Mrs Charles George and Miss Joanna Clayton

Thursday 30 January 2003

40. There have, of course, been numerous toll revisions over the years to cover the costs of servicing the very substantial debt and the charges of the tunnel. The debt charges are largely the product of the great cost of constructing the tunnels, and in particular the twin bore Kingsway Tunnel which turned out at a cost of £43 million to be almost twice the estimated cost when the project began, although I think with hindsight everyone agrees that the decision to proceed despite the growing cost was amply justified.

41. Since and including 1968 there have been ten upward revisions. If I could take the Committee to B7, and I just pause so the Committee can find where tab B is and then invite you to exhibit B7, there is a column, and it is on the right-hand side underneath the words "Memorandum", entitled "Car Tolls" and from that the Committee will see that there have been a number of upward revisions of the car tolls taking the toll from ten pence to £1.20 at the very bottom of the page. Indeed, very shortly an application will be made for a further increase to £1.30 which is unlikely to take effect until April 2004.

42. The statutory procedure for revising tolls at the present time is laborious. It tends to involve both a period of deficit financing whilst the toll revision is under consideration and an element of slippage so that the amount of toll revision tends, at the end, to bring in a smaller amount than was originally anticipated because of the rate of inflation.

43. On the last five occasions when a toll revision has been proposed there has been an objection and, therefore, there has been a public inquiry and, therefore, there have been all the inherent delays. On each occasion the Secretary of State has dismissed the objection after inquiry and confirmed the proposed revision. Each revision has taken nearly two years to work through the process, including an average of about five months for arranging a public inquiry and a further five months between the start of the inquiry and the eventual Secretary of State's decision following receipt of an inspector's report.

44. If I could just ask the Committee now to turn to exhibit B15, the Committee will see the timetable for the current toll increase. It began with consultation with the district councils that lasted between October and December 2002. We are now at the stage of the consideration of objections. The Order cannot be submitted until April 2003. It seems inevitable that someone will object and the earliest date at which it is going to be possible to implement the toll increase will be April 2004. Therefore, that shows the sort of delays which are inherent in the present system.

45. For a long time everyone has appreciated that the existing system for toll revisions is unsatisfactory. As long ago as 1995 the Department of Transport put out a consultation paper on the regulation of tolls and statutory undertakings and at your leisure, I do not suppose Members have any leisure but if the Committee were to find a moment to glance at A36, page 226, you would find a very interesting consultation document in which the Department put forward the problems which arise in connection with the present form of statutory procedures, not just for the Mersey Tunnels but throughout the country. At that stage the Department expressed the view, which was somewhat of an understatement, that "the practical value of the controls is questionable". That you will find in the bundle at page 229, paragraph 3.2. They also said that the procedures "had severe disadvantages for the undertakings in terms of the costs of procedures and the delay". That is at page 229, paragraph 3.3. They said that the disadvantages "operated as a deterrent to long-term investment". That is paragraph 3.4 at page 230 of the bundle. That consultation concluded with the following words: "The existing procedures and criteria are difficult and disproportionately expensive to administer". That was page 230, paragraph 4.1.

46. The complexities of achieving a single statutory proposal which would meet the circumstances of the many different toll regimes throughout the country has meant that central government has fought shy of general legislation. After all, it is not an area which is exactly a headline catcher compared with other government Bills which have to fight for their place in the parliamentary timetable. So there has been no general legislation although there has been consultation and general agreement that the existing system should be changed.

47. Having set the scene I turn to history and fortunately there is available a video made to mark the sixtieth anniversary of the opening of the Queensway Tunnel which in an edited and abbreviated form I am going to invite the Committee to watch in a few moments.

48. Before we get to that I would like to just say a few words about recent history and trends because these are matters that the Committee may wish to bear in mind when you see the short video.

49. The first matter is that traffic passing through the tunnels has steadily grown. If I could take the Committee to exhibit B5, the Committee will see a graph and they will see the figures for the Queensway in blue and added on the figures for the Kingsway Tunnel and the general increase in traffic to the existing position. Now one has got some 24.6 million vehicles passing through the tunnel carrying approximately 34.1 million people. How that compares with the usage of the other modes crossing the Mersey is shown in C4. I just ask the Committee to turn that up.

50. This is looking at ways in which people cross the River Mersey and 78 per cent of the total are crossing through the tunnels in cars or commercial vehicles or heavy goods vehicles and 9.6 million are going by the other modes, that is by rail or by bus or by ferry. Two-thirds of the trips have an origin or a destination within Merseyside. If the Committee would just turn on a few pages to exhibit C8 there is what I think is called a pie chart and one can see there that the large wedge, which is some two-thirds, have an origin and a destination within Merseyside.

51. The second matter to mention to the Committee is that in the peak hours flows are now approaching capacity although there is still some room for further growth. This is a matter which is going to be important later on and requires me to take the Committee to B12 and B13.

52. Looking at B12 the Committee will be able to see that there is a column headed "Eastbound" and the capacity total for the morning there is 6,800, that is five lines down the column, the eastbound column. The present flow is about half way down the page, that is the 6,250, so one is nearing the point of capacity but still with a little room for further growth. The same is true of the other direction also.

53. CHAIRMAN: Mr George, you tempt me since you say this is an important matter that we will return to, the capacity. Going back to your exhibit B5 that you mentioned about six or so exhibits ago, I was interested there to see that the Queensway Tunnel had traffic flows in 1968 approaching 20 million and that today is at just over half that level. Has the Queensway capacity been structurally and permanently reduced or does it still have that capacity for traffic that it passed in 1968?

54. MR GEORGE: I think the answer to that is that there have been some reductions and I think that is because of side passageways and other safety measures. I will make sure that the Committee is given a specific answer and an analysis of its capacity. There is certainly not a massive reserve there waiting to be used up and, indeed, the decision has been taken, for instance, that heavy goods vehicles should not use the Queensway Tunnel for safety reasons.

55. CHAIRMAN: There is no need to go to any trouble unless we find later that we need that analysis. Please do not worry. Thank you for that explanation.

56. MR GEORGE: The third matter on trends and recent history is that it is apparent that the existence of tolls, as the Committee would probably expect, does have some effect in suppressing traffic levels and traffic growth through the tunnels. In shorthand, if you did not have tolls you would have more vehicles passing through. Mr Bates, who is the transportation consultant who is going to give evidence, calculates that but for the existing level of toll in the tunnel, and assuming that they had infinite capacity, which of course they do not have, then the peak flow would be something in the region of 7,600 compared with the present figure of just over 6,000 which is well above the existing peak hour capacity of the 6,800. Therefore, the existence of tolls is operating as some sort of control on traffic numbers.

57. Fourthly, so far as financing, and I suspect this is a matter the Committee are aware of because of the Second Reading debate, in the late 1980s and early 1990s there was a very difficult period for the financing of the tunnel caused by rising costs and debt charges at a time when tolls fell way behind the RPI. This is apparent if one looks at exhibit B7 and goes to the centre column called "Operating Losses" where you can see a gradual build up of the operating losses. In the late 1980s they were reaching a figure of ten million in one year and for a number of years continuing at around eight million, then there was a 7.9 and a 7.8. That was the period of crisis for the financing of the Mersey Tunnel. That deficit was made good by the five Merseyside authorities. They had to precept for the deficit and their ratepayers produced that money, initially both their commercial ratepayers and their domestic ratepayers and then eventually when the government altered the system for commercial rate paying to a national basis it fell entirely to be paid by the residents of all of the five districts.

58. I mentioned that tolls were lagging behind the RPI and if I could just ask the Committee to turn on to exhibit B14, you can see the toll levels and the RPI line and you can see the sag in the 1980s at a time when tolls were falling behind RPI whereas they have now caught up.

59. The fifth feature to mention is that in recent years, following a massive toll hike in 1992 and you can see that hike very clearly on B14, income has increased so that it now covers operational and refurbishment costs and debt repayment and that is apparent if we go back a few pages to B7 and we have already looked at the operating loss column, there is no longer an operating loss and if you look at the column "Tolls Income" the Committee will see a growing income just as there is a growing traffic and it has been possible to balance the income with the expenditure and to pay for an amount of refurbishment. The Committee will see the fourth column along is headed "Refurbishment". Whereas in the past there had not been any money over to do refurbishment, the Committee will see that money is available to spend on refurbishment. Therefore, it has not been necessary since the early 1990s to turn to the five Merseyside districts and seek their assistance with funding the deficit, but there remains a concern in the districts, and that concern has been expressed also on the floor of the House, that the tunnels could fall into deficit again and if that were to happen inevitably it would mean the PTA returning to the districts and seeking funding assistance. That concern appears in, for instance, the report of the officers of Knowsley Council in respect of this Bill. If the Committee would turn for a moment in the bundle to A18, page 24, this is a report which began on page 23 by the Director of Finance and various other departments to the Knowsley Council, and at paragraph 5.3, dealing with the issues which arose from this Bill, the view of Officers was that the existing legislation leaves Merseytravel vulnerable to deficits simply because they cannot react quickly enough to inflationary pressures. It is the last sentence I was drawing the Committee's attention to, "This in turn creates a risk for the Merseyside District Councils, including Knowsley, of pressure on the Merseytravel levy, to cover any deficit that might arise."