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The Severn Crossings Toll: Government Response to the Committee’S Third Report of Session 2010-11

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The Severn Crossings Toll: Government Response to the Committee’S Third Report of Session 2010-11 House of Commons Welsh Affairs Committee The Severn Crossings Toll: Government Response to the Committee’s Third Report of Session 2010-11 Fifth Special Report of Session 2010–11 Ordered by the House of Commons to be printed 1 March 2011 HC 837 Published on 7 March 2011 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Welsh Affairs Committee The Welsh Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Office of the Secretary of State for Wales (including relations with the National Assembly for Wales). Current membership David T.C. Davies MP (Conservative, Monmouth) (Chair) Stuart Andrew MP (Conservative, Pudsey) Guto Bebb MP (Conservative, Aberconwy) Alun Cairns MP (Conservative, Vale of Glamorgan), Geraint Davies MP (Labour, Swansea West) Jonathan Edwards MP (Plaid Cymru, Carmarthen East and Dinefwr) Mrs Siân C. James MP (Labour, Swansea East) Susan Elan Jones MP (Labour, Clwyd South) Karen Lumley MP (Conservative, Redditch) Jessica Morden MP (Labour, Newport East) Owen Smith MP (Labour, Pontypridd) Mr Mark Williams MP (Liberal Democrat, Ceredigion) The following Members were also a members of the committee during the Parliament: Glyn Davies MP (Conservative, Montgomeryshire) Nia Griffith MP (Labour, Llanelli) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk . Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/welshcom Committee staff The current staff of the Committee is Adrian Jenner (Clerk), Alison Groves (Second Clerk), Anwen Rees (Inquiry Manager), Jenny Nelson (Senior Committee Assistant), Dabinder Rai (Committee Assistant), Mr Tes Stranger (Committee Support Assistant) and Laura Humble (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Welsh Affairs Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 3264; and the Committee’s email address is [email protected] . Government Response to the Committee’s Third Report of Session 2010-11 1 Fifth Special Report The Committee published its Third Report of Session 2010-11 The Severn Crossings Toll on 22 December 2010. The Government Response was received by the Committee on 22 February 2011 and is published as an Appendix to this Special Report. Appendix: Government Response This paper sets out the Government’s Response to the Third Report of Session 2010-11 (HC 506) on The Severn Crossings Toll. The Government welcomes the report and is grateful to the Committee and all those who gave evidence in the preparation of this report. The report is important and sets out a compelling narrative about the challenges faced by the Government over the future of the Crossings. The conclusions and recommendations will make an important contribution to how the Government will meet these challenges. We have identified 18 conclusions or recommendations from the Committee’s report. The response follows the broad structure set out by the Committee in its summary of conclusions or recommendations. In our response we have grouped some of the recommendations out of chronological order where the subject matter is related. Impact of the Toll on the Welsh Economy 1. The Severn Crossings provide a key link in Wales’ transport and economic infrastructure. We note that successive Governments have never undertaken a study of the economic and social impact of the Severn Crossings toll charges. There is therefore no quantitative evidence as to the effect of the toll on the economy of Wales. (Paragraph 35) 2. We recognise the concerns of business about the impact of the high cost of the toll. Some businesses argue that the toll represents a barrier to business activity across the bridge, hampering the development of Welsh businesses and acting as a deterrent to inward investment into the country. In particular, it was argued that the toll has a significant effect on the transport and logistics sector and on the tourism industry. However, no firm conclusion can be drawn without a comprehensive study to evaluate the impact of the toll. (Paragraph 36) 3. We welcome the Economic Impact Study commissioned by the Welsh Assembly Government. To ensure that it captures the full picture, the study should examine not only the elasticity of demand amongst current users, but also seek the views of companies in Wales who argue it is not financially worth their while seeking work in England. We also recommend that the study includes companies 2 Government Response to the Committee’s Third Report of Session 2010-11 that have located on the English side of the crossings and ascertain the extent to which their decision was influenced by the level of the toll. (Paragraph 37) 4. We welcome the Department for Transport’s commitment to consider the findings of the survey commissioned by the Welsh Assembly Government. We look forward in due course to debating the Government Response to the Committee’s Report on the floor of the House. (Paragraph 38) 5. The Severn Crossings are essential to the Welsh economy. There is the perception however, that the high cost of the toll is detrimental to businesses in Wales and to the development of the Welsh economy and discourages traffic between England and Wales. The Government must ensure that it takes note of the economic impact study commissioned by the Welsh Assembly Government. (Paragraph 96) Currently we have seen no evidence that tolling is a disincentive to business investment in South Wales. The new Severn Crossing has greatly improved the transport links into Wales which is likely to have supported business investment in Wales and in particular South Wales. And we await the outcome of the Welsh Assembly Government’s Economic Impact study. The Severn Crossings under the Concession Agreement 6. We welcome the introduction of a facility to make payment of the Severn Crossings toll by credit cards; albeit many years after it should have been. The Severn Crossings are a gateway into Wales and provide a first impression to many travellers. For too long, the first impression of visitors was this antiquated system. This unacceptable situation went on too long. The introduction of a contemporary payment system is essential and not before time. (Paragraph 61) 7. We are disappointed that a permanent system is not yet in place. Severn River Crossing Plc maintain that a permanent system will be installed and active by the end of the first quarter of 2011 by the latest. The public must be informed of developments and the system must be available in as many toll plazas as possible to make the credit card payment system accessible to the most number of users. We will continue to monitor developments closely. (Paragraph 62) A card payment facility remains in place on both Crossings. Despite the difficulties we have faced introducing this system within the confines of the Severn Bridges Act, we are delighted that this alternative method of payment was available for the Ryder Cup and then from early November. Information on the existing card payment system is available on the Highways Agency’s website which is updated to reflect any changes. A further press release will be issued when the full system is implemented and at this time the HA and SRC Government Response to the Committee’s Third Report of Session 2010-11 3 will use other information channels to publicise the payment options as widely as possible. 8. We are disappointed that it has not been possible to freeze the toll for 2011. The inflexibility of the Severn Bridges Act, as originally drafted, does not allow the Government to impose a level of toll charge as it sees fit in the current economic climate without incurring liability for the taxpayer. The Government should take responsibility for the failure of civil servants twenty years ago to future- proof the legislation. (Paragraph 66) 9. We make no comment on the merits of using private sector finance to deliver public sector infrastructure. However, it is important that the Government learns from the inflexibility of the Severn Bridges Act 1992 and the concession agreement when agreeing future contracts. (Paragraph 68) 10. Our inquiry has demonstrated the inflexibility contained in the Severn Bridges Act 1992 and the concession agreement between the Government and Severn River Crossing Plc. This has made it difficult for the Government to respond to the current economic climate and freeze the tolls. The Government must learn from the issues that have resulted as a result of the drafting of the Act for future Private Finance Initiative projects. (Paragraph 97) The Concession Agreement and Severn Bridges Act 1992 provides protection for the Concessionaire to ensure its costs are recovered through the tolls. The annual indexation of the tolls was a key risk mitigation factor when the Concessionaire signed the billion pound concession agreement in 1989. The Severn Crossings Concession was delivered and agreed under very different circumstances and reflected the market knowledge and precedent at the time. Without such risk mitigation at that time, it is likely that the Concessionaire would not have signed the agreement without an increase of the tender price to cover such risks to SRC’s sole income stream. The UK Private Finance Industry has significantly matured and developed in the subsequent 20 years and this would lead to a different risk profile for any new similar PFI project. 11. There seems to be no appetite on the side of Severn River Crossing Plc to reduce the toll prices and extend the concession beyond the current forecasted end date of 2017.
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