Highways (Financing) Bill (Second sitting)

Jim Dickson Excerpts

Committee stage
Thursday 29th October 2026 Public Bill Committees

[Douglas Lumsden]

Q I guess you could step in and increase the costs and have them earning more to try to keep them on a sustainable footing.

Will Godfrey: At certain points it is possible that a regulator could introduce things like cost limits, beyond which there was then a redetermination of a price allowance, but not necessarily one that was a simple “costs have overrun by CX, therefore tolls increase by the same amount.” It would not be an automatic pass-through; it would be subject to that efficiency and economy test.

[Jim Dickson (Dartford) (Lab)]

Q One of the things that has come through from other witnesses today is the need for pace on this project—the status quo is appalling for my residents but every bad for the economy and for various sectors. Matt, would you say that the need for us to pass some legislation, then have an equity competition and then appoint the funders is slowing down your work to make sure that the project continues and completes on time—and hopefully on budget and on spec as well?

Matt Palmer: We are moving at pace. The Chancellor at the last autumn Budget—not this one—announced funding to get us to private finance, and we are well into that. We are moving at pace. There is a misunderstanding that we have not started. We have very definitely started: 2,000 people are on site, we have 14 sq km of land and there is a lot of mud at the moment, I am afraid. We are moving well and at pace. Our target is to get a tunnel boring machine, which will be the largest in the world at the time, in the ground in 2028, which will line up roughly with when we go to private finance. All of that is contingent on the fact that we need the legislation through to allow us to get the equity to move on thereafter.

[Jim Dickson]

Q Is this largely the result of having had considerable allocation of Treasury funding already, in order to be able to make a start and, essentially, mobilise and begin the project in the way described?

Matt Palmer: The logic is that the economic benefit of the scheme is great. Not only does it solve the problem in the local area; it is a national-level project, so we move at pace, we start the construction and we take a lot of the difficult, time-consuming activities like land assembly—putting plots of land together—and that is what we are doing at the moment. All of that enables a much more stable platform for investors to come in.

[Alison Griffiths]

Q I want to come back to the question of hydrotreated vegetable oil. Mr Palmer, you suggested that there was parity/comparability in costs between white diesel and HVO. I have spent a little time in the last few minutes looking at Google, Claude and ChatGPT, and not one of those sources suggests that is the case unless you count HVO being 10% to 30% more expensive as comparable. So I want to push back and ask you to be more precise on the additional cost base of using HVO in construction across the course of this project, both to date and in your estimates going forward.

Matt Palmer: In construction in the UK, about two thirds of our constructors use HVO as standard. For a project, you will find that a number of constructors bid with HVO—it is just in the costs. That is the case with lower Thames crossing. Two thirds of our contractors bid with HVO.

--- Later in debate ---

[Alison Griffiths]

Q Can anything in how the relationships are built with the procurement teams be changed to shift that?

Roger Forsdyke: I think so. If you have gateways where you build the price through detailed submissions, you can then control it. You do not want uncontrollable cost and excellent quality, but you need to create some gateways through the process so that you can control the quality as you go through. That is my experience. Those sorts of two-stage processes create the best outcomes.

You then have to make sure there is no undefined scope. As you cross the line to secured and the responsibility moves to the contractor, you do not want any change. That is sometimes very hard to achieve, but it is a really important step. It is often, “Oh, we just need to get started,” and the pressure of starting often means that the project will start prematurely, before the scope is defined. That is where the optimism bias goes in—the provisional sum might be light or whatever—and then you end up with escalation, notwithstanding the delays to resolving the issues themselves.

Andrew Truscott: I do not have a huge amount to add, because Roger has put it beautifully. I will just say one thing, and he can kick me under the table: contracting is a hard business. They do billions of pounds-worth of revenue for 2%, 3% or 4% margins—it is hard—and there is therefore little scope in their business models for mistakes. They will always enter into these sorts of projects with an expectation that mistakes do not land at their desk, because otherwise they go bust, and they have done globally.

Again, credit to the way LTC is being procured. I think separating church and state a little bit—separating equity and financing from contracting, rather than having one single proposal—is arguably a way of getting more certainty around deliverability than amalgamating all those elements into one. Where we have seen material cost overruns, it tends to be in the big projects where one single solution is given to a customer. We have been looking at a lot of US projects recently in the road space where single projects— equity, traffic and revenue, as well as construction—are lumped into one big unit and presented to a customer, who then tries to aggregate and always aggregates to lowest cost, and that is not always the right solution.

I am giving my previous panellists an awful lot of credit today, which is wonderful. I think disaggregating elements could be a way of managing that risk and that cost and delay overrun quite well.

[Jim Dickson]

Q I agree with your earlier point that it is really important that the tolls are kept affordable in every way, not only for the haulage industry but for motorists and other vehicles. Presumably one aspect of that will be this being an attractive project for which lots of interest is generated in the market, and therefore we get lots of potential bidders—

Andrew Truscott: Hopefully not.

[Jim Dickson]

In terms of investor attractiveness, how would you rank the scheme globally against other schemes of similar size, or other comparable schemes? Do you think we are set to have a competitive and very interested set of players looking to bid?

Andrew Truscott: It is a really good question. I will try to keep my answer brief, because I could bore you for about a month on this.

The short answer is that the big attention for the main global contractors—of which there are, let us be honest, a handful—is currently on the US. The US is undergoing a big programme of what they are calling managed lanes projects, which are about upgrading existing roadways to be either tolled or semi-tolled or managed. I am sure you have not seen Ferrovial or Cintra—all the big Spanish contractors are very focused on the US. Australia is sporadic but yes, there are some large projects—not necessarily transportation projects—that are attracting interest from investors and contractors in Australia. In Europe, you can count it on the fingers of one hand. Actually, that is where LTC may get more attention, as a consequence of the lack of other available opportunities.

However, this is a big project. This is a big equity cheque and there will be an awful lot of investors who say—well, I am certainly yet to meet the investor who will be able to write a single cheque for the entire amount. My guess is that this will come down to pools of consortium of capital, very much like those that ended up being on Thames Tideway, who come together because the amount of capital required is just so huge.

Do I expect it to be competitive? Unfortunately, yes. Do I expect you to have 10 to 15 single-asset bidders all vying to buy 100% of the equity? Not in the slightest.

[Jim Dickson]

That is very helpful.

[Douglas Lumsden]

Q Andrew, I think you said earlier that one of the issues was uncapped cost overruns for the contractor. What is the consequence of that? Does it scare some contractors away?

Andrew Truscott: Not for the contractor; for the investor. Sorry—if I said “contractor”, I meant “investor”. Apologies. I do not care about the contractors. [Laughter.]

It is not because we do not understand and price risk; that is what we do for a living. It is just that I cannot go to my investment committee and, when asked, “Okay, Andrew, what is the maximum amount of equity you are going to put into this project and therefore what is the return you are expecting to get on it?”, give the answer, “I don’t know.” That is not a conversation—well, it could be a conversation, but it would be the last conversation I have with my investment committee.

--- Later in debate ---

[Greg Smith]

I am grateful.

[Jim Dickson]

Q I am a very strong supporter of the Bill, because it enables major projects such as the lower Thames crossing to be funded, but the tolling issue is important. We cannot talk about individual toll levels, but we can talk about mechanisms by which reasonable—hopefully affordable—tolls will be set for both industry and individual motorists. Could the Minister enlarge a bit on how the ORR, with the legislation designed and passed by Parliament, will ensure that tolls fit the definition of “affordable” as far as possible?

Justin Madders: I understand why you ask that question. The Bill sets the framework for the RAB model, and that will establish the independent regulator. Its remit is clear, and it is there in the first few clauses of the Bill: to take account of the interests of road users. There will be fair pricing, transparency and long-term sustainability as a result of that. You will also be aware that there will be a stakeholder group in which users will have the opportunity to feed in. We have a pretty robust set of reassurances that I hope will satisfy you and your constituents.

[Olly Glover]

Q A witness said that one of my questions was best aimed at Government, so it would be churlish of me not to avail myself of the opportunity to ask it to you, Minister. What metrics should the Government use to determine whether alternative financing arrangements deliver better value for money for road infrastructure projects than direct Treasury funding? How are the Government thinking about that question?

Justin Madders: First, as it made clear, the Treasury will not fund the totality of the project, so we have to look at other models. There are different views about how that would work. If we want to compare it to the private finance initiative, which has been the major funding source for a number of crossings in recent years, costs under the RAB model tend to be lower.

Clearly, we have an independent regulator that will, as I have explained and you have heard in evidence, be able to limit cost recovery, to make sure it is economic and efficient. There will be regular requirements set out to review that under the licence. Ultimately, the Government will not be left, as they would be under PFI, with repaying a debt over many years. That might be off the balance sheet, but it still ends up coming to the taxpayer.