Millennium firm's budget is rejected

The pounds 700m budget and business plan for the Millennium Exhibition has been rejected by the Millennium Commission. The organisers have been told to come back with new figures before the pounds 200m earmarked by the commission for the scheme can be released.

Although the commission said it wanted the exhibition to proceed, negotiations over money will continue over the next few days because of concerns that the organiser, Millennium Central, has failed to show that the project can be delivered within the budget.

The commission issued a statement last night confirming that it wants "to proceed with the National Exhibition at Greenwich", but saying that it "is now finalising the means by which the exhibition will be delivered within an acceptable budget". The budget has also come under fierce criticism from Jack Cunningham, the shadow national heritage secretary, who said that it was so poorly drafted that if "Labour councillors had come to Mr Heseltine with this type of budget, he would have thrown them out with a flea in their ears".

The commission was attempting to quash rumours that the scheme was in jeopardy, but in seeking to reduce costs questions are being posed over whether the grandiose plan to have 12 pavilions underneath a massive dome will have to be scaled down. There are also doubts over the future of the pounds 41m being earmarked for 72 schemes in the provinces, but these are unlikely to be axed because ministers are anxious to give the Millennium celebrations a national flavour.

Yesterday, Michael Heseltine, Deputy Prime Minister, and Virginia Bottomley, Secretary of State for National Heritage, met to confirm the Millennium Commission's commitment to the exhibition but until a realistic budget can be produced by Millennium Central, the scheme's future remains in doubt.

In a sense, the organisers and the exhibition designers, Imagination, have the commission over a barrel. It is far too late for any other company to be brought into organise the project if it is to be completed in time for the autumn 1999 deadline.

The major hurdle to overcome is the estimate of contingencies contained in the budget. The pounds 700m is based on pounds 150m of sponsorship, only pounds 50m of which has been raised, pounds 200m from the commission and pounds 350m from the 13.5 million expected to visit the site. However, advisers to Millennium Central, said that a minimum of pounds 187m contingencies in case of overspending, bad weather and other liabilities was needed and a further pounds 35m for inflation should be allowed, bringing the total budget to over pounds 900m.

The worst-case scenario suggested by the advisers involved a potential overspend of pounds 425m, and it is these figures which are of concern to the Commission and Dr Cunningham.

In September, Mrs Bottomley asked him for his support for the draft budget plans. He refused to give an open-ended commitment.