The Department's objectives
9. The provision of a bridge between the mainland
and Skye to be paid for mainly by tolls on users was an objective
of Government policy. The overall objective was to have as soon
as possible a privately tolled crossing to deal with the problems
of congestion and delay associated with the former ferry service.
The Department also aimed to keep tolls at or below the former
ferry fares in real terms and they wanted a deal that allowed
tolls to cease within 20 years. They aimed to achieve value for
money through the process of competition for the project deal,
and they expected the competition would also ensure a satisfactory
design for the crossing.
The primary objective
10. Clearly the Department achieved the primary objective,
given that the bridge was opened in 1995 six years after they
first accepted responsibility for the project, against the background
that they had stated
that they would not have provided a publicly funded bridge until
well into the next century, if at all. We note that opening the
bridge provides a number of benefits compared to the former ferry
service. As well as the elimination of congestion and delay associated
with the ferry, these benefits include shorter journey times,
improved reliability in bad weather and the elimination of charges
once the concession is terminated.
11. The Department told us
that the previous Government had had no plans for a publicly financed
fixed crossing to Skye. Accordingly, the choice the Department
faced was either to continue with the ferries and upgrade them
or to provide a tolled bridge. They said
also that the local authorities and all but one of 17 community
councils concerned preferred the bridge with the tolls to the
alternative of carrying on with no bridge; and that the prospect
of a tolled bridge with tolls no higher than ferry fares was put
very clearly to the public inquiry which accepted those proposals.
The level and duration of tolls
12. The Department told us
that they believed the contract would enable the concession to
be paid off, as intended, within 20 years and with tolls no higher
in real terms than the former ferry fares. Although how long within
this period the concession will run depends on traffic flows,
and it is still early days, the Department told us that the latest
figures continue to suggest that the project will be paid off
in between 14 and 17 years.
13. The operator of the former ferry service was
Caledonian MacBrayne, a Government owned company which continues
to provide other ferry services in and around the Highlands and
Islands of Scotland.
Given that the Department's objective was to keep tolls at the
same level in real terms as the ferry fares, we asked why the
company were able to increase ferry fares on the Skye route by
more than inflation between 1991 and 1995 when the bridge opened.
The Department told us
that this was a matter principally for the company and that, though
the Department set the external finance limit for the company
within which the company had to work, they would not directly
influence the company's increases in fares.
14. They acknowledged,
however, that the Government had an interest in the link between
fares and the economy of the islands. They told us that the Government
had asked Highlands and Islands Enterprise to investigate this
aspect in the light of the current year's increase in fares across
all the company's routes.
Recent changes in discounted tolls
15. In July 1997 the Government completed a review
with Highland Council of current toll levels for the bridge, as
they had undertaken in their manifesto for the General Election.
The Secretary of State's objectives for the review were to reduce
the impact of the Skye Bridge tolls on those with a frequent need
to cross the bridge, and to bring tolls for those users to a level
that was generally acceptable within the limits of what was affordable
given other pressures on public expenditure in Scotland.
16. The Department told us
that as a result of the review they proposed a 50 per cent reduction
in discounted tolls for cars and motorcycles, and a 25 per cent
reduction in tolls for commercial vehicles and public service
buses. The consent of the operator was required to make these
changes, however, and the Department had not completed the necessary
negotiations to permit any changes in tolls before this Committee
took evidence in public in November 1997.
17. Subsequently, following the completion of the
negotiations with the operator which the Department announced
in December 1997, the Department provided us with information
about the new agreement which will reduce substantially the discounted
tolls with effect from 1 January 1998. For example car drivers
may now purchase books of 20 toll tickets for £26 giving
an effective single toll of £1.30, compared to £2.44
previously for those who purchased books of 10 tickets priced
18. The new agreement provides for the Department
to compensate the operator for the reductions in income that they
expect as a result of the additional discounts they now offer.
The Department told us
that they have estimated that they will pay the operator between
£380,000 and £560,000 a year, though the compensation
in any year is dependent on traffic in that year and other factors
and is not known with certainty in advance.
19. On the basis of these estimates, and reflecting
the Department's previous forecast that the concession will end
between the years 2009 and 2013, the National Audit Office estimate
that over the remaining life of the concession the Department's
further payments as a result of the new agreement may total between
some £2.8 million and £3.4 million in 1991
20. The Department told us
that the operator will benefit from additional toll income from
any additional traffic which the new discounted and substantially
reduced tolls may generate, but could lose income to the extent
that the new discounted tolls encourage users who would have paid
the full toll to move to a discounted toll.
21. The Department told us
that the new agreement recognises the benefits to the operator
from traffic generated by the lower tolls by capping the Department's
payments to the operator at £600,000 in current prices and
at current traffic levels in any one year. We note, however, that
if payments to the operator are below this level, i.e. at the
level the Department expect, the operator will get the full benefit
of any increased traffic generated by the lower tolls.
The design of the crossing
22. The Department relied on competition to propose
a design which would be consistent with their environmental and
aesthetic requirements for the bridge.
23. Following objections and because of the novelty
of the proposals, there was a public inquiry to examine the proposals
put forward by the operators in their bid and provisionally accepted
by the Department. Though the proposals did not attract unanimous
support, the report of the inquiry in 1992 was satisfied with
the design subject to some modifications which have been carried
out largely at the Department's expense, amounting to some £4 million.
24. We asked the Department why they and their advisers
on aesthetic and environmental matters did not anticipate the
design issues and objections which were considered at the public
inquiry and which added significantly to their costs. The Department
said that they had
involved the advisers almost from the outset, and they had set
out hoping that they would be able to reach agreement with all
the parties concerned. The Department said that they did not think
they could have predicted the criticism of the Royal Fine Art
Commission for Scotland that the bridge proposal did not come
up to international standard.
25. We asked the Department why, nevertheless, they
could not have anticipated some changes, given that it is not
unusual for a public inquiry to produce such results. The Department
said that at the time the tenders were submitted there had been
an acceptance amongst the advisers of the proposals and it was
subsequently that pressure came through for change so they had
been right in assuming at the point when the bids arrived that
the design could be delivered as proposed.
26. The Department achieved their primary objective,
the provision of a privately financed tolled crossing to Skye.
Compared with the former ferry service this has brought a number
of benefits to people travelling to and from Skye, including shorter
journey times and a more reliable service in bad weather. The
Department did not fully achieve their other objectives in relation
to the level of tolls, the duration of the concession or the design
of the bridge. Our reservations on these are set out below.
27. The Department expect traffic to continue to
grow at a rate that will allow the bridge to become toll free
within 14 and 17 years from opening, with tolls kept below the
level of the former ferry fares. But we note that the contract
which the Department signed does not guarantee that the bridge
will be toll-free within the Department's 20 year target period,
nor that tolls will remain lower than their target level.
28. Following the Government's decision to set lower
tolls for regular users of the bridge, the Department's further
payments to the operator of some £3 million over the
remaining life of the concession will count towards the £24 million
target revenue for the operator. While the new payments do not
increase the total revenue the operator will receive, they may
increase the operator's profits from the project. This is because,
given the target toll revenue, the operator's profits depend on
the length of the concession: the shorter the concession, the
shorter the period for which the operator must bear the operating
costs of the bridge, and hence the higher the profits.
29. We would have expected the Department to have
negotiated a revised agreement for tolls which minimised their
own extra costs and which was financially neutral for the operator.
But there is no assurance that this will be the case. Because
the new lower tolls are likely to generate extra traffic, over
and above the levels there would have been under the original
toll regime, the operator is likely to reach the £24 million
target revenue sooner than previously expected. And because the
new agreement does not take full account of this likely earlier
flow of revenue, this means that the operator's profits are likely
to be higher than previously expected.
30. The principal test of the Department's objective
to ensure a satisfactory design of the crossing was the outcome
of the public inquiry which in 1992 examined the proposals put
forward by the operators and the objections that had been made
to them. The Department were not wholly successful here, since
the design did not attract unanimous support, and while the report
of the public inquiry endorsed the design this was subject to
a number of modifications which were carried out largely at the
expense of the Department.
4 C&AG's Report para 2 and Figure 1 Back
C&AG's Report paras 8-9 Back
Q47, 97 Back
C&AG's Report paras 5 and 3.15 Back
11 Q87-88 Back
pp 1-3 Back
13 ibid Back
Appendix 1, pp 20-25 Back
15 ibid Back
Appendix 3, p26 Back
Appendix 1, pp 20-25 Back
C&AG's Report Paragraphs 2.5-2.9 Back