Highways (Financing) Bill (First sitting)

Debate between Tristan Osborne and Alison Griffiths

Thursday 29th October 2026 Public Bill Committees

[Alison Griffiths]

I used to work at RAC.

Steve Gooding: As somebody who worked there, I think there are two key things: one is independence, and the other is capability. We are talking specifically about growing and making sure that the ORR has the requisite capability to undertake the tricky and, in a way, very public task of setting that. It would need to build that up. As you say, a lot of the expertise in the ORR today is on railways. Yes, that is engineering, construction and all that, but I would certainly like to see a significant strengthening in the capability of the ORR around some of the specific things about this project and its relationship with the existing crossing.

Edmund King: I agree. I believe the ORR is looking to bring in new skills, particularly in economic regulation and the broader issues, which will be needed. There are similarities between road and rail, but there are also differences and some of the consequences in regulation are quite different, so it will need to be beefed up.

[Tristan Osborne (Chatham and Aylesford) (Lab)]

Q It is a pleasure to serve under your chairmanship, Ms Lewell. I have two questions. First, the Bill looks specifically at the crossing, but there are other infrastructure upgrades—as an MP in north Kent, my example is the A229 Blue Bell Hill upgrade. There are key junctions where congestion is a problem. In your view, does the Bill take into account the other, wider infrastructure upgrades that might be necessary?

Secondly, this week, the Public Accounts Committee, which I sit on, released a report on the RAB model for Sizewell, which there are concerns about. Do you have a view on that model? I appreciate that you have indicated that the model will not be used elsewhere, but is there an educated view on whether an alternative model might have worked better?

Steve Gooding: On the first point, the Bill is not specific even to the Dartford crossing or the lower Thames crossing, so I do not think that it takes account of the other schemes we have talked about per se, other than in the general duty for the Secretary of State and ORR to consider the network as a whole. That has already been raised, but the Committee might want to probe it a bit further.

As for the RAB model, I can certainly see the logic, but one has to start with a decision that the Chancellor does not wish to borrow the money himself. If that is the case, in these circumstances, given where National Highways has got to already with contracting for the construction of the tunnel, this appears to be a sensible model, provided that lessons are learnt from past RAB projects. One of those is about the ability and capability of the regulator to do what it is being relied on to do.

Edmund King: One of the features of the RAB model that is quite hard to get your head around is that it is open ended. There is no finish date. On the M6 toll I know that it is a different private finance model, but it was given a 53-year concession. Under this model, in effect, the concession could be 100 or 120 years unless the licence is revoked. That is quite difficult to get your head around at first, because when you look at the Dartford crossing and the tolls going to the Treasury, this is totally changing the model. We have to be sure that the safeguards are there and built into the model. That is why I think toughening up and strengthening the Office of Rail and Road and bringing in a greater degree of independence is increasingly vital.

Highways (Financing) Bill (Second sitting)

Debate between Tristan Osborne and Alison Griffiths

Committee stage
Thursday 29th October 2026 Public Bill Committees

[Tristan Osborne (Chatham and Aylesford) (Lab)]

Q Under the French model which you have cited as a template, 91% of roads are owned by privatised companies, and that is very different to the UK. They are extremely controversial and many accuse companies in France of price gouging. We have concerns about asset management and the valuations. You have said that the RAB model is potentially ideal, but is there any element of it that you can say is better than the French concessionary model? What teeth would you give the regulator to make it so, if we were to go down that route? What is missing from the RAB model that would make it more effective?

Ben Hopkinson: It is a good question. First, in the French example, I am well aware that it is quite expensive to drive on a French motorway. On the other hand, they have many more miles of motorway, and if it is too expensive you can take the equivalent of an A road for certain journeys. Judging by the number of people who drive on French motorways, I think people are generally willing to accept the costs, especially given that they have built many more miles of motorway just this century than we have in total.

I could be proved wrong if it works really well, but the main challenge with the RAB model is the sheer uncertainty of whether the ORR is up to the task and has the right staff in place. It has never done this before. I know there have already been some concerns about capacity issues and general commercial experience within the ORR. I would be concerned if the private sector had large commercial control and contract teams and the public sector did not have them and was out-negotiated. That is certainly possible if civil servants are not able to properly push back on price increases.

I think the fundamental incentives in a RAB model are not right for delivering one-of-a-kind, unique pieces of infrastructure. It works a lot better for infrastructure that has very clear unit costs—for example, the cost of laying 100 metres of pipe. That is good because a regulator is clearly able to understand how much 100 metres of pipe costs to lay and can apply that across its base, whereas the cost of one lower Thames crossing is up in the air. Some additions from the private contractor might seem sensible; they might get away with that. Having a more environmentally friendly construction process certainly seems sensible on the face of it, but that also adds cost. I would want to be reassured that the ORR is up to the task and has both the capacity and the know-how to properly understand the arrangements it is entering into.

Sam Dumitriu: You mentioned price gouging. It is important to work out what the main risks are. Roads are, in most cases, natural monopolies, and the best thing about being a monopoly is a quiet life. It is not necessarily that you have all these opportunities to gouge your customers; it is that the lack of competition means you are not forced to adopt cost-saving measures, or become more customer-friendly and so on. You might have a situation where various people are claiming quite high margins or they are being aggressive in that sense, but the UK has the other problem, where people are not on it around costs. They are not working out what the best structure is to ensure that costs keep falling.

On Ben’s point, one possible way of resolving the issue is quite a radical reform that is probably beyond the scope of the Bill. I have always wondered whether it makes sense for the UK to have Ofgem doing RAB regulation for energy networks, Ofwat doing it for water, the ORR for road and rail and Ofcom for telecoms, or whether it makes sense to have a specialist economic regulator that deals with the costs of natural monopoly networks. That would have a bunch of advantages. It would potentially resolve some of the revolving door problems that you might see. It would also ensure that there is a similar expertise and a standard approach. You do not want varying approaches between all the regulators, because that suggests that they are doing something wrong when you have essentially the same economic problem to solve. As I say, however, that would be far beyond the scope of the Bill.

[Alison Griffiths (Bognor Regis and Littlehampton) (Con)]

Q I will build on some of what the shadow Minister, my hon. Friend the Member for Mid Buckinghamshire, said about tipping points. My question is to both of you, so please feel free to answer in whichever order you prefer. The shadow Minister was referring to things such as fuel duty, I am acutely conscious that the cost base of the lower Thames crossing project is going up and is as yet unknown, and we do not know what the toll will be.

In a situation such as we have at the moment, where diesel is at £2 a litre and the sustainable version another 50p on top of that, costs are going right up not only for the build, but for the corporate budgets of the haulage companies and for everyday individuals, who have to manage their household budgets. If the cost goes up to a level beyond the right balance of pricing that is commercially viable for the operator, or absorbable for the family or the business, what happens?

At the moment, I am worried about a white elephant across the Thames. In such circumstances, in the end all the costs would get absorbed by the taxpayer and this model goes up in smoke. I am keen to hear from you how concerned I should be about that and what alternative models there are elsewhere.

Ben Hopkinson: The ultimate backstop is the Exchequer. Already the Exchequer has had to bear the cost of bringing the lower Thames crossing through planning. I think it is expected to spend about £3.1 billion on the lower Thames crossing even before private investment is brought in. If we have a circumstance where the toll is not paying back what is necessary and the private body that has financed the road falls into difficulty, the Bill states that the Exchequer is able to top up or provide payments, guarantees or low-cost loans. The backstop is therefore ultimately the taxpayer, combined with higher charges for motorists on the road.

--- Later in debate ---

[Tristan Osborne]

Q This question links to the independent review. I questioned the ORR on this. Obviously, you are sitting on the other side of the table, and you are looking to extract as much as you can from an investor perspective. You represent one side of the spectrum, and the regulators are on the other side. There has to be a working partnership between you both. Obviously, the efficiency of a project finance model such as the one for this crossing relies on certainty and predictability for investors, and regulators being there to ensure the stability of the regime. Obviously, we do not have a regulator that manages this at the moment. Where does investor confidence stand regarding the ORR? Do you think investor confidence is there for this model to work going forward?

Andrew Truscott: I would slightly reject your first statement, if I am honest. As an infrastructure investor, we provide, candidly, the lowest cost private capital that is available across the world. If you are attracting John Laing and people like us, I can guarantee that you are getting the lowest cost of equity capital that you can possibly attract and therefore the risk transfer needs to be accordingly appropriate.

I will slightly repeat my opening comments: when we first started interacting with DFT about this project, I was quite nervous about the RAB model. I am not a RAB nerd; there are lots of RAB nerds, and I am not one. RAB can be incredibly complicated, and it can take a huge amount of time to drill down. There is not a regulator. There is an awful lot of work that needs to be done. Am I nervous that that is going to take longer than it should do or could do? Yes, I am, but again, credit to DFT and the Treasury, they seem to be well on track. Maybe the better answer to your question is that we as investors will need absolute certainty—and I mean absolute certainty—about what that regulatory model is, who the regulator is and how that regulation is going to work before we will put in a dollar, a pound, or a euro—whatever currency you like.

[Alison Griffiths]

Q I want to go back to comments that both of you have made. Andrew, you said that you can count on one hand the number of projects that finish on time and on budget, and that is despite the extensive experience that you both have. Roger, you said that cost overruns come from uncertainty. I had a 30-year private sector career. One experience I had negotiating contracts was that when the customer was creating unrealistic expectations or poor procurement was taking place, where you had a competitive environment and people were trying to win the contract was where you ended up with cost and time overruns. Are there any lessons the Government should be learning about how we procure these types of contract so that we get the best possible outcome at the best possible price, but without cost and time overruns?

Roger Forsdyke: It is really interesting that you say that from your experience it is the commercial pressure. The most important thing in the tendering process is to have measurables beyond just the cost. If it is first past the post, you are destined to push the price down to the lowest-quality bid, which often creates the problems you are describing and that we described earlier. You have to look at how you will measure the quality of the tenders in real terms, beyond the cost of the lowest bid. I do not think that is regularly done effectively, so you end up with cheap materials, optimistic programming, optimistic budgeting and all those things just to get to a price that is probably optimistic in the first place. That echoes what Andrew said.