Crossing the border: road and rail links between England and Wales - Welsh Affairs Committee Contents


3  Cross-border roads

53.  Travel by road still accounts for the vast majority of journeys made by residents of Wales.[75] Almost 130 million journeys between England and Wales were made by road in 2010: [76] more than 16 times the number of rail journeys. Prioritising improvements to road links between England and Wales can be problematic because of how responsibilities for roads are shared. As set out in paragraph 5, Welsh and English authorities are responsible for cross-border roads only on their side of the border, although the UK Government has sometimes funded improvements in Wales where a project physically crosses the border. CILT wanted better coordination on cross-border road policy to ensure connectivity for Wales was "not compromised by England-centric decision making."[77] Our inquiry focussed on two key cross-border road issues: improvements around the M4 and the level of tolls and future ownership of the Severn Crossings.

Improvements to the M4

54.  The M4 is the main road link between England and South Wales, with over 60,000 journeys made between England and Wales on the motorway each day, almost a fifth of all road journeys between England and Wales. The motorway suffers from congestion and poor reliability of journey times due to the high level of traffic and out-dated design standards. The majority of witnesses believed that improvements to the M4 on the Welsh side of the border should be a key priority for the Welsh Government. The South East Wales Economic Forum considered improvements to the M4 to be the most important cross-border transport issue of the day.[78]

55.  The Welsh Government considered improvements to reduce congestion problems on the M4 around Newport in 2009, but rejected them because they were unaffordable. The UK Government's 2011 Autumn Economic Statement included an undertaking to engage with the Welsh Government on improvements to the M4.[79] The Welsh Government subsequently opened a consultation in March 2012 on enhancements to the M4. Proposals ranged from £45m on improvements to a distributor road to a £830m bypass to the south of Newport.[80] The Welsh Government has also agreed to consider improvements to the M4 north of Port Talbot.[81]

56.  The Freight Transport Association raised doubts about whether the Welsh Government had the funding to make the necessary improvements to the M4.[82] ICE Wales Cymru believed that innovative finance solutions might be needed to fund improvements to the M4.[83] The toll revenue from the Severn Crossings was suggested—including by the Welsh Government Minister—as one potential means of funding.[84] Another was increased borrowing powers for the Welsh Government.[85] The latter was agreed, in principle, by the UK Government and Welsh Government in October 2012, and was also supported by the Silk Commission, which was set up to consider current financial and constitutional arrangements in Wales.[86]

57.  The Welsh Government told us that, since the 2011 Autumn Statement, officials had met with their UK Government counterparts "on a number of occasions to discuss options for financing major strategic enhancements to the M4". It was "too soon to say what the outcome of the discussion will be".[87]

58.  We welcome the Welsh Government's consultation to explore options for improving the M4. This motorway is a key strategic road for Wales and the UK more broadly. It has suffered from under-investment and congestion for too long. We call on the UK Government to continue working with the Welsh Government on improvements to the M4, in particular to identify attainable funding solutions for the essential improvements required for this key strategic road.

The Severn Crossings

59.  The Severn Bridge and Second Severn Crossing in South Wales are two of the most important transport links between England and Wales: traffic on these two roads represents almost a quarter of all road journeys between England and Wales. The bridges were opened in 1966 and 1996, on the M48 and M4 respectively. Under the contract for the construction of the Second Severn Bridge, Severn River Crossing Plc took over responsibility for the operation and maintenance of the original bridge, and the financing of the outstanding debt for its construction. In return, Severn River Crossing Plc was permitted to collect tolls from both crossings for an agreed period. This is its only source of income. The Crossings will return to public ownership when the current concession ends in 2018. Although the Crossings are a key route for people travelling into and out of Wales, one of the bridges is located entirely in England, while another is partly in England.

60.  We examined the Severn Crossings Toll in a separate inquiry in 2010.[88] In this inquiry we re-visited two issues from that report in respect of the Severn Crossings which are still to be resolved: the level of tolls and a future strategy for the Crossings after 2018.

FUTURE OWNERSHIP OF THE CROSSINGS

61.  Our 2010 report on The Severn Crossings Toll called for the urgent development of a future strategy for the Severn Crossings, once it returns to public ownership in 2018. However, no such strategy is yet in place. On the contrary, our inquiry exposed a disagreement between the UK Government and Welsh Government about the future ownership of the Crossings. The Severn Bridges Act 1992 allows for Government to continue tolling for up to a five years after the Concession ends to recover its own costs. The Parliamentary Under-Secretary of State for Transport told us that the UK Government would continue to maintain tolls after 2018 due to outstanding debt it had incurred in respect of the bridges. This meant there would be no reconsideration of the ownership structure until the "early 2020s".[89]

62.  In response to the Minister's comments, the First Minister for Wales, Rt Hon Carwyn Jones AM, issued a statement on 5 November 2012 saying that it would be "unacceptable" for the UK Government to retain the income from tolls beyond 2018, and that it was clear that decisions about the future of the bridges should be made in Wales.[90]

63.  There is a clear disagreement between the UK and Welsh Governments over the ownership of the Severn Crossings when the Concession ends in 2018. It is vital that this dispute is resolved as soon as possible.

LEVEL OF TOLLS

64.  In our 2010 Report, we concluded that the UK Government should reduce the cost of the tolls when the Crossings returned to public ownership in 2018.[91] Two years on, we heard again from a variety of witnesses about how the high level of tolls was having a negative impact on the Welsh economy. The South East Wales Economic Forum said that the tolls on the Severn Crossings were the highest in the UK and caused a "real problem" by discouraging travel between England and Wales.[92] The Freight Transport Association described the tolls as a "direct tax on doing business for Welsh [freight] operators, or on doing business in Wales."[93] A recent Welsh Government report argued that removing the tolls could potentially boost the economy of South Wales by £107 million due to an increase in productivity of 0.48%.[94]

65.  Once the Crossings return to public ownership, VAT will no longer be payable on toll revenue. This could potentially enable a reduction in toll prices with no loss of net revenue.

66.  On the issue of the level of tolls after 2018, the DfT told us:

The Government has not undertaken any decision on the level of the tolls when the commercial concessions ends. VAT would not apply to a publicly-run toll. However prices did not rise when VAT was first included in the toll, so it would be wrong to assume prices would automatically go down once VAT was removed. There may be valid reasons to try to repay the outstanding debts as quickly as possible, for example to open the way for new arrangements for the Crossing.

67.  In response to a Parliamentary Question, the Chief Secretary to the Treasury told the House of Commons in November 2012 that he would consider—as part of the Government's response to the Silk Commission's Part 1 report on Financial Powers to Strengthen Wales—whether the loss of revenue from reducing or removing the tolls could be offset by a subsequent increase in income tax as a result of higher job creation in Wales.[95]

68.   The level of the tolls on the Severn Crossings hampers the development of businesses in Wales and deters inward investment to Wales. We are disappointed that the DfT has not agreed to reduce the level of tolls at the end of the Concession. We are unconvinced by the DfT's assertion that the fact VAT will no longer be payable on toll revenue from 2018 should not necessarily translate to an immediate reduction in the level of tolls.

69.  We renew our call for tolls on the Severn Crossings to be reduced when the Concession ends in 2018. The UK Government should investigate how this can best be achieved. We recommend that the UK Government bring forward proposals for the management of the Crossings and tolling after they return to public ownership.

70.  The Chief Secretary to the Treasury should deliver his commitment to consider, as part of the UK Government's response to the Silk Commission, whether the income lost through reducing or removing the tolls could be recouped by a subsequent increase in income tax as a result of job creation in Wales.

LEVEL OF DEBT

71.  As noted in paragraph 61, the UK Government has said it will not consider the ownership structure of the Crossings until it has recovered its own debts for building and maintaining the Crossing, which it expects to be in the early 2020s. When we inquired into the Severn Crossings Tolls in 2010 we were advised that the DfT's responsibilities for latent defects on the Crossings had resulted in an accumulated debt of £19 million, arising from costs being incurred that fell outside the Concession agreement. But no indication was given that the accumulated debt could increase substantially.[96]

72.  During this inquiry, the DfT informed us that the current accumulated deficit of costs falling outside of the Concession was £112 million. This included costs for "professional advice, works associated with latent defects such as the main cable corrosion on the Severn Bridge, and £4m of the £126m pre-concession debt from 1992". The DfT said there was "significant uncertainty" about the final amount of debt:

There is significant uncertainty around what the accumulated deficit will be at the end of the concession period because this will depend on the costs of any additional work that may need to be carried out on the Crossings, including mitigation of latent defects. However, with the concession period currently predicted to end in 2018, it is estimated that the deficit will be well over 100 million pounds, and be recovered by the early 2020s.[97]

We have asked for a more detailed breakdown of the Government's debts in respect of the Crossings. The DfT have said that a detailed breakdown of this kind is in preparation and will be shared with us and the Welsh Government.[98]

73.  We were surprised that the Government has now accumulated a £112 million debt on the Crossings, which means the Government intends to retain income from the tolls for several years after the Concession ends. It is hugely disappointing that the Government did not make clear during our 2010 inquiry on the Severn Crossings Toll that the debt could increase to such a level. We are also concerned that the accumulation of this debt will delay reducing the level of the tolls after 2018.

74.  It is imperative that the DfT publish a full breakdown of the outstanding debt which the Government holds for the Severn Crossings, detailing how and when this was incurred. We also call on the DfT to provide an explanation of why the costs resulting in this debt were not covered in the Concession Agreement, but are instead to be borne by those travelling between England and Wales via the Severn Crossings.

75.  We will continue to closely monitor developments with the Severn Crossings over the course of this Parliament. We will take evidence from the Department for Transport minister again on this matter later in 2013.

Cross-border roads in North Wales

76.  Good road links between England and the north of Wales are important to allow the large daily movement of people between the North West of England and North Wales. Taith, the transport consortium for North Wales, said that a number of key cross-border routes in north Wales suffered from congestion. The A55/A483 junction near Chester was described as a "significant congestion bottleneck that impacts on the network in England and Wales". The A494 Aston Hill and A49 were also said to suffer from congestion.[99]

77.  The DfT announced in October 2012 that it will fund improvements to the A55/A483 junction. The Welsh Government Minister told us he welcomed the news but would have appreciated prior warning from the DfT about the project:

Recently, there was an announcement on the A55/A494, just on the other side of the Welsh border, on the Chester side of the Welsh border, [...] which came completely out of the blue to us. We knew nothing about it. Now, as it happens it is an enhancement and that is great, but this is a through road for England/Wales traffic and that is just one element of this that we just were unsighted on. Not a bad thing, but it would have been really helpful in terms of planning infrastructure, if there was something that we wanted to do on our side, to have the engagement. There are still things that slip the net and I just think we have to get better at that. [100]

This appears to contradict the DfT's evidence to us which stated that "both sides now operate on a "no surprises" basis".[101]

78.  We are concerned that there does not seem to be the same level of co-ordination between the UK Government and Welsh Government on improvements to key cross-border roads in north Wales, as there has been in south Wales with the M4. We welcome the DfT's commitment to address the bottleneck at the A55 and A483 junction, which is a key cross-border route for traffic between England and Wales, but we were surprised to discover that the Welsh Government had not been informed of this prior to its announcement. We expect the DfT to communicate to the Welsh Government its plans for projects with cross-border implications prior to announcing them.



75   Welsh Transport Statistics 2010, Welsh Government Back

76   Ev w5 Back

77   Ibid. Back

78   Q51 Back

79   Autumn Statement 2011, HM Treasury, Cm 8231, Nov 2011 Back

80   'M4 Corridor Enhancement Measures Consultation Document', Welsh Government, November 2012 Back

81   'Proposed improvements between junctions 38 and 42, M4, Port Talbot, Welsh Government, 12 June 2012 Back

82   Q44 [Ian Gallagher] Back

83   Ev w3 Back

84   'Governments reach new agreement on Welsh funding', HM Government and Welsh Government, 24 October 2012 Back

85   Q237 Back

86   'Governments reach new agreement on Welsh funding', HM Government and Welsh Government, 24 October 2012; Empowerment and Responsibility: Financial Powers to Strengthen Wales, Commission on Devolution in Wales, November 2012 Back

87   Ev 48 Back

88   Third Report of Session 2010-11, The Severn Crossings Toll, HC 506 Back

89   Qq 178-9, Ev 85 Back

90   'First Minister calls for Severn Crossing charges to be controlled by the Welsh Government', Welsh Government, 5 November 2012 Back

91   The Severn Crossings Toll, HC 506 Back

92   Q46 Back

93   Ev 73 Back

94   The Impact of the Severn Tolls on the Welsh Economy, Welsh Government, November 2012  Back

95   HC Deb, 6 November 2012, cols 711-712 Back

96   The Severn Crossings Toll, HC 506 Back

97   Ev 69 Back

98   Ev 85 Back

99   Ev 60 Back

100   Q205 Back

101   Ev 69 Back


 
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Prepared 6 March 2013