Ministers hid the true cost of Holyrood

MINISTERS presented Holyrood as the cheapest site for the new parliament building even though they knew it was more expensive than its closest rival.

Lord Fraser, who is investigating the spiralling costs of the project, was yesterday shown a set of detailed figures which appeared to show ministers and officials deliberately played down the real cost of the Holyrood site to win approval from the public.

They also exaggerated the difference between Holyrood and St Andrew’s House, the only other option at that stage, early in 1998, insisting that St Andrew’s House would prove to be more expensive when, in fact, the opposite was the case.

John Campbell, the counsel for the inquiry, took the highly unusual step of accusing officials of being "economical with the reality" - a thinly-veiled accusation of misleading the public.

The revelations over the cost of the Holyrood site emerged at the end of another day of drama at the Fraser Inquiry, which started with an astonishing attack on the press by Mr Campbell and Lord Fraser.

Both criticised newspapers, including The Scotsman, for quoting politicians who wanted to comment on the inquiry, an attack prompted by the Scottish Executive which was angry several of its civil servants had been singled out for criticism.

Crucial information about the controversial type of contract agreed for the Holyrood project also emerged yesterday.

The inquiry was shown an internal Scottish Office minute from February 1998 which revealed that traditional forms of tendering, which would have allowed firms to bid for a complete design and which would have kept the costs down, had been rejected because it was likely to prove too slow.

Alastair Wyllie, a senior official in the building division of the Scottish Executive, also admitted that the type of contract which was eventually chosen - construction management - placed almost all the risk for cost overruns on the client, in this case the Parliament itself.

Another option, management contract, which would have handed over much of the risk to an external expert, was rejected on the explicit advice of Bill Armstrong, a senior civil servant who went on to head the project.

But most of the attention was focused on the breakdown of cost between St Andrew’s House and Holyrood when the site decision was taken by Donald Dewar in January 1998.

The news release announcing the selection of Holyrood on 9 January, 1998, claimed the new parliament would cost £50 million if built there and £65 million if constructed at St Andrew’s House, a key difference in price at that stage.

But that £50 million did not include VAT and fees at up to £19 million, site acquisition and demolition work at £4.5 million and £7 million for the refurbishment of Queensberry House. Nor did it include the £15-£20 million cost of the refurbishment of St Andrew’s House, which had to be completed whatever happened. The overall total, which ministers were aware of at that time and could have mentioned, was about £100 million for the Holyrood site.

The St Andrew’s House site did not need to be bought and, even with the refurbishment, VAT and fees, would have cost about £90 million - less than Holyrood, although ministers insisted it would cost more.

Robert Gordon, who was the civil servant in charge of the devolution project, was asked to justify these omissions but could not.

Mr Campbell said: "My problem with the £50-£55 million figure is that it’s not really the whole story is it? It excludes demolition costs, it appears to exclude the cost of Queensberry House, which was estimated at up to £7 million, and it appears to exclude VAT and fees.

"Even at the upper end of the bracket, wasn’t that a figure that was economic with the reality?"

Mr Gordon said the press release had made it clear the figure did not include VAT and fees, but he did not explain the other differences.

He also revealed that much of the rush imposed on civil servants came from Mr Dewar, who wanted to announce the winning site to coincide with the second stage in the Scotland Bill.

He said: "I’m not sure whether a commitment had been given but there was a target to have the site of the parliament decided before the second reading of the Scotland Bill, in the second week of January 1998."