Severn Bridges (Tolls)

Andrew Jones Excerpts

Tuesday 21st July 2015 Westminster Hall

[The Parliamentary Under-Secretary of State for Transport (Andrew Jones)]

It is a pleasure to serve under your chairmanship again, Mr Gray. I congratulate the hon. Member for Newport East (Jessica Morden)on securing this debate about tolls on the Severn crossings. It has become extremely clear, from contributions from hon. Members on both sides of the Chamber, just how important the crossings are to the economy of Wales and to the whole of the west of England. The argument has been made very strongly, particularly with reference to the high volumes of people crossing for tourism or for the manufacturing industry, reflecting key strengths of the Welsh economy.

I am pleased to respond to this Adjournment debate on a subject of great importance to the hon. Lady and her constituents. I know that she has campaigned on the matter for a considerable time. I was quite surprised, but very pleased to find the interest from right across the UK. Lessons from different parts of the UK can always be considered. I was also delighted to hear colleagues argue for less cost on business as a driver of economic growth. That is music to Conservative ears. I also recognise how it links firmly with the Government’s plans to drive infrastructure investment as a key lever of economic growth. I will just say a little, if I may, about how that will work.

The Government have announced increased funding to deliver improvements on our road infrastructure network targeted entirely at delivering economic growth. Our commitment to deliver a step change in our transport infrastructure was made clear by my right hon. Friend the Chancellor of the Exchequer in his statement on 26 June 2013, when he announced the conclusions of the spending review of that year. I am sure that everyone will be aware of the Government’s announcement on 1 December 2014 of the road investment strategy. As part of that strategy, the investment plan outlines how we will invest in the strategic road network between now and 2021 to make the improvements that will put us on the path to delivering all our long-term economic goals. In total, the Government are investing £15.2 billion in more than 100 major schemes, which will enhance, renew and transform the network.

Of course, the strategic road network is solely in England and roads are a devolved responsibility in Wales, but the Government have also provided the Welsh Government with the borrowing powers to fund the new M4 relief road, which I hope will address the congestion that has long plagued that section of the M4. I am highlighting that, because it shows one way of working together—the principle of partnership that I consider to be very positive and that will be most important as we take forward the Severn crossings and their future.

More than 220 million Severn crossings have been paid for since 1992, and traffic has increased by more than 50% over that period. More than 13 million crossings were paid for last year, which is a significant increase of 3.7% on the previous year. We should also note that those figures cover only crossings into Wales—people pay a return toll—and not journeys in the opposite direction. It is reasonable to surmise that the total traffic figures are double the recorded tolls, which highlights the importance of the crossings to the economies of both countries and the role the crossings play in strengthening the bonds that already exist between the two nations, which is of course a key objective of many parties in this House.

The hon. Member for Newport East has raised several issues regarding the Severn crossings, including the tolls that are charged for using them. As she knows, for decades successive Governments of all persuasions have held the view that crossings on estuaries should be paid for by the user, rather than by the taxpayer. They have taken that approach because of the outstanding savings in both time and money that such expensive infrastructure projects make possible. It is important to make that point at this stage, and it should be remembered.

I hesitate to provide a historical context, because I know that the hon. Lady is acutely aware of all the history, but it is relevant. The first Severn bridge was tolled when it opened in 1966 to pay for its construction, and it enabled a direct link from the English motorway network into Wales. However, it was not long before the first crossing operated significantly above its designed traffic capacity, and it became clear that further capacity would be required. In order to fund a second crossing, a concession agreement was signed with Severn River Crossing Ltd, which took on the operation and maintenance of the first bridge and the construction of the new bridge. The second bridge subsequently opened in 1996.

As is the norm with concession agreements, Severn River Crossing Ltd is authorised to collect tolls to meet its financial obligations. Those tolls are in place to repay the construction and financing costs of the second Severn crossing, to repay the remaining debt from the first river crossing and to maintain and operate both crossings, and the tolls form the company’s only source of income. The concession agreement was structured so that certain risks, such as costs relating to latent defects on the first crossing, were borne by the Government, rather than by Severn River Crossing Ltd. By taking on those risks, the Government were able to finance the construction of the second crossing and the maintenance of both crossings at much lower cost than they could otherwise have achieved. If those risks had been included in the concession arrangements, the tolls that users have paid for many years would necessarily have been considerably higher, which would have pushed back the concession further than the current projected end date of 2018.

Members have asked when the concession will finish. That will happen when it has achieved total income of £1.029 billion at 1989 prices, so it is not possible to give an exact date for when it will finish. We are able to project ahead based on current usage but, as I mentioned earlier, usage is going up, so the date may come forward.

[Jessica Morden]

Will the corporation tax cut have an impact? Does the Minister anticipate that that will bring forward the date when the concession ends?

[Andrew Jones]

The corporation tax cut should be viewed as part of a broader economic package to drive growth. The more economic activity we have, the greater the use of the crossings will be. The corporation tax rates paid by individual companies are not part of this process, but the overall activity that the Government are seeking to create through a vast focus on economic growth will certainly bring things forward, as more economic growth means more crossings, and more crossings mean more revenue, which means that the target will be reached earlier.

The Severn Bridges Act 1992 sets out the tolling arrangements and the basis for yearly increases in the toll rates. New toll rates are introduced on 1 January each year and are increased in line with the retail prices index using a formula that is then rounded up to the nearest 10p. I stress that the Secretary of State for Transport does not have the authority to reduce Severn tolls without amending primary legislation and obtaining the concessionaire’s agreement. The concessionaire is extremely unlikely to agree to anything that would affect its net revenue without compensation and agreement from its shareholders and lenders. That is a key point, because we are talking about what happens after the concession ends.

At the end of the concession, as everyone has noted, the crossings will revert to public ownership. As the Chancellor stated in his March Budget, once the crossings are in public ownership, VAT will no longer be payable on the tolls, which will be reflected in the toll prices. Members have asked for clarity on that, and I am happy to confirm that VAT on the tolls is going.

[Jessica Morden]

The Minister will know that, as the tolls go up automatically in 2016 and 2017, by the time the toll increases are applied in 2018, taking off the VAT will return the tolls to about £5.60, according to my back-of-an-envelope calculation, which means that about 90p will come off in two and a half years’ time. Does he appreciate that that is no great shakes?

[Andrew Jones]

Removing VAT will result in a significant cost reduction. Of course, like all Members, I would like cost reductions in all sorts of areas of our economy, but to say that VAT reductions are matters of great insignificance is simply wrong. It should be remembered that further reductions in tolls for some vehicle classes once the crossings return to public ownership were also announced in the March Budget. The Chancellor announced that, when the concession to toll the crossings ends, the higher toll rate for vans will be reduced to the same rate as for cars, which will be a significant benefit to smaller businesses on both sides of the crossings. So we are considering some toll reductions, which is significant.

Our intention is to continue tolling after the projected end of the concession in 2018 simply to recover the costs that have been incurred in relation to the crossings that fall outside the agreement. The current projection of those costs stands at £88 million. We have not made any decisions about the operation and tolling arrangements for the crossings once the current regime ends. The road investment strategy contains the Government’s commitment to working with the Welsh Government and others to determine the long-term future of the Severn crossings. The Under-Secretary of State for Wales, my hon. Friend the Member for Vale of Glamorgan (Alun Cairns), who is sitting next to me, has done excellent work in highlighting the economic impact that the toll reduction for vans and the VAT reduction will have on the area and in explaining the importance of the crossings overall. We have already met to discuss that subject, and I anticipate that we will meet again shortly.

[Stephen Kinnock]

The Minister says that the Government have not yet made a decision, and 2018 is not that far away. As hon. Members said earlier, business abhors a vacuum. Business needs certainty, and it needs to know where its costs will be. Can we please have clarity on when the decision will be made and why it cannot be made within a defined period of time?

[Andrew Jones]

Although 2018 is not that far, it is still three years away. Work on what happens next is under way. We are looking at a potential end date for the concession of around 2018. It is a financial target, rather than a fixed date, which means that we have a requirement to plan appropriately, and I will address that next.

[Jonathan Edwards]

As I said in reply to an intervention during my contribution, the Minister’s party in Wales is campaigning for the Assembly elections, which are less than a year away, on the basis that the Welsh Government will have control of the Severn bridges and that, under his party’s control, the costs will be reduced. He has clearly not made up his mind on the ownership of the bridges following the end of the concessionary period. Is it not the case, therefore, that the pledges his party is making in Wales are not worth the paper they are written on?

[Andrew Jones]

One aspect of devolved government, which is what we have now in the UK, is that the same party will hold different views in different areas, reflecting local circumstances. That happens throughout the UK, and I think that it is a positive rather than a negative that people are arguing, lobbying and making the case for their area. It happens, and we should get used to it, because it is here to stay while we have a United Kingdom with devolved Assemblies and Parliaments.

I mentioned that we have not yet made any decisions about the arrangements after the concession finishes, but the Government have been clear that we will need to make proper provision for the repayment of debt and for future maintenance.

[Nia Griffith]

I appreciate that we cannot expect to have all the answers today, and that there are difficult decisions to make and things to work out. However, can the Minister set a timetable in the very near future for when all those things will be done, so that come September, we will know what is likely to happen and when we are likely to get certainty? That is what we really want to know.

[Andrew Jones]

I cannot give the hon. Lady a final date, but I can tell her that that work has started and is taking place in the Department, with colleagues in the Wales Office. Let me leave hon. Members in no doubt that the Government are committed to the successful operation of the crossings. They are vital, and the economies on both sides have benefited greatly from their presence.

[Richard Burden]

I think that the Minister may inadvertently have misunderstood my hon. Friend’s question. She was not asking him when the Government will make their final decision; we understand that that will take some time. She was asking for a timetable or road map of the process whereby decisions will be made. Who will be talked to at which stage? Which agenda items will be discussed at which stage—the debt, toll levels, the technology, off-peak reductions? In the autumn, can the Minister give some kind of timetable for when those things will be considered?

[Andrew Jones]

I mentioned earlier that we are already committed by the road investment strategy to work with the Welsh Government, and we are more than happy to continue with all the strategy commitments. As I said, I have already started work with my colleagues in the Wales Office. I am expecting more work to be done over the summer and in the early autumn by my officials in the Department, and will be more than happy to share it more widely as we go forward, but I cannot yet give a specific date. However, it is work in progress, and we are starting that work. It will certainly involve wide co-operation and consultation.

[David T. C. Davies]

Can the Minister supply an answer in this debate to the questions about how much extra money the Government have received in VAT and industrial buildings allowance, and the costs of maintenance? If he cannot give those exact figures today, can he commit his Department to providing them before the autumn? Otherwise, I suspect that hon. Members might decide that they want to apply for another debate, and I will certainly support them if they do.

--- Later in debate ---

[Andrew Jones]

The annual accounts for the Severn river crossings will be published shortly, and I will consider what other information can be made available. However, we must be a little cautious about hypothecating the amount of VAT raised, but on general principles of transparency, I am more than happy to supply that figure. I cannot stand here and give my hon. Friend large amounts of data this afternoon, but we will approach all investment issues on principles of transparency and collaboration, including data transparency.

Numerous questions were asked; I will answer some of them now. It was asked whether the Severn crossings could be handed over to the Welsh Government. I have absolutely no plan whatever to change ownership, but I have every intention of working together on future operation of the crossings. We will take that forward in partnership and consultation. The publication shortly of the annual accounts was mentioned. Many requests about consultation have been made. I am happy to commit to all that and to hear from all parties, including from local councils in the area and any local enterprise partnerships. The key point is that nothing has been decided. All policies are still under consideration.

Several colleagues mentioned technology. The opportunities presented by technology are significant, and it can make an enormous difference. I have started to consider whether we can take lessons from other free-flow schemes in our country, notably the DART tag scheme, which has made a significant time saving for commuters on the Dartford crossing. We are considering whether that could be used on the Severn. I am also considering whether it could be made collectable both ways; technology frees up opportunity, and I think that it would prove popular.

When the concession ends, we have a significant opportunity. I am extremely keen to ensure that we take it, because the whole project matters. We know full well, as has been made clear in this debate by colleagues from across the House, just how important the crossings are to the local economy and nationally. The people of the area have been paying to cross the Severn, but I remind colleagues that we are in a period of significant infrastructure investment. This Government are delivering the most ambitious road investment scheme since the 1970s. I view the Severn crossings as an integral part of our transport infrastructure, which is why we are taking forward work in my Department. We have three years to ensure that we get it right and to improve the situation for the area. This is a fantastic opportunity, and I look forward to working with colleagues here and locally to ensure that we get it right.

[Jessica Morden]

I am grateful to the Minister for that response, although I suspect that hon. Members and Friends will have more questions to ask him. I thank colleagues for coming today; I counted about 15 in the Chamber, which shows the high level of interest in the topic.

In thanking the Minister for his response, I reiterate to him the list of points raised in this debate, and I suggest that he writes to all Members here to outline the answers to some of the questions asked, not least to spare him from having to come back yet again for another 90-minute debate on the Severn bridge tolls. To reiterate, the wish list from this debate includes financial information about the Severn bridge tabled for hon. Members to scrutinise—I am sure that the Select Committee on Welsh Affairs will return to that in its work—and a clear timetable about where we will be in future, as mentioned by my hon. Friend the Member for Llanelli. Perhaps the Minister will also commit to meeting groups of us to give us regular updates, not least to spare himself another debate.

[Andrew Jones]

I am happy to make that commitment.

[Jessica Morden]

I thank the Minister for that. To reiterate what the hon. Member for Monmouth and I said earlier, this Government have done extremely well out of the bridges; they have been a cash cow. The Government’s assertion that they might keep on tolling rather than reduce the high tolls after the concession ends—we know that although the debt will be £88 million, the Government have already recouped £154 million in VAT response—will not go down well. I would appreciate it if the Government reconsidered reducing the tolls further.

Question put and agreed to.

Resolved,

That this House has considered tolls on the Severn bridges.