£295,000 BUDGET LOSS AS COFFEE CHAIN PULLS OUT OF TRAFALGAR SQUARE

12.01.00am GMT Tue 23rd Nov 2004

Ahead of the London Assembly Budget Committee later today (Tuesday 23rd November), new figures revealed by the London Assembly Liberal Democrats show that the Mayor will lose £295,000 of budgeted revenue following the decision of a major café outlet to terminate their lease on the stall in Trafalgar Square.

The figures, taken from the draft GLA's 2005/06 Budget and Business Plan Submission and Mayoral Approval Forms, shows that the Mayor charged the café outlet £400,000 per year to lease the site. Following the termination of the contract, the new lease fee to an alternative operator will provide only £50,000 per year with an additional percentage income if turnover exceeds £250,000. The loss to the GLA budget is estimated by the Mayor to be around £295,000.

The first year of operation was also blighted by problems and following negotiations, the licence fee for 2003/04 was dropped by 40% owing to 'contract specifications not being fully operational delivery until January 2004'.

Liberal Democrat London Assembly Member, Mike Tuffrey, said:-

"The loss of almost three quarters of the potential revenue from a business contract raises serious doubts about the ability of Mr Livingstone to do long term deals with the private sector. The inability of the Mayor to do his sums right has once again led to extra pressures on taxpayers to come up with the difference.

"As he spent so much cash removing the pigeons from Trafalgar Square, the least we could expect is that he can recoup some of that by negotiating a long term deal on facilities. As it is, the Mayor will lose £295,000 of hard cash for next year."

ENDS

Notes to editor

· The draft GLA's 2005/06 Budget and Business Plan Submission will be discussed at Committee on 23rd November 2004. In the 'Adjustments to the Medium Term Financial Plan' told Members that there was a shortfall of £295,000 in the revenue from the café in Trafalgar Square and states:

"Trafalgar Square - £295K

As we reported in MAFs 1612, 1636 and 1831 [enclosed below] the Company which had originally held the lease for this café terminated their contract during 2004/05 and a new tendering exercise had to be undertaken. The income bids which were submitted during this process were significantly lower that that which had previously existed."

· In February 2004, the Mayor reduced the fee for the first 6 months by 40%. In Mayoral Approval Form 1612, he stated:-

"In relation to the contract with Costa for the operation of the café on Trafalgar Square, to agree that the fee for the first six months of the contract reflects a reduction in the contract sum of 40% due to the contract specification not being to full operational delivery until January 2004. The revised licence fee for 2003/04 is £180,000."

· In March 2004, Costa Coffee withdrew from operating the café in Trafalgar Square. Mayoral Approval Form 1636 said:-

"To note that Costa Limited has given notice to withdraw from operating the Café on Trafalgar Square. To approve a process to award a new contract to a company in order to ensure the continuing operation of the Café on Trafalgar Square. The budget for the 2004/05-licence fee is based on the Café being fully operational in accordance with the specification and Costa paying the full amount of the license fee as tendered for the sum of £400,000 per year. It is expected that any new license will be less than that tendered by Costa. If the new license fee is substantially below £400,000 this may impact on the ability to cover ongoing running costs."

· In June 2004, the Mayor admitted that money would have to be moved from other budgets to maintain the lifts and meet the contracts of the cleaners in Trafalgar Square. Mayoral Approval Form 1831 stated:-

"Noted the tender process for the lease of the Café at Trafalgar Square (With the commencement of this process approved by MA1636) and approved the appointment of Rred (Dellrizz Limited) as the successful tenderer for the lease of the Café on Trafalgar Square.

Noted the resultant financial shortfall on the Squares Management budget and approved a carry forward of £190,000 from the 2003/04 into the 2004/05 budget to cover that shortfall for the current financial year.

The lease fee with Rred (Dellrizz Limited) will yield £50,000 per annum with an additional percentage income if turnover exceeds £250,000 (5% over £250,000 and 10% over £500,000).

The café income has always been intended to offset some of the costs of the Trafalgar Square toilet maintenance contract. The annual value of the existing toilet-cleaning contract with OCS is £147,000.

The full costs of toilets, café and lifts are currently estimated to be £264,000.

There will be a substantial impact on the Squares Management budget as the lease fee will not now offset all costs associated with the running of the public toilets. Given the higher than anticipated under- spend in 2003/04 it is proposed to carry forward resources totalling £190,000 into 2004/05 to cover the shortfall arising from the withdrawal of Costa from the café on the Square and the substantially lower income fee from the new Café provider.

£20,000 of the shortfall will be met from income on Events on the Square."