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Highways Agency Framework Document

The Minister of State, Department for Transport (Dr. Stephen Ladyman): The Highways Agency has an important role in delivering the successful management and operation of the strategic road network. It fulfils this role on behalf of the Secretary of State and the Agency's relationship with the Department for Transport is covered by a framework document.

The framework document sets out the roles and responsibilities of the Highways Agency, its chief executive and how he will work with the Secretary of State and the Permanent Secretary of the Department for Transport. The previous framework document dated from 1999 and was due for revision.

The framework document has been revised in accordance with Cabinet Office guidelines and has been approved by the Chief Secretary to the Treasury. Today I have placed copies of the new Highways Agency framework document in the Libraries of both Houses.
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British Transport Police (Funding)

The Secretary of State for Transport (Mr. Alistair Darling): The professionalism and dedication to duty of the British Transport Police (BTP) was illustrated to the full by their response to the terrorist attacks in London on 7 and 21 July. The Government appreciate the highly professional capability demonstrated by the BTP.

Following discussion with the chief constable and the chairman of the BTP Authority, it is clear that the BTP incurred substantial costs as a result of their response to the attacks. I have therefore agreed to make a contribution of £3.6 million to the funding of the additional costs incurred. This sum covers the costs of overtime, accommodation and other overheads. It will also contribute to the costs of CCTV viewing equipment for speedy analysis of CCTV images.

BTP have confirmed that further additional costs associated with the failed bombing attempts of 21 July and other operations directly related to the July attacks are to be absorbed within BTP's existing budget.

However, this one-off payment does not prejudice the general principle that it is the rail industry that is responsible for funding the BTP. Any future request for central funding will only be considered on the merits of the case.

Rapid Transit Scheme (South Hampshire)

The Parliamentary Under-Secretary of State for Transport (Derek Twigg): In July 2004, I took the decision to withdraw funding for the South Hampshire rapid transit (SHRT) scheme because of excessive cost increases. Since then, the scheme's promoters, Portsmouth city council and Hampshire county council, have put revised proposals to the Department.

I have considered very carefully all the new information provided by the promoters. The promoters have succeeded in reducing the cost of the tram schemes below last summer's level. However, costs remain significantly higher than those the Department approved.

The latest tram proposals are still very expensive—costs are nearly 50 per cent. higher than originally planned. This is for a reduced scheme which places more of the risks with the public sector. I therefore cannot support requests to re-instate the SHRT proposal.

The scheme was given full approval in 2001 with a cap on the public sector funding of £170 million, present value terms at 2003 prices. Following receipt of bids that greatly exceeded the approved public sector cost, the promoters put forward an alternative proposal in late 2003 removing the proposed cycle shuttle and introducing revenue risk sharing. But the public sector funding remained £100 million more than we had approved.

The promoters' latest proposal requires public sector funding of £214 million in 2003 present value terms. Cost savings were achieved by removing the short loop proposed for Fareham and changing the proposed procurement, with less risk transfer to the private sector. This is a 26 per cent. increase above the previously approved amount. However, this simple comparison does not give a full picture because:
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I appreciate that the promoters have made every effort to reduce the costs of the scheme. However, it is clear that costs remain significantly higher than those that I previously approved. In the light of all the information, I cannot support requests to re-instate the SHRT proposal.


The Parliamentary Under-Secretary of State for Transport (Derek Twigg): On 13 June this year, I said that the £170 million Government funding that had originally been approved for Merseytram remained available if the scheme could be delivered at that cost.

Since then we have had regular discussions to secure the necessary funding commitments from the Merseyside districts, over which Merseytravel has powers to levy funds, to give confidence that the scheme would be delivered without further requests for Government funding. Unfortunately the required assurances have not been forthcoming. I have therefore decided that this scheme cannot proceed.

Merseytram Line 1 was given provisional approval in December 2002, at a public sector cost of £225 million, and with a cap of £170 million on central Government contributions. Costs subsequently increased, and Merseytravel advised the Department in May 2005 that the total public sector cost was £315 million—an increase of 40 per cent. This was for a scheme that was smaller in scope than the one we had approved.

This led to my announcement on 13 June 2005 that the Government would not increase its contribution to the project. However, our position has remained clear that the previously committed £170 million was available if the scheme could be delivered at that cost.

Since June, the Department's key concern has been to ensure that there would be no further requests for Government funding. To this end, the Department needed assurance that the districts, as the ultimate flinders of any shortfalls, had properly considered the risks, and accepted the consequences of the Government's contribution being capped. This logically meant that there should be no cap on the contribution from local sources. We made clear in July 2005 that we would need written undertakings from the Merseyside districts to this effect.
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Since then, the Department has tried to help the authorities find a way forward. In September 2005 it became clear that not all of the Merseyside districts would be prepared to give such undertakings. We agreed to consider a proposition that Liverpool and Knowsley, as the principal beneficiaries of the project, would provide assurances that they between them would meet any cost overruns or funding gaps. We have also agreed to requests to extend the deadline for a decision.

We have also said that our requirements would be satisfied by an arrangement under which the two districts would enter a back-to-back agreement committing Merseytravel to take the risk above a certain level, as long as the districts' commitments to the Department were unconditional. This approach could address district concerns about the prudence or lawfulness of providing unconditional commitments to the Department, provided that they satisfied themselves that they could rely on the agreement with Merseytravel.

The Merseyside authorities have now had four months to deliver these commitments, but they have not been prepared to do so. What the districts have offered is a capped commitment, whereby Liverpool and Knowsley would bear costs up to £24 million. Above that level, they have asked us to rely on assurances from Merseytravel.

However, Liverpool city council has recently received written legal advice that it would not be prudent or lawful for Liverpool to rely on Merseytravel assurances about the risk of cost overruns without a proper independent due diligence exercise.

If Liverpool's own legal advice is that it cannot currently rely on Merseytravel assurances, then clearly it is not reasonable to expect the Department to do so.

Liverpool's advice is consistent with our view that there is nothing inherently unlawful in an unconditional district undertaking. What is preventing the districts from providing the commitment letters we have requested is that they cannot be confident in Merseytravel's assurances.

Our requirements have been clear since July. We have now had months of discussion with Merseyside. They have had plenty of time to undertake the necessary due diligence work. However, it is unfortunately clear that the districts are not prepared to give us the assurances we need; so we cannot be confident that there will be no further requests for funding. I have therefore decided that the scheme cannot proceed.

I recognise that transport investment is needed in Merseyside to support future growth in the area. We have committed over £200 million to transport improvements in Merseyside over the last five years, and we intend to continue to support good value schemes in the area. The Department stands ready to work with Merseytravel and Merseyside authorities on a package of transport improvements for Merseyside, especially improved public transport in the areas that would have been served by Merseytram. Funding will be there for the right proposals.