Severn Bridges (Tolling)

Jessica Morden Excerpts

Wednesday 5th March 2014 Westminster Hall

[Jessica Morden (Newport East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bone, especially in view of your south Wales connections. I am grateful for the opportunity to debate the Severn bridge tolls. The subject has been debated regularly in this place in recent times and has been given keen cross-party scrutiny by the Select Committee on Welsh Affairs, of which I am a member. The level of tolls on the Severn bridges is a thorny issue. It is an ongoing frustration for constituents and businesses. That concerns me, because I have a toll booth on the edge of my constituency, and it concerns other hon. Members who have constituencies in south Wales and England. I am grateful for the turnout today.

[Mr Mark Williams (Ceredigion) (LD)]

I congratulate the hon. Lady on securing the debate. I emphasise that there are ramifications for a much broader range of people than those who represent the M4 corridor. Those of us in west Wales, haulage industry contractors and the tourist sector have a deep interest as well.

[Jessica Morden]

The hon. Gentleman makes a valid point. As the Welsh Affairs Committee discovered during our inquiry, the tolls have major ramifications for the rest of south Wales. For that reason, I am glad that other hon. Members are here, and I hope that they get a chance to talk about how they have been affected.

As we approach the end of the concession with Severn River Crossing plc in 2018, we need an openness from the Department for Transport and the Treasury about the plans that are being made for when the bridges return to public ownership. The Welsh Affairs Committee published its report on the Severn crossings in 2010, which urged the Government urgently to set up a future strategy for the crossings and called for tolls to be reduced significantly. Four years later, however, we are no further on. The only progress has been to allow people to pay by debit or credit card on the bridges in time for the Ryder cup, and what a long-drawn-out, tortuous process that was.

The tolls continue to go up every year, regardless of the economic climate and people’s ability to pay, and my constituents need some kind of light at the end of the tunnel. It is generally accepted that tolling was necessary to fund the crossings on the Severn, but what was so unfair about the Severn Bridges Act 1992 was that it introduced a concession so rigid and inflexible that the toll cannot be varied to help in difficult economic times without the taxpayer incurring liability. Any request to modernise the bridges receives the stock response that the Government cannot make any changes without extending the concessionary period even further or charging the taxpayer. The situation is unfair, because Severn River Crossing plc is fully compensated for any change that comes along, and it can whack the tolls up year after year in line with the 1992 Act. The Treasury is happy because it keeps the VAT and other tax income, and it quietly does well out of the bridges, but bridge users are stung time after time, and they have to pay more for longer.

I called the debate because I want to articulate the real frustration that bridge users feel, and to ask the Minister explain openly where we are and what the Government are planning. We have learned over the years that information on the finances of the bridges is hard to come by. Mysterious debts spring up, and dates and figures regularly change. I hope that today offers us a chance to get some clarity. If anybody is in any doubt about the effect that the tolls continue to have on the economy, they need only hear what a business man said to me this week:

“the majority of business visitors comment within the first few minutes of a meeting about the toll, never positively, and people feel that it develops a negative impression of Wales—both from a business perspective, but also for those who may return as a potential tourist.”

If every meeting in the offices and factories of south Wales starts like that, something has to be done. It is time that the Government listened.

[Paul Flynn (Newport West) (Lab)]

Does my hon. Friend share my bitter disappointment that the hon. Member for Monmouth (David T. C. Davies), who demanded this week that the Severn bridges be nationalised, is not here to deliver his battle cry to build socialism in our time?

[Jessica Morden]

The hon. Member for Monmouth (David T. C. Davies), who is the Chair of the Welsh Affairs Committee, is away. I know that he would have been here otherwise. We note with interest his conversion to the cause.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I congratulate the hon. Lady on securing this extremely important debate. She mentioned the hidden costs; the UK Government dropped a bombshell on the Welsh Affairs Committee a year or so ago, when they said that there would be an outstanding debt at the end of the concessionary period, when the bridges returned to public ownership. There is no clarity about the sums involved or how long it will take to pay that debt. Does she share my concern that many of our constituents believe that the Treasury is using the bridges as a cash cow? Without clarity on the matter, the people of south Wales will feel that the Treasury is intent on fleecing motorists for the foreseeable future.

[Jessica Morden]

I strongly agree, and I will say much the same thing in my remarks. The Severn bridge tolls are the most expensive in the UK. It now costs £6.40 for a car to cross the bridge, £12.80 for a van, and £19.20 for a coach or lorry. By comparison, it costs just £1.50 for a car to cross the Humber bridge or £2 to use the Dartford crossing. However, the Dartford crossing is free to use between 10 pm and 6 am, and a scheme was recently launched under which local residents can pay just £20 a year to cross the bridge as often as they like. Those are both examples of the Government stepping in after local campaigns and helping long-suffering road users. If they can help businesses and residents in those areas, why can they not take decisive action to help in the case of the Severn bridges?

The tolls are a cost-of-living issue for my constituents, especially those who commute daily over the bridge, and the cost is a big burden for many businesses that operate out of south Wales. Constituents constantly tell me how hard they find it to absorb the increased tolls each year when pay is frozen, hours are reduced and the cost of living continues to rise. A constituent e-mailed me a few weeks ago to say:

“I’m employed in Yate in Bristol which means I have the daily trip across the bridge. While I had budgeted for the bridge cost, the actual cost of commuting along with the increase in the cost of living is currently causing me great concern. I try to ride an old motorcycle as much as I can”—

a motorcycle can cross for free—

“but I have found the wind protection on both bridges to be unsatisfactory, even in the summer, leading me to balance the cost of taking the car with the danger of taking the motorbike. Therefore, I would really like to take the car every day but the cost is just too high, and as you know the cost has now increased again.”

There is little choice. It costs about £2,400 to commute to Bristol by train using a standard adult ticket. Some of my constituents feel that the yearly toll increases have a knock-on effect on alternative modes of transport, such as the bus or the train, which further restricts their choices. The train service from Severn Tunnel Junction station is frequently full, and commuters are sometimes left standing on the platform at peak times. Those who commute between Bristol and Newport East have a really raw deal, which is a significant barrier to those looking for employment in Bristol. It is one thing to pay the toll once a week or so, but quite another to pay it every day, just to go to work. The local anger and frustration was demonstrated just a few days ago on St David’s day, when 120 local singers re-enacted the Rebecca riots—the men were dressed in traditional women’s clothing, apparently—on the M48 bridge. That shows just how strongly people feel about the matter.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

I congratulate my hon. Friend on securing an excellent debate on a crucial issue, and I endorse all the points that she has made so far. She has mentioned individuals, but does she agree that we are also hearing increasingly from businesses? In particular, the Freight Transport Association, which has 700 members across Wales—many of them in my constituency—has talked about the impact that the tolls are having on the small margins in its members’ businesses.

[Jessica Morden]

I thank my hon. Friend for his intervention. I was going to praise the Freight Transport Association for its campaign, so I am glad that he mentioned it, and I very much agree with him. The Newport business man I mentioned earlier also told me about the negative impression of the toll:

“the toll has a major effect on recruitment and retention of staff in both directions. The northern fringes of Bristol across to Cardiff are all very commutable (M4 allowing) but having to build in excess of the £30 per week in to commuting costs prevents a lot of skills transfer between the areas. As an example, an employee of one of my clients told me that the bridge tolls have risen nearly 50% in her time commuting, whereas her salary has risen less than 15%.”

Businesses, particularly those in the haulage industry—I make special mention of the Freight Transport Association’s campaign—say that the tolls mean they bear a cost that their competitors across the bridge do not have to deal with. They have to add the cost on to their bottom line, which hits their competitiveness. Some companies pay in excess of £250,000 a year.

A Welsh Government study, of which I am sure the Minister is aware, shows that scrapping the tolls altogether could improve the economic output of south Wales by some £107 million. The report also shows that for a car journey—excluding commuters and business travel—the toll represents approximately 19% of the costs of a trip between Cardiff and Bristol. For light goods vehicles the figure is 23%, and for heavy goods vehicles it is 21%. The total cost of crossing the bridge for businesses and consumers, once VAT is taken into account, is in excess of £80 million a year in 2009 prices.

That is the impact of the tolls, which I am sure other Members will also articulate, but what can the Government do to help? Every year, when it is announced that the tolls will go up, bridge users ask for them to be frozen, and the Government say that they cannot be, because of the concession. However, the Government wrote off £150 million of the £330 million debt on the Humber bridge, so where there is a will, there is a way. The Government could step in and compensate the concessionaire; they just choose not to. Will the Minister address that point when he responds?

Last year, the Welsh Affairs Committee asked the previous Minister, the hon. Member for Lewes (Norman Baker), to look at a scheme for business—for example, a toll-free overnight period that would help businesses with their costs, as well as easing congestion. The current Minister has replied that the concession would have to be extended to pay for that. I will say it again: the Government stepped in to help with the Humber bridge; why not do so here? Will he clarify his remarks about the TAG concession being the limit of the concession that the Government can offer under European law? It would be helpful to have that explained in person.

Will the Minister also give us some answers on what the Government are planning, as regards where we go at the end of the concession, when the bridge returns to public ownership? The Treasury has done pretty well out of the Severn bridges in previous years. In 2000, the European Court of Justice ruled that VAT must be charged on private bridges. Between 2003 and 2012, the Government accrued an unexpected windfall of £121 million as a result of that change. Estimates from the Scrutiny Unit suggest that by the end of 2013, the figure is likely to be nearer to £135 million.

The Finance Act 2007 started the abolition of the industrial buildings allowance, meaning that the Government held on to an estimated £21.2 million, in 1989 prices, which they would never have expected. I understand that in today’s prices, that would be nearer to £40 million. Although the Government argue that they must continue tolling to recoup the £88 million in costs from unexpected repairs to the first bridge, they have actually accrued more than £160 million from both changes, which is more than enough to write off the existing debt. Will the Minister please update those figures and confirm how much to date the Government have received from VAT, and how much has been saved as a result of abolishing the industrial buildings allowance? The Department for Transport does not seem keen to answer my latest parliamentary question, even though we have had the figures before.

Will the Minister confirm that we are still looking at mid-2018—the last date we had—for the end of the concession? Previous Ministers have alluded to the fact that they would like to continue tolling for two years after the concession ends in order to recoup the Government debt that we have discussed previously—that was admitted to the Welsh Affairs Committee a couple of years ago. Is that still the case? Will the Government publish an updated full breakdown of the outstanding £88 million of debt and how and when it was incurred?

What is the current thinking on the level of the toll? The Minister has just written to the Select Committee to say that VAT would not be collected on a public bridge after the concession ends; will the tolls therefore reduce by at least that amount? If not, and the Government maintain the level of the toll, the Freight Transport Association has pointed out that businesses will no longer be able to reclaim VAT and so could effectively face a 20% hike in tolls. A specific answer on that possibility would be helpful, because we do not want businesses to end up in a worse position.

What serious work has been done on concessions for people who live locally? As I mentioned earlier, people who live locally can now cross the Dartford crossing an unlimited amount of times for £20 a year; that sounds extremely good to me. I hope that we do not hear, again, the stock answer to all such questions: “We have made no decisions about the tolling and do not know what the level will be. We are not there yet.” At the heart of the issue is a strong suspicion that the Government see the bridges as a cash cow, or even—as was suggested to me—a river of money. The concessionaire is in a win-win situation, as it can increase the tolls every year and be compensated for any changes. Meanwhile, the Government receive more than they expect through VAT and other income, while the poor old user has to pay more for longer.

In its 2010 report, the Welsh Affairs Committee recommended that, come 2018, tolls be reduced to a maintenance-only level, which would be very much supported by my constituents. We called for transparency on the financial arrangements of the bridges, and for discussions on ownership to be considered. We also asked the Government to consider off-peak rates for businesses, and local concession schemes for residents. Four years on, we have very little detail on anything. May we please have some answers today?

--- Later in debate ---

[Mr Harper]

All I am suggesting at this stage is that the Minister does not rule out considering that in the future. Of course, the tolls would not be in perpetuity, but I do not want to rule them out. The hon. Gentleman needs to reflect on the fact that the bridges do not affect just Wales. The bridges are three quarters in England; as I said, the old Severn bridge is wholly located in England, and it affects my constituents in England just as much as it affects his constituents in Wales. It is important for the House to remember that the debate about the Severn crossings and the tolling regime is not just a Welsh issue, but an English one too; and that it does not affect just south Wales, but, as the hon. Member for Ceredigion (Mr Williams) mentioned, the rest of Wales. This is a wider question, and we need to look at the economic impact on Wales and on England—in Newport West, Newport East and my constituency—and make a balanced judgment.

I was clear in my remarks: I would prefer another crossing over the River Severn that does not have tolling and that does not require tolling on existing crossings. However, I am realistic enough to know that, given the state of the public finances, caused largely by the Government whom the hon. Member for Newport West (Paul Flynn) supported, difficult decisions have to be made. There is a debate to be had about whether we can have the infrastructure sooner by funding some of it from tolling. That debate is worth having, and I want to put it on the table. I am asking the Minister not to make decisions today for a position four and a half years in the future and rule things out that we may have cause to regret. That is all I am asking him to do. I have asked the Highways Agency to undertake some option appraisals, so that we can have a sensible and balanced debate in the future.

[Jessica Morden]

It will come as no surprise to the hon. Gentleman that my priority is for the tolls to come down for my constituents and businesses post-2018, when the concession ends. However, does he think that the current level of tolling is acceptable?

[Mr Harper]

The debate I always have with my constituents is simply to remind them that both Severn crossings had to be constructed and paid for, and that the toll revenue simply repays the cost of providing and operating the crossings. There is a trade-off: if we did not increase the toll each year—of course I understand why that is unpopular; I would prefer it not to go up as well—we would extend the concession period. That is a trade-off the Government have to make. The option would be open to the Government, as it was—I remind the hon. Lady—to the previous Government, whom she supported. For 13 years, they did not make any amendments—by choice—to the tolling regime. They did not do any of the things that she is suggesting, just to put the issue into context.

While it is tempting, we must be honest with our constituents that things have to be paid for, and they can be paid for in only one of two ways, one of which is for the cost to fall on the general taxpayer. Although the public finances have been hugely improved by the difficult decisions taken by the Government, they are in a state because we inherited them from the previous Government. There is no magic money tree to pay for the toll revenue. If we sweep the toll revenue away—I know how tempting that would be—either cuts will have to be made elsewhere, or taxes will have to rise. Politicians owe it to our constituents to be honest and frank with them. There is no magic money tree, and the bills have to be paid.

[Jessica Morden]

If we are to be honest with our constituents, does the hon. Gentleman accept that we should point out that the Government have now benefited by more than twice the debt on the bridge from unexpected tax income as a result of changes related to the bridges? The Government have actually done well in terms of VAT and other tax changes.

[Mr Harper]

That is a perfectly reasonable point, which of course has to be balanced—I am sure the Minister will set this out—against some of the costs. I am clear: I want the tolls to come down; they can certainly come down by the level of VAT. I certainly think that they can come down. All I am asking is that at this point the Minister does not suggest that the tolls are swept away, if the cost of removing them would mean that a future crossing over the River Severn either never happened or only happened at some far distant point in the future. I am only asking him not to make that decision today, given that we have not properly considered the arguments.

--- Later in debate ---

[Richard Burden]

I will address the UK Government and the Welsh Government in a while, but the substance of the hon. Gentleman’s point is correct. Working out the meaning of “local” is complex. I am simply saying that the Government should not close the door. They should consider it and see what is feasible, and they need to do so relatively quickly because decisions have to be made in the near future. The situation has gone on long enough.

[Jessica Morden]

That is the point. We do not know whether the Government are even considering the measure. We want clarity.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Transport (Mr Robert Goodwill)]

It is a pleasure, as always, to serve under your chairmanship, Mr Bone. First, I congratulate the hon. Member for Newport East (Jessica Morden) on securing this debate on the Severn crossings. Before I discuss the tolls on the Severn crossings, I make the point that it has been the policy of successive Governments since 1945 that crossings on estuaries should be paid for by the user rather than by the taxpayer. Successive Governments have taken the view that tolls on all such crossings are justified because the user benefits from the exceptional savings in time and money that those expensive facilities make possible.

It might be helpful if I give a brief outline of the history of the Severn crossings, some of which is relevant to the issues that have been raised. The first Severn bridge was opened by the Queen in September 1966, providing a direct link from the M4 motorway into Wales, with a toll in place for use of the bridge to pay for the cost of construction. In 1986, the Government said that a second bridge would be constructed. In July 1988, they announced that the private sector would be given an opportunity to participate in the scheme, and in April 1990 they announced the selection of the bid led by John Laing Ltd with GTM-Entrepose to design, build and finance the second crossing. That consortium was also to take over the maintenance and operation of the existing Severn bridge.

In October of that year, the concession agreement between the Government and Severn River Crossing plc was formally signed. In February 1992, the Severn Bridges Bill received Royal Assent. The concession agreement was enshrined in an Act of Parliament and commenced in April 1992. Severn River Crossing plc then took over both the operation and maintenance of the present bridge and the construction of the new bridge. The concession agreement was structured so that certain risks were borne by the Government, rather than by Severn River Crossing plc, for example, costs relating to latent defects on the first Severn crossing. By bearing those risks, the Government could finance the construction of the second crossing and maintenance of the crossings at a much lower cost. If those risks had been included in the concession arrangement, the tolls would have needed to be higher or the end of the concession would have been longer than under the current arrangement.

Construction of the new bridge started in September 1992, and the new crossing was opened on 5 June 1996 by the Prince of Wales, almost 30 years after the opening of the first bridge. As part of the concession agreement, Severn River Crossing plc is authorised to collect tolls to meet its financial obligations. The tolls repay the construction and financing costs of the second Severn crossing, the remaining debt from the first existing crossing from 1992 and pay for the maintenance and operation of both crossings. It is worth stressing that that is the company’s only source of income. The concession period is limited to a maximum of 30 years. The actual end date will be achieved when the concessionaire has collected a fixed sum of money from tolls, which is £1.029 billion at 1989 prices.

The Severn Bridges Act 1992 applies a clear structure to the tolls to give the concessionaire confidence that it will be able to meet its liabilities and manage the risks that it accepted through the concession agreement. The toll levels were set for three categories of vehicles at the time of tender and are embodied in the 1992 Act. The Act sets out the tolling arrangements and the basis for yearly increases in the toll rates. Toll rates are fixed in real terms. The new rates are introduced on 1 January each year and are increased in line with the retail prices index using a formula, and rounded to the nearest 10 pence.

The shadow Minister, the hon. Member for Birmingham, Northfield (Richard Burden), asked about the possibility of introducing free-flow tolling on the Severn crossing, as is to be introduced on the Dartford crossings, but that depends on decisions on future charging arrangements that are yet to be taken. For example, it would be imprudent to invest in an expensive tolling system that operated for only three or four years, were the Government of the day to decide to discontinue charging. We would need to assess the costs and benefits of free-flow tolling on the Severn crossing as we did on the Dartford. However, as a general principle, the Government support moving towards more efficient ways of collecting tolls, which benefit traffic flow.

[Jessica Morden]

As the Minister looks toward the end of the concession in 2018, could he address the VAT issue and clarify what was meant in the letter sent to the Welsh Affairs Committee this week? When the VAT charge comes off the bridges, because they return to public ownership, will that mean a reduction in the tolls, or are the Government planning to keep the tolls at the current level?

[Mr Goodwill]

I thank the hon. Lady for that question. From 2003, when VAT was imposed, to 2012, about £120 million gross has been collected. However, some business users will have reclaimed a fair proportion of the VAT. It is the case that when this Parliament comes to an end, it would be open to the Government of the day to make a decision as to whether they continue to charge the same fee, or reduce it by 20% or whatever the prevailing rate of VAT. No decision has been made, and I suspect it would be above my pay grade to make that particular decision. It is probably slightly early to consider that point.

[Jessica Morden]

Will the Minister provide us with an update on the money that has been collected to date, since the VAT changes and the changes in the industrial buildings allowance, so that we can have a full update of how much money the Government have collected so far? I am happy for him to write to us.

[Mr Goodwill]

Yes, by all means. I have given the hon. Lady the latest figure on the VAT. If I may, I will write to her with a more up-to-date figure on the VAT, if we can get hold of it, and also on the buildings tax that she mentioned.

[Mr Goodwill]

Yes, it would be reasonable to assume that most business users reclaim the VAT, so when we write to Members participating in this debate, we will estimate that level. When there is talk of the Government using this as a cash cow, it must not be forgotten that every vehicle saves 52 miles by crossing one of the crossings, but on the long journeys going the long way round, they would actually be paying a fair amount of fuel duty. So it is not simply that the Government benefit from the VAT; there is actually a loss in terms of the amount of fuel revenue that otherwise would have been collected.

I want to stress an important point: the Secretary of State does not have the authority to reduce Severn tolls without amending primary legislation and obtaining the concessionaire’s agreement. The concessionaire would not be able to agree to anything that would affect its net revenue without compensation and agreement from its shareholders and lenders, which would result, if such an agreement were forthcoming, in a cost to the taxpayer. Any discounts or exemptions are a matter for the concessionaire to decide, provided that those provisions comply with existing legislation, such as the Eurovignette directive. Where that is not the case, such schemes cannot be introduced without changes to the concession agreement.

Discounts of 10% for vehicles of over 3.5 tonnes, and 20% for other vehicles, are offered by way of a season TAG, based on 22 trips per month. Blue-badge holders and the emergency services are exempt. There are significant discounts for users, including businesses that make multiple trips per day. Tolls are charged in a westbound direction only, from England into Wales. The current toll prices are: £6.40 for cars; £12.80 for vans; and £19.20 for vehicles over 3.5 tonnes.

Once one-way tolling and the distance saved owing to the existence of the crossings are accounted for, Severn tolls compare favourably with toll levels on other crossings. On the points raised by the hon. Member for Newport East, I can give some examples. The toll for a car is £6.40, but, with the free return journey, it is equivalent to £3.20 for a saving of 52 miles; the Dartford toll is £2 for a saving of 22 miles; and the Tyne tunnel has a charge of £1.60 for a saving of only eight miles.

The hon. Member for Birmingham, Northfield mentioned lorries. In the case of the Humber bridge, lorries pay £12.50 for a saving of 45 miles, whereas on the Severn crossing—if we divide by two for the free return—it is £9.60 for 52 miles. Some of the comparisons made with other crossings in the country do not necessarily bear scrutiny, or perhaps Members can pick their example to support their case.

[Jessica Morden]

Does the Minister also accept that the Government stepped in recently to the tune of £150 million to reduce tolls on the Humber bridge? If they can do that on the Humber, why can they not do it for the Severn bridges?