Disastrous ‘Digital Region’ project costs soar to £155m

Workers laying cables in Rotherham for Digital Region
Workers laying cables in Rotherham for Digital Region
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The total cost to British taxpayers of Yorkshire’s disastrous ‘Digital Region’ internet project has now hit £155m, with the area’s hard-pressed local councils liable for nearly half the burden.

At a time when libraries are being closed and front-line services slashed in the biggest council spending squeeze in decades, new figures reveal South Yorkshire’s local authorities will have spent at least £65m propping up a broadband network which they said would be cost-neutral – and which hardly anybody is using.

It emerged this week that four years after its high-profile launch, taxpayer-owned Digital Region currently has just 3,000 paying customers – less than three per cent of the 108,000 it needed to be financially viable. The network has effectively cost taxpayers more than £50,000 for each person using it.

“This is not a happy story,” said Business Minister Michael Fallon. “However laudable the motive, the project was deeply flawed.”

The total cost soared beyond £150m after the Government, which inherited a 50 per cent share in the project from now-defunct regional development agency (RDA) Yorkshire Forward, announced plans to spend a further £45m to extricate itself from the venture in an effort to protect taxpayers from further liabilities. Digital Region is still racking up losses of almost £1m-a-month.

Yorkshire Forward had already written off almost £45m of public money it loaned to the project before the RDAs were abolished.

Digital Region, designed to give the residents of South Yorkshire “the best broadband network in Europe”, was supposed to cost British taxpayers just £10m when it was launched in 2009.

The rest of the money to build the £92m underground network of data cables came via a large European Union grant and a series of taxpayer-funded loans from Yorkshire Forward and Sheffield, Rotherham, Doncaster and Barnsley Councils.

The councils were told the scheme would ultimately not cost them a penny, with the money they and Yorkshire Forward lent due to be paid back once the business began making sizeable profits.

But the failure to secure even a fraction of the customers needed, or to include any safeguards in the deals with private-sector contractors which might have protected taxpayers from future liabilities, mean Digital Region has become a disastrous strain on the public purse.

All the taxpayer-funded loans have now been written off, and the scheme has been repeatedly bailed out to prevent it going bust. Mr Fallon has said the £27m EU loan will now have to be paid back, due to the project’s failure to meet key targets.

The Yorkshire Post can reveal today that the project needed yet another secret bail-out from local councils earlier this year, taking council liabilities up to at least £65m.

Newly-published accounts by Sheffield, Doncaster, Rotherham and Barnsley Councils reveal the authorities were forced to pay a further £6.5m this year to keep the scheme afloat – the third time in three years the project has needed additional support from the taxpayer. Not one of the bail-outs has ever been announced publicly, with details emerging only when the local authorities or Digital Region Ltd – the company they set up to run the project – publish their end-of-year accounts.

The councils have repeatedly refused to comment on the scheme’s finances, claiming they are prevented from doing so by “commercial confidentiality”.

Only former Mayor of Doncaster Peter Davies has broken the wall of silence in South Yorkshire, telling the Yorkshire Post earlier this year: “It is a disaster. It is a scheme which nobody in their right mind would have entered into.

“The council leaders involved thought they were businessmen, but the way the project has gone proves they wouldn’t know how to run a whelk stall.”

The four councils are currently locked in long-running negotiations with French telecoms firm Bouygues, who they hope will agree to take over the running and marketing of the network as well as its huge liabilities.

The only alternative appears to be shutting down the network altogether.

A statement released by the four local authorities said they were not in a position to comment on the project’s finances in any detail while the negotiations are ongoing.

“At the end of the re-procurement process we will be in a better position to provide more information on the benefits of the scheme and the investments we have made,” a spokeswoman said.