Highways (Financing) Bill (Second sitting)

Justin Madders Excerpts

Committee stage
Thursday 29th October 2026 Public Bill Committees

[Greg Smith]

Q That is helpful. Clearly, the Bill is predicated on tolls being charged upon completion, for use to create that payback. You have clearly looked at France. Having driven to the Alps at Easter, I know from bitter personal experience just how much you pay at every toll booth there: they are beautiful roads, but it costs hundreds of euros to travel a single trip of that sort of distance. Where is the British tipping point? How many more toll roads—those could be built, but there is also concern that road charging could be expanded to other roads under the Bill, because of some of its wording—would the economy bear, without major changes to fuel duty, road fund licence rates, et cetera?

Sam Dumitriu: One thing is that a lot of major road projects have been cancelled recently. The first road investment strategy was much more ambitious than the ones that followed. That was partly due to covid, but now we are out the other end, we see reduced ambition on road building. Road maintenance has gone up a bit, which is positive, but at the same time, we are not building the projects.

It is important to look at which projects are appropriate for tolling; bridges and tunnels make perfect sense. In America, lots of additional lanes that have their own toll are built. Based on our geography and the amount of road infrastructure we have, you probably could not do that—when you are adding a super-fast lane on a seven-lane motorway, that works; it does not really work here—but clearly there are lots of bottlenecks and opportunities to finance things via tolls.

The question we have to ask is, as fuel duty revenue declines, because people are switching to electric vehicles, will there be the same impetus to put money into the roads? Currently, motorists do not get a very fair deal: they pay a lot in tax, but they do not see the same return in road building, as the money tends to go into the general pot. You might want to, say, hypothecate that revenue—that is one thing—but road user charging gets around the question of politicians attempting to use infrastructure money generally to put it towards your primary, day-to-day spending, whether that is on the NHS or £100 to deal with the cost of living, et cetera.

There needs to be some way of insulating long-term infrastructure funding from those, and that is the advantage of tolling. The problem is that motorists will only bear or accept it if they are confident that they are not being hit by all these other taxes and are getting something genuinely new in return. I do not see many motorists complaining about the Silvertown and Blackwall tunnels being tolled, because they have new infrastructure and congestion has fallen. It would be different if an existing road were tolled without a noticeable improvement.

Ben Hopkinson: There is nothing inherently wrong with road user charging. It is quite sensible that the people who use and get the benefits of an infrastructure asset pay towards its construction and maintenance. The challenge is that we already have quite high fuel duty, and it is more than solely the combination of carbon output and what we spend on roads and maintenance. If fuel duty were solely for mitigating the externalities of carbon emissions, combined with the upkeep, maintenance and addition of roads, it would be around 35p, rather than the about 52p it is now, so fuel duty is already higher than the economic impacts of roads and emissions.

If you kept fuel duty where it is, or cancelled out the 5p cut—the scrapping of which is perennially promised—and added road user charging on top, that would be quite a significant burden for motorists to bear. But ideally, new infrastructure would be funded through some form of road user charging. The people who drive get the benefits, so that is only fair.

[The Parliamentary Under-Secretary of State for Transport (Justin Madders)]

Q Good afternoon, gentlemen. Mr Hopkinson, you have expressed concerns about the limited incentives for cost control—presumably that is mainly in the construction part of the scheme; obviously, we are talking about the lower Thames crossing here. The Bill gives the ORR the ability to set licence conditions on economic allowances and expenditure controls, and provides for the investors to make a reasonable return. Those safeguards are set out. Do you not consider those sufficient and would you like to see something in addition?

Ben Hopkinson: I am well aware that there are safeguards and that the regulator is tasked with ensuring that there are not runaway costs. However, the ORR has never done this before. No regulator has ever done a RAB for a road before. There is a real risk that if it sets the return too high, motorists will pay significantly more, but if it sets the return too low, then no one will want to invest.

While in theory the model makes a lot of sense, I am a little worried about the practicalities of the ORR accidentally setting a rate too high or too low. In other sectors where rates are set by regulators, there are often risks, especially when there are macroeconomic shifts—higher interest rates, for example. Regulators are sometimes slow to update to that. There are concerns there. With a concession model, as used in France and around the world, there are much better incentives for contractors to keep costs down because they are the ones bearing them, not the potential motorists.

[Justin Madders]

Q But you would accept that in that model there is no control from the regulator?

Ben Hopkinson: Well, there is a bit of control. There is also the market pushback; if tolls are set too high, people simply will not use the new asset. In that circumstance, the private constructor bears the revenue risk of it being set too high. There is also the overall agreement that the concessionaire strikes with the state initially.

One other concern that I have about the RAB is that there is not necessarily a sunset clause. In France, it is very common for roads to return to public ownership after about 60 or 70 years. There is a chance here, under the RAB, that there is no sunset and so they are permanently away from state ownership. I know that the Bill does provide for some sunset clauses if they impose them, but that is not the default here. That is another concern that I have about the RAB model.

[Justin Madders]

Q As you rightly point out, there are a number of opportunities for licences to be terminated. I would suggest that risks on revenue for too high a toll charge would apply equally in this model as they would in concession models.

Sam, you spoke about the planning delays and have set out the significant costs and delays because of that. In terms of the lower Thames crossing, is it your understanding that those risks are now past?

Sam Dumitriu: In general, it appears so. However, we have seen some cases for example, in energy infrastructure, where you can have a development consent order passed and construction under way, but then encounter further planning-related delays.

For example, the Hinkley Point C nuclear power station is potentially the most expensive nuclear power station that the world will ever see. One of the issues is that, after spending around £700 million on fish mitigations, it is still in the process of trying to get the permit that unlocks the final phase of construction. If it does not get that permit, it then has to apply for a DCO variation, so there can still be planning risk even if you address the up-front challenges. Hopefully some of the changes in the Planning and Infrastructure Act 2025 around environmental delivery plans—if they start being rolled out much further than the initial pilot—and potentially also changes to judicial review, which can delay some of these things as well, will address those.

In terms of the point about safeguards, there is one reason to be slightly less pessimistic than Ben. One advantage with the ORR that you do not have with Ofgem or Ofwat is that in National Highways you have a state-owned body with access to cost information. What you tend to see with these other sectors is more opaque, because it is fundamentally people in industry paying very expensive economic consultancies to produce lengthy PowerPoints to tell you how much something should cost. If you have National Highways building toll projects funded via RAB, you have that information, which should allow you to see through some of the perhaps excessive claims on cost that you can see in other sectors. That is a positive, but you still have the fundamental problem of the RAB, which is slightly less incentive to keep costs down unless you have very good information and a regulator that is very on it.

[Justin Madders]

We hope the Bill will address those concerns.

[Olly Glover (Didcot and Wantage) (LD)]

Q Both of your organisations and many others have highlighted how the UK is not great at delivering infrastructure quickly and efficiently. Do you believe that the Bill in its current form has the potential to accelerate the delivery of major road projects?

Ben Hopkinson: I completely agree that the UK has a long historical challenge with delivering infrastructure cheaply and quickly. HS2 is the most expensive railway ever built, and the Bakerloo line extension will be one of the most expensive underground lines ever built. Tramlines are double the cost here compared to other European countries. We have the most expensive nuclear power plant ever built. There is a real long-term failure to build infrastructure quickly and cheaply.

On the Bill, it is good that we are getting private financing in, and that will help ease some of the burden on the state, when we are already pushed up against our fiscal limits. As I have mentioned, I have a little concern about the incentive structure, especially insofar as the private constructor has incentives to escalate costs as much as they can get away with under the ORR. A concession model might work a little better.

Sam Dumitriu: One of the important things when it comes to infrastructure delivery is ensuring you have a pipeline of projects, you know what you will build next and you can plan appropriately. We have many reasons why, in the UK, those pipelines get knocked about. Sometimes you have a road that you want to build, and everyone wants it built, but someone has brought a lawsuit against the road and it is delayed by a year. That makes planning for that really challenging.

One of the other problems is that sometimes those delays mean that you get pushed into different funding windows—the Treasury can reopen conversations about value for money, especially when in every Budget someone is trying to squeeze things into the fiscal rules and moving things from one period into another period, and cost-saving measures that are really delays. Those things tend to happen, and have happened for ever.

One thing that was really impressive under the last Government was the road investment strategy approach, which essentially said “We will set out a strategic case for all the big roads we want to build, we will give a pot of money and then we will give a delivery body the freedom to execute that.” The freedom to execute was slightly constrained by the planning system and all those delays, but fundamentally that is a very good approach. The challenge comes when the money is not quite there from the public purse, in part because the fiscal situation is tighter, but also because different choices are being made. In that case, private finance can fill the gap and ensure that you have a much more stable pipeline. I am in favour of that aspect and I think that will speed up delivery.

--- Later in debate ---

[Greg Smith]

Q I will ask my last question. Clearly, your organisation, sitting across your members who supply the vehicles, would be in trouble if the number of vehicles on the road started going down. Have you done any modelling on where the breaking point or tipping point—call it what you will—would be on top of existing fuel duties, the new 3p a mile for battery cars, road fund licences and so on in terms of the overall volume of additional toll roads that this Bill could enable?

Thomas McLennan: That is a very good question. I am afraid we have not done that modelling, but we can look into it. The more pernicious point for us is that the more points of friction you have in your usership, the less likely you are to be able to make the usership work for you. We have unfortunately seen that even in great measures, and in London the level of friction has meant that some car club companies had to fold. It is challenging to operate where you have a split, with every borough having its own rules—all of those interactions have been deeply challenging. With more consistency, we can have a strategic vision on how to deliver within that framework. That is a much stronger approach to enable the investment from ourselves and the customers to be able to keep mobility moving in this country.

[Justin Madders]

Q You said a little about how consistency across the country would be helpful for your members. I just want to take you one step back: is the principle of barrierless charging one that your organisation would support?

Thomas McLennan: We have had very mixed experiences with barrierless charging, so I do not think we can give a pure vision on that right now. We have had some use cases where currently there is not even the ability to transfer liability to someone who has hired a vehicle—the operator does not allow it. Then there are other instances where you can do bulk uploads, the system works really well and it is effectively smooth sailing.

What we always see is that the removal of barriers means a lot more penalty charge notices. That obviously makes sense, because previously you had to pay to get across, and then the barrier is removed and lots of people do not pay, so there is a sharp increase in penalty charge notices. All of our members have reported that to us.

The question is what happens after that. The inconsistencies mean that you can then have a duplicative effect of enormous administrative burdens on everyone involved, which have to be paid to make that work. We would say that if we are going towards barrierless charging from the get-go, which we understand has congestion benefits and so on, it needs to be done so that you do not shift the burden of someone paying at the barrier downstream to someone then having to figure out how to transfer liability or chase up on that, removing people’s ability to challenge the fines because they have just been paid, and so on. We need to look at all those things in the Bill from the start and structure them there.

[Justin Madders]

Q The regulation-making powers in the Bill will hopefully address those concerns if there is adequate consultation as we move forward.

Thomas McLennan: I have a concern that there is too much emphasis on downstream consultation in the Bill. We want to see a requirement to enable things such as the transfer of liability in the Bill because that has not been consistent in the market to date. We need to see that embedded from the start.

[The Chair]

I call Olly Glover.

--- Later in debate ---

[Greg Smith]

Yes.

Will Godfrey: In terms of the construction of this particular project, as I say, the way you hold the company to account relates to what is in the licence, and it is important to draw a distinction between what is in the development consent order and what is in the licence. The regulator’s role is not to hold the company to account on the DCO—that remains subject to the separate process for the scrutiny and delivery of that.

What the ORR would be doing under these arrangements is holding the company to account on the licence itself. The first price control settlement, if you like, would be set by the Department as part of a competition toward the first licence. Those would set the commercial terms—the expectation around allowed revenue and so forth—and then the ORR would come in as the regulator at the start of the price control and hold the company to account against that, by monitoring and scrutinising the delivery against the relevant milestones on the construction.

[Justin Madders]

Q Good afternoon. You probably heard witnesses earlier express a little scepticism about your ability to deal with the potential cost inflation or exaggeration—whatever word you want to use. You have obviously both been involved in this project from its inception, particularly in terms of construction, and you are running the existing crossing, so you know what the running costs and maintenance costs are. Would you say that, because of that, the scope for being blinded by PowerPoint, for want of a better description, is probably more limited than it could be?

Matt Palmer: The lower Thames crossing has been developed in detail over the last six years. Our development consent order fixes that scope very tightly; we cannot build any more or any less, so the scope is very well known. We are now running at 90% designed, so we literally are fully designed, and it has been competitively bid for. It is operating—we are currently on site with 3,300 people—and operating well against that very defined scope.

It is, I am afraid, just a simple road. My colleagues back at base will kick me for that, but as a project it is a simple thing to build. We are not building a complex signalling system or a control system for a nuclear power station; we are just building a simple dumb asset. As for our ability to control that, control on road construction is historically very good. If you take a similar project, which would be something like Thames Tideway, a similar RAB-based model, it is another simple dumb asset—that is no disrespect to my colleagues who built that. These are simple projects to build. They are large, but they are simple, and we know how to build them in the UK. The cost control on it is predominantly driven by the fact that we know what we are building and what it costs.

[Justin Madders]

Do have anything to add, Mr Godfrey?

Will Godfrey: I would reiterate the point that the development consent order tightly defines the scope of what is being delivered. As Matt said, the project is already well advanced.

There are a few other points to bring up. Getting the cost forecast right, which underpins the allowed revenue for the first control period, is really important. That is the baseline against which you are holding the company to account. The instruments thereafter are what you specify in the licence, and that is really important to get right. That is not stuff you put in the Bill, but it is really important that you get it right in the licence and that you have the right incentives for the privately financed entity to deliver against that schedule. You need to make sure that the balance in the allocation of risk is right and that end users are ultimately protected from the risks of cost overruns.

As I say, this project is fairly well advanced already; it is not like we are talking about starting one from scratch.

[Olly Glover]

Q Over the decades, we have often heard the wisdom that private finance is better than the Treasury, because it helps to keep things off the Treasury books and avoids constraints from public sector financing. But with some of those private finance initiatives, the whole-life costs can end up being quite a lot higher and being a burden on the taxpayer in a different way. What metrics do you feel that the Government should use to determine whether alternative finance arrangements, rather than direct Treasury funding, deliver better value for money for individual road schemes? What criteria should there be for deciding that?

Will Godfrey: I think the ORR’s role, as envisaged in the Bill, would not be to advise on those questions. That would be more of a question to address to Government. It is perhaps relevant here that it is important to take account of the risk-adjusted cost of financing. You have already made the point about whether things are on the balance sheet or not. Another point to bring in is the certainty around the funding and delivery arrangements. RAB-based price controls are a commitment to a certain cycle of, typically, five-year reviews in which you set the funding requirements, the price control limits and what is delivered in that period. You reset each time but the point is that it is not potentially subject to Government reopening the arrangements for the funding, which is sometimes encountered in other publicly funded arrangements. I think that is as much as I am able to say. That is more of a question for Government.

--- Later in debate ---

[The Chair]

Minister?

[Justin Madders]

No questions.

[The Chair]

Olly Glover?