Select Committee on Mersey Tunnels Bill Minutes of Evidence

Examination of Witnesses(Question 80-99)

Mrs Charles George and Miss Joanna Clayton

Thursday 30 January 2003

80. CHAIRMAN: Mr George, on exhibit B9 you show the safety work programme going to about £8 million in 2004-05 and 2005-06 but then falling in 2006-07 to £3.4 million, about half the level.

81. MR GEORGE: Yes, Sir.

82. CHAIRMAN: So what you are saying really is not that it will continue to grow year on year for the foreseeable future but that it goes up to that level in 2005-06 and then falls again?

83. MR GEORGE: At present we are predicting quite a healthy surplus from tolls when we get to that period. What we do not know, of course, is to what extent there will then turn out to be a further set of requirements. For instance, the new Directive has not been looked at and costed out to see what sort of implications it would have if we went further. What you see there is simply what we are planning presently in the light of the 2002 Eurotest. Provided that is all we have to do thereafter we can simply assume that there will be an ordinary RPI type increase in refurbishment costs year by year but nothing more.

84. History tends to suggest that just when you have finished one lot of works one then finds there is another tranche but I do not believe it is likely we shall have quite this sort of batch of expenditure coming immediately next. It will come at some stage but probably not in the latter part of this decade, it probably will be beyond. The answer is no-one quite knows but we would simply say those charged with the tunnels' finances, and indeed the Committee also who are charged now with finding the system, should be aware that the unexpected does happen and you suddenly find yourself having to produce many millions more each year for a period of five years as a result of upgrading.

85. CHAIRMAN: Where there are requirements for spending on infrastructure, be it road or rail or whatever, in other areas in the Merseyside as elsewhere, then that safety or maintenance work would be funded from public funds from the taxpayer in whatever form the taxes are collected?

86. MR GEORGE: It can only be funded either from tunnel tolls or from the ratepayers of the Merseyside areas or from Government grant if the Government is prepared to give grant. As Mr Wilkinson will explain over the years there have been frequent appeals to the Government for grants for the Mersey Tunnels and they have always received a rebuff and been told "It is a local responsibility sort it out for yourselves".

87. MR CUNNINGHAM: Are you saying you could not borrow from a bank? Earlier on you mentioned the fact you are using revenue to fund these developments, are you precluded from borrowing from banks? Is there a reason why you do not borrow from banks?

88. MR GEORGE: Unfortunately the Mersey Tunnel cannot just simply go out and borrow from a bank because it is a public transport authority it is subject to all the borrowing terms. What it can do is to apply to the Government for permission to borrow and that is how it has acquired its past very large debts. It has gone back recently and asked if it may borrow a substantial further tranche to do these works. So far it has received no encouragement whatever. It had, so to speak, to cover the position by making the application, given past history it does not expect that application will receive favour but certainly it has made the application.

89. Provided it gets the Government's consents then it can borrow and would normally not borrow simply from a bank because it would normally be able to borrow on lower interest rates if it did make its way through the Government borrowing. The Chancellor of the Exchequer tends not to be very enthusiastic about that because that then goes into the total Government borrowing and the aim is to try and keep that under constraint whether it be this administration or the last administration so all local authorities find that when they want to borrow for projects there is always a certain resistance from central Government.

90. CHAIRMAN: So the outstanding debt that I believe rose to about £140 million in 1991/92 and has now fallen back to about £106 million or thereabouts ----

91. MR GEORGE: A bit less than 100 now.

92. CHAIRMAN: A bit less than 100 today, okay. That is actual debt, that is real debt on the books that needs to be serviced?

93. MR GEORGE: It has to be serviced.

94. CHAIRMAN: Because the accounts on page B7 did not strike me as being a set of accounts that I would normally see since there was always a precise balance between total income and total expenditure which would strike me as being a constructed situation on a proper set of accounts.

95. MR GEORGE: I can appreciate that criticism and ----

96. CHAIRMAN: It is not a criticism, it is purely a comment on the accounting.

97. MR GEORGE: You are quite right, there is an adjustment and, therefore, I entirely take the point the Chairman is making. Yes, although there is the substantial debt, in B18, if I could ask the Committee to look on there, there is something called the debt profile showing how it is broken down and who the money is owed to and the various provisions for the debt. That debt will finally be paid off in about 2047/48, that is the contractual terms of the debt. The vast mass of it will have been paid off by the late 2020s, that is when there will be a big come down of the debt, others will carry after that. That is assuming we do not succeed, as Mr Cunningham suggested we may be able to, in borrowing more. Of course, every time we borrow more we can do more works but we saddle ourselves with paying it out over a prolonged period.

98. MR CUNNINGHAM: I was not suggesting anything, I was asking a question for clarification.

99. MR GEORGE: When I say "suggesting" I do not by any means mean recommending but at any rate adverting to the possibility of it. The assumptions for the paying off of the debt are assuming that we do not borrow more towards funding of the tunnel, that we will be able to cope with funding the tunnel for the future out of the surplus from the tolls because if the Committee allows tolls to rise in accordance with the RPI, which is what we are seeking, there will be a surplus. The first call on that surplus will of course be the maintenance and refurbishment and upgrading of the tunnel and it is only when that has been done that one can consider spending it on any other purposes, but you never get to the stage of having any money over for a proper refurbishment programme or for spending it on other purposes unless one can ensure that the tolls do continue to rise in line with inflation. If they do not rise in line with the RPI we are going to be back to the position of the 1980s with a growing deficit, at which time not a penny was able to be spent on refurbishment.

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