing visitors to be £100 a day."

The agency took the railway and CairnGorm Mountain ski resort over in May 2008.

It followed agreements reached with Bank of Scotland Corporate and CairnGorm Mountain Trust on large debts owed by CairnGorm Mountain Limited (CML).

Highland Council also agreed to write off a £1m loan to CML.

The audit committee reviewed the financing of the funicular following an investigation by spending watchdog Audit Scotland.

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