Welsh Affairs CommitteeFurther written evidence from the Rt Hon Simon Burns MP, Minister of State, Department for Transport

During the evidence session on 16 October Stephen Hammond and I undertook to provide two further pieces of information, one relating to signalling work on the North Wales main line, the other to modelling of the debt and tolls for the Severn bridges.

I understand there were also some questions which the Committee had intended to ask during the oral evidence session but which were not reached as a result of the session unfortunately being cut short by the Committee members’ wish to be in the Chamber for a statement. This letter responds to the Committee’s further questions, and to the commitments given during the session. I would also ask that you take note of two corrections to the evidence given.

In response to a question from Guto Bebb MP (Q191 in the transcript), I undertook to provide an update of work on resignalling/improvements to signalling along the North Wales Main Line. I have responded separately to Mr Bebb’s Parliamentary Question on the same issue.

Work on signalling/resignalling is of course an operational matter for Network Rail. The Government has provided funding to Network Rail and the rail industry up to 2019 to purchase the infrastructure enhancement that best improves passenger and freight journeys in Wales and England. Much of the signalling on the North Wales route is due for renewal from the 2013–14, providing opportunities for low cost change that could improve the speed of journeys and the number of trains that can be accommodated.

HLOS 1 (covering the Control Period 09/10 to 13/14) provided £325 million to the Network Rail Discretionary Fund for the best value infrastructure improvements on the network not directly specified in the HLOS. HLOS 2 has provided £300 million for passenger journey improvements in Control Period 5 (14/15 to 2018–19). Beyond this, the Welsh Government works in partnership with Network Rail to enhance and improve rail infrastructure in Wales and can develop and fund schemes in addition to any funding obtained from the Westminster Government. The Welsh Government did not identify the North Wales coast route as a priority for investment in HLOS 2.

Network Rail is expected to examine opportunities to improve journeys along the North Wales coast route as part of its preparation for re-signalling and will inform the industry and the two Governments of its findings.

You asked for responses to three further questions. First, what efforts are being made to ensure that Network Rail maintains lines in Wales to the correct route availability standards? Network Rail is required by the Office of the Rail regulator (ORR) to maintain the network to the correct availability standards as part of its Network License and the ORR monitors this. This role is part of ORR’s statutory duties and the Department does not normally involve itself in this area it would be inefficient to do so.

Second, you asked what reassurances can be given that the TEN-T proposals brought forward by the European Commission adequately recognise regional needs? We have worked closely with all the Devolved Administrations—Wales, Scotland and Northern Ireland—to take account of their suggestions and concerns in developing a UK position for our negotiations with the European Commission and the respective Presidencies. This includes the proposed Core and Comprehensive Networks and the proposals in the draft TEN-T Regulation.

And finally, you asked about the Department’s position on how the improvements required by the TEN-T proposals will be funded, and how this might affect other investment? The UK’s approach for negotiations on TEN-T has focussed on three overarching objectives:

Binding deadlines for the Comprehensive and Core Networks to be replaced with indicative targets and refer to the development of the TEN-T Core and Comprehensive Networks instead of their completion.

Decisions on which projects should be developed and invested in on national networks to remain with the Member States concerned and Private Sector transport operators within them.

No additional financial or administrative burdens on Member States or Private Sector transport operators.

We believe that the General Approach text agreed at the March 2012 Transport Council contained sufficient flexibility to address these concerns. The draft TEN-T Regulation is now being considered by the European Parliament, and is due to be voted on in Plenary in January 2013. In the meantime we will continue to lobby to maintain the General Approach text.

In response to Q186, Stephen Hammond undertook to provide information on the work that has been undertaken relating to the modelling of debt/tolls for the Severn bridges. Subsequently you asked that we clarify the level of debt that will need to be recovered through tolling, how and when it was incurred and why it was not covered by the concession agreement. You further asked why there are no plans to reduce the toll at the end of the Concession, when it will no longer subject to VAT.

When the concession period ends, the crossings will revert back to public ownership. The Severn Bridges Act 1992 allows for Government to continue tolling for up to a further five years to recover its own costs. These are costs that fall outside of the scope of the current concession including for professional advice, works associated with latent defects such as the main cable corrosion on the Severn Bridge, and £4 million of the £126 million pre-concession debt from 1992. These amounts are reported each year in the Severn Bridge Accounts. As at 31 March 2012, the accumulated deficit was £112 million.

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, (not several hundred millions to be repaid by the mid-2020s, as stated in response to Mrs James (Qs 178 and 179)).

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.

I would also wish to take the opportunity to make a small correction to a statement I made in response to Question 196. Having read the transcript I realise in my response I incorrectly referred to Swansea port as being on the Comprehensive Network. Swansea port is not in fact on the Comprehensive Network as it did not meet the European Commission’s threshold of 0.1% of EU throughput for passengers or freight. I apologise for that error. The point made that neither Swansea port or Port Talbot are part of the Core Network is however correct.

I trust this follows through on the commitments given during the evidence session, and addresses the Committee’s supplementary questions.

November 2012

Prepared 5th March 2013