Select Committee on Mersey Tunnels Bills Minutes of Evidence

Examinations of Witnesses (Questions 140-159)


The Petition of David Loudon, John McGoldrick and MR JOHN McGOLDRICK examined

140. How close is the relationship with the local authorities?

(Mr Wilkinson) That is very close. There are details in this exhibit of the links that we have with district councils and those links are reinforced through formal consultations and regular liaison at member and officer level. For example the Chair of the Authority and the Chief Executive attend meetings of the body known as the Merseyside Co­ordinating Committee. We have officers networked. My colleague the Chief Executive chairs a Committee of district chief officers dealing with the production of the local transport plan and I serve on the Finance Directors Forum for Merseyside Local Authorities.

141. If we now move on to the Queensway Tunnel, the first one to be built, could you just explain how it was to be funded?

(Mr Wilkinson) The original intent in four local acts passed between 1925 and 1933 was to finance the tunnel partly by borrowing and then partly by tolling users, the scheme was to meet the construction costs in part by grant but then by borrowing and then putting the cost of debt charges and operating costs on to the users. I understand there was an option considered at that time to have some local assistance from rates but I understand that was initially rejected, although subsequently had to be relied on.

142. I think that tunnel was constructed in 1925, it opened to traffic in 1934, what was the financial history of the early years?

(Mr Wilkinson) In the early years the tunnel was making a loss. The traffic that was attracted proved to be lower than was originally thought and as a result of that the tunnel was making a loss up to and during the war years until roundabout 1947.

143. It is probably helpful if we turn to your Exhibit B4, is it not, page 5.

(Mr Wilkinson) Exhibit B4 provides a summary of the finances of the tunnels, as you can see, for a period of 33 years or so from 1934 to 1967/68. The losses I am referring to are in the column head "losses" which is about two thirds of the way across the page.

144. If we go to the right­hand column where it says "total traffic" we can see it starting at two million a year, then it built up to 18 million by 1968 but there was a very, very slow increase in the period up to the mid­50s. Correct?

(Mr Wilkinson) That is absolutely right. The traffic of the tunnel really began to take off, as it were, at the beginning of the 1950s coincidently with the growth in private car ownership.

145. Running at a loss, as we can see, in the period up to 1947 in the column "losses".

(Mr Wilkinson) Those losses were financed initially from local rates. As I hope the Committee can see the losses ceased in 1946/47 and the tunnels then became profitable in the sense that they were able to make substantial contributions to the fund and even pay taxation.

146. What was the consequence of the traffic building up?

(Mr Wilkinson) The average traffic growth from the late 1940s through to the early 1960s was in the region of 7.5 per cent per annum. Even though the tunnels' finances were buoyant the traffic had grown by the early 60s to about 13 million vehicles a year and it was causing more and more congestion on approach roads, more and more difficulties in terms of ventilation which necessitated extensive improvements. It was clear by the early 1960s that the Queensway Tunnel was rapidly approaching its peak capacity limit and creating gridlock in Liverpool and Birkenhead.

147. What was the remedy to the gridlock?

(Mr Wilkinson) What effectively happened was that there was a series of local consultations and the general opinion or widespread support was given to the concept of building a second tunnel to be paid for, I must make the point, by continued tolling. This in the early 1960s was a concept that was adopted at a range of other crossings round the country, they include the first Dartford tunnel, the Forth Road Bridge, the Severn Bridge and the Tyne Tunnel.

148. When was the new tunnel, the Kingsway Tunnel built?

(Mr Wilkinson) The first tube opened for traffic in June 1971 and the second tube in March 1974.

149. Is that opening in 1974?

(Mr Wilkinson) It opened for traffic in 1974.

150. How was the new tunnel financed?

(Mr Wilkinson) Entirely by borrowing as a result of which the crossing rapidly slipped back into operating deficits during the financial year 1968/69. The intent permitted in the enabling legislation was that operating loses would occur temporarily and would be financed by a practice known as capitalisation, which is reborrowing. This is a practice that was commonplace in the legislation affecting all of the tolled crossings provided in the late 60s and early 70s. The idea was that reborrowing the losses would provide time for the traffic to escalate. Unfortunately, however, everything that could go wrong went wrong with Mersey Tunnel's finances in the late 60s and the early 1970s. Inflation substantially increased both the construction cost of the new tunnel and the operating costs, interest rates increased considerably and far from growing, as was expected from building a new tunnel, the traffic largely remained static in the face of increasing fuel prices and indeed fuel shortages.

151. Mr Wilkinson pause there for a second and just let us spend the last three minutes or so before lunch looking at some of your exhibits. Could we go to Exhibit B5 first and just explain that to their Lordships?

(Mr Wilkinson) Exhibit B5 shows the total traffic using the Mersey tunnel from when it opened in the early 1930s to the present day. The blue shadow on the exhibit is the traffic through the Birkenhead tunnel, the yellow is the traffic which started to come through the Kingsway Tunnel and the top line gives you some idea of the volume of traffic growth at different periods. The 7.5 per cent per annum which I referred to from the late 40s through to the early 60s is quite clearly shown in the slope on that blue line.

152. If we turn over the page to B6 we can see the debt mounting, could you just explain what is happening there?

(Mr Wilkinson) Yes, my Lord. Once the Kingsway Tunnel was built and began its operations, as I indicated earlier, the operating loses were capitalised, financed by borrowing so that the accumulation of the debt of constructing of the tunnel and on the debt on its operating deficits meant a rapid increase in total debt, which you see on the upward slope and that blue line there.

153. If we look at the line for 1986 that is the time Merseytravel took over the tunnel when the old County Council was abolished and you were on a rising graph of debt and it goes on steeply upwards until the early 1990s when it peaks. Do you see that there?

(Mr Wilkinson) Merseytravel inherited the structures with a debt of about £100m. I hope the exhibit shows you the debt eventually climbed to £140 million but is now back below 100m. At this point in time that solid line on that exhibit.

154. MR GEORGE: If we come to the appetizer before lunch it is Exhibit B7.

155. CHAIRMAN: Before we move on to B7 you mentioned earlier Mr George, I think you said that the majority of debt was with the local authority, is that entire debt from the local authorities?

156. MR GEORGE: I will leave that to Mr Wilkinson.

(Mr Wilkinson) My intent in due course is to introduce Exhibit B20 which explains precisely to whom the debt is owed, the interest rates and such.

157. If your Lordship goes to Exhibit B20 I think your Lordship will probably find the answer to your question. In item two there you have the Current Annual Debt Charges and the figures outstanding. The last item, MDCs, that is what the 28 has come down to. The biggest item is an item owed to Wirral Borough Council, the second item down. Then your Lordship can see the Department of Transport. We will come back to that later, those are the figures.

158. CHAIRMAN: I understand the Department of Transport, I understand the Wirral, I do not understand PWLB.

(Mr Wilkinson) The Public Works Loan Board.

159. CHAIRMAN: Mr George, I apologise I have taken you off track.

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