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New report uncovers huge financial risks for the proposed Mersey Gateway Bridge

20 January 2011
An independent report into the proposed Mersey Gateway Bridge has highlighted serious financial risks, according to sustainable transport charity Campaign for Better Transport.

The Risks and Financing of the Mersey Gateway Bridge report, backed by the charity and the North West Transport Activists Roundtable, has demonstrated that the increased cost of private finance since the original proposal and the risks to toll revenue mean the project could be a huge financial risk.

The report also warns against an adviser-driven process and recommends an independent assessment into the risks and value for money once bids are received. The report goes on to suggest that Halton Borough Council and the Government should be prepared to walk away from the project if the risks are too great and the resulting bids do not offer value for money.

The bridge, which would span the Mersey between Runcorn and Widnes, is to be constructed and operated under a Private Finance Initiative (PFI) and paid for by a combination of tolls on the new bridge, tolls on the existing Silver Jubilee Bridge and public funds through PFI credits.  The Government is keen to see more privately funded new toll roads and the Mersey Gateway project is being seen as a pilot.

One of the main findings of the report is that toll revenue will not be sufficient to cover the costs of funding the construction and operating costs of the bridge. Halton Borough Council has promised to keep tolls similar to those for the Mersey Tunnel and provide discounts for local users. However, traffic surveys show that 90 per cent of likely users will be from the local area, meaning toll revenue could be much lower than anticipated once the discount scheme is factored in.

Stephen Joseph, Campaign for Better Transport’s chief exec, said: "The financial implications and viability of introducing the recommended discounts for the Mersey Gateway project could be huge. Not only could it make raising private finance for the project very difficult, it could also create huge liabilities for the local council and the Government, who may be called upon to underwrite the costs of any discount scheme.  There is a real danger here of "adviser-driven" processes where nobody checks if the public interest and value for money are being safeguarded. We need an independent review before contracts are signed and the project is finally agreed."

David Parish, who co-wrote the report, said: "The National Audit Office criticised the Highways Agency over the PFI contract for the M25, stating that the agency was over reliant on its advisers3. Using PFI funding for the Mersey Gateway project under current conditions in the debt markets will require higher tolls or higher Government financial support than originally planned.  There is a real risk of the Mersey Gateway project proceeding on the basis of impetus provided by advisers without Government or Halton Borough Council assessing whether the project truly achieves value for money for taxpayers or users."

Lillian Burns, from North West Transport Activists Roundtable, said: "The consultants have found that the revenue from tolls alone will be insufficient to cover the cost of the PFI scheme.  This is even before any consideration at all is given to special concessions for local people - something which local politicians and senior local authority officers have promised the people of Halton since day one."

Notes to Editors

1. The Risks and Financing of the Mersey Gateway Bridge report was carried out by Chris Castles and David Parish.

Chris Castles spent his career working in the field of transport policy and planning advising on a wide range of issues, including investment appraisal, financing, pricing policy, market analysis, regulation and privatisation. After 30 years with PricewaterhouseCoopers leading international Transport Economics and Policy practice, he retired and became an independent consultant. He has advised on many major transport investment projects including the restructuring of Eurotunnel, a review of the Swiss Transalpine rail tunnels, the Channel Tunnel Rail Link, urban rail links in South Africa and the private finance agreement for the Arlanda airport rail link.  

David Parish is an independent infrastructure economist who has advised governments, companies and agencies in over thirty countries on economic and financial issues associated with infrastructure. He spent most of his professional career with PricewaterhouseCoopers, where he was a partner in the consultancy practice. His early career was in the Departments of the Environment and Transport where he was an economist in the Economics (Highways and Freight) Division, working on traffic forecasting and the impact of the energy crisis on transport policy.

2. The Mersey Gateway Bridge is one of ten 'supported' transport projects for which the Department for Transport will make a final decision on providing funding by the end of January, subject to final bids from local councils.

3. National Audit Office report: Procurement of the M25 private finance contract

4. The M6 toll five years on: Counting the cost of congestion relief, Campaign for Better Transport