Written Evidence from Kent County Council (SRC 022)

1.              Summary

1.1              Kent County Council (KCC), as the Local Transport Authority for Kent, welcomes the opportunity to submit written evidence to this inquiry into Strategic River Crossings. We would be very happy to expand on any aspect either in writing or as oral evidence.  

1.2              KCC’s submission focuses on the strategic river crossing of the Lower Thames and the need for a new crossing to the east of Gravesend to relieve the existing Dartford-Thurrock crossing.

1.3                KCC’s submission of evidence can be summarised as follows:

• The need for a new Lower Thames Crossing has been established by both Kent County Council and the Government. However, the Government’s lack of decisive action means that the route alignment of the new crossing has still not been established despite a consultation on the corridor options. KCC urges that a preferred corridor is identified as a matter of urgency to avoid unnecessary cost to the public purse and the new crossing is delivered without further delay.

• A new Lower Thames Crossing to the east of Gravesend (Option C) will be fundamental in helping deliver government priorities and is the best option for Kent and UK plc in terms of economic growth. A KPMG study concluded that a new crossing to the east of Gravesend will directly create 6,000 new jobs and contribute 12.7 billion to the local economy. Economic benefits on this scale would be 6 times greater than a crossing on the line of the existing Dartford Crossing would provide.  In addition, extra capacity on the existing route would provide no benefits in terms of network resilience. KCC fully acknowledges that the route C option as proposed by the Department for Transport (DfT) will have specific environmental impacts.  In order to reduce this environmental impact however, KCC has developed a route alignment modification and increased tunnelling for Option C. KCC also proposes that network route improvements in addition to that of the Option C variant, including various junction improvements and sections of dualling on the M2/A2 corridor will deliver greater economic benefits in the form of a new strategic route from the Channel Ports to the Midlands and the North.   

• Examples of North American investors, as shown by their interest in constructing and operating a new Lower Thames Crossing, demonstrates how the public sector can attract private sector investment as a method of financing new strategic river crossings and unlock economic growth at no cost to the public purse.    

1.4              Kent County Council recommends to the committee that action is taken by the Government to:

• Make a decision on the route alignment for a new Lower Thames Crossing immediately and act to deliver a new strategic river crossing in the short term.

• Select Option C, subject to the route alignment modifications, increased tunnelling and wider strategic road network enhancements, as the preferred route due to its significantly greater economic benefits and provision of network resilience.

• Engage with the private sector to secure investment for the new strategic river crossing without the need for public spending.

2.               How well does local and national government work together to plan and deliver river crossing projects?

2.1              Kent County Council (KCC) has long made the case for a new Lower Thames Crossing and this position was formalised in the Council’s ‘Transport Delivery Plan for Kent – Growth without Gridlock’ (December 2010) and Kent’s Third Local Transport Plan (LTP3) 2011-16 (April 2011). However, the Government, despite having recognised the need for new capacity and consulted on three corridor options for a new crossing in May 2013, have yet to make a decision on the preferred alignment of the new crossing route. Instead, further appraisal work for options A and C is underway having discarded Option B in December 2013. KCC is frustrated by this lack of decisive action by Government and stresses the need to move forward into a delivery phase for a new crossing as soon as possible given the clear evidence presented by Government that this project is needed now.

2.2              National government needs to work closer with local government to ensure the delivery of new river crossings that are vital to local, regional and national economies. KCC and has made the case to Government that economic growth is being inhibited by the lack of capacity at the Dartford crossing. KCC has long made this case to various Ministers of Transport and the Department for Transport (DfT), however to date there appears to be an unnecessary amount of process and delayed decision making which does not bring delivery of a solution any closer.  The risk of this delay is that it now puts the project into the realms of uncertainty following a general election in May 2015, and this is from a consultation launch in May 2013. 

2.3              The Dartford-Thurrock River Crossing of the lower Thames is a key part of the UK’s Strategic Road Network (SRN) as a vital link in the M25 London Orbital which facilitates north-south routes from the Channel ports to the Midlands and the North. However, it is also a severe bottleneck on the SRN as the crossing regularly operates in excess of its design capacity which causes congestion and unreliable journey times. In 2012, the crossing carried an average of 135,895 vehicles per day[1]. Average delays are in excess of 11 minutes northbound and 9 minutes southbound per ten vehicle miles for the slowest 10 percent of journeys. This is among the worst average delays on the M25 and 2-3 times the national average of 3.9 minutes across the SRN in 2008[2]. The situation has not improved, as according to more recent DfT statistics[3], less than 60% of journeys on this section of the SRN were classed as ‘on time’ in 2013.

2.4              KCC believes the DfT’s estimated cost to the economy of this congestion of £15m is significantly underestimated (the DfT has previously quoted £40m) and that in reality, this figure should be substantially higher. DfT’s 2011 forecasts of traffic growth of 41% by 2035, on top of the existing congestion levels, are sufficient to establish that the introduction of free-flow tolling (expected in October 2014) will not create anything other than very short term relief.  It is clear that the fundamental issues of the crossing being over capacity and providing extremely low levels of network resilience will remain even with the introduction of free-flow tolling on the existing crossing.

2.5              The lack of alternative crossings exacerbates disruption caused when the crossing is restricted or closed. There are up to 15 major incidents ‘expected’ annually which can cause stationary traffic in excess of 20 miles in each direction. This also impacts on local roads, with Dartford at gridlock during times of disruption. Vehicle emissions from stationary traffic have a significant impact on air quality, to the extent that residents living in close proximity to the crossing suffer adverse health and lower than average life expectancy.

2.6              In response to the DfT consultation on corridor options for a new Lower Thames Crossing in May 2013, KCC’s preference is for Option C, to the east of Gravesend, subject to modifications to the indicative route alignment and the tunnel option being selected to mitigate the impact on internationally protected marshes. This option gives the greatest economic growth and job creation potential; creates a new strategic route from the Channel ports to the Midlands and the North; and improves network resilience. The option needs to be tunnelled in order to also prevent closure due to extreme weather events, i.e. strong winds, which are experienced by the QE II Bridge at the existing Dartford Crossing, as well as to reduce its environmental impact.

2.7              Government needs to work more closely with Local Transport Authorities and Local Enterprise Partnerships (LEPs) to deliver essential new capacity on strategic river crossings which fall under the remit of central Government (through the Highways Agency) to deliver. The benefits of which apply to local, regional and national economies through the provision of a new strategic route.  At present, despite clear representation from local authorities and clear evidence on the need for the project, Government is working in isolation on its decision making, which in the case of this particular project, will put its future delivery at risk following the upcoming general election. 

3.              What other government priorities, such as new house building, urban regeneration and new business opportunities can be delivered through additional strategic river crossings?

3.1              The Thames Gateway is Europe’s biggest regeneration area with 160,000 houses and 225,000 jobs planned by 2026. There are a number of substantial developments coming forward within this area including the recently opened London Gateway which will be the UK’s biggest deep water port and Europe’s largest logistics park generating 12,000 jobs; and proposals for Paramount Park Resort generating 27,000 jobs with an anticipated opening in 2019.

3.2              Current congestion on the existing crossing along with forecast traffic growth and the significant scale of potential development makes additional crossing capacity top priority. It is needed to ensure that growth is not constrained across the Thames Gateway and the area delivers its full potential for the local, regional and national economies.

3.3              In terms of the economic growth and regeneration aspects, a number of studies have been carried out over the years. KCC submitted the following evidence from these studies in response to the DfT’s May 2013 consultation. Table 1 sets out the results of three of those studies, although the results for Option B have been removed as this route corridor option was discarded by the DfT in December 2013. 

3.4              For regeneration potential and the creation of jobs, the DfT work as part of the May 2013 consultation, showed that Option C and C variant would provide the greatest job numbers.  The KPMG study commissioned by KCC in 2010 similarly shows that Option C would contribute £12.7 billion to local GVA, through a six-fold increase in jobs over Option A. The DfT Option B corridor, which has since been dropped from further consideration, would have clearly impacted on the potential to deliver the Paramount Park Resort as well as the already consented Ebbsfleet development for 3,300 dwellings and commercial quarter. In the Autumn 2013 statement, Ebbsfleet was designated as a ‘garden city’ and a development corporation will help to accelerate its delivery.

Table 1

3.5              While all three studies have used different methodologies in assessing regeneration impacts, they are relatively consistent in concluding that Option C will provide the strongest regeneration benefits. For total business benefits again Option C and C variant provide substantially higher returns than Options A.

3.6              Regarding the network resilience aspect, which is key to the objectives KCC would want from any new crossing, it is clear that Option A, while relieving the immediate crossing will not do anything to the approaches to the crossing.  Congestion and incidents on these approaches will to a large extent negate the benefits from the additional crossing capacity in this location.  Peak traffic volumes of up to 180,000 vehicles per day will still gridlock J30/31 and J2 and the approach roads and will lead to queuing traffic for 18 hours a day.  This will simply reduce UK productivity and competitiveness and result in a missed opportunity to boost British business and the national economy.

3.7              In addition to the developments in the Thames Gateway, a new Lower Thames Crossing will add capacity and resilience to the strategic network across Kent and between Kent’s ports and the Midlands and the North.  KCC has bifurcation, the splitting of traffic to and from the eastern and western dock facilities in Dover, between the M20/A20 and M2/A2 corridors, as a key objective of its transport strategy.  In addition to a new Lower Thames Crossing, bifurcation involves a number of improvements on the A2 to deliver a high quality strategic corridor that will cater for the significant growth planned at Dover with its plans for a new terminal, and Calais which is set to double in size by 2016, as well as general traffic and freight growth.   DfT forecasts are for HGV volumes to grow by 43% and LGVs by 88% by 2035[6].  In addition, Government forecasts that Roll on Roll off (RoRo) traffic will grow by 101% by 2030[7].  This would equate to 3.8 million HGVs using Dover with around 1.3 million of these using a Lower Thames crossing. 

3.8              Improvements needed to achieve bifurcation of traffic between the M20/A20 and M2/A2 corridors to and from Dover include:

•              A2 Lydden dualling and dualling of a number of single carriageway sections on approach to Dover;

•              M2 J7 Brenley Corner improvement to increase capacity and provide free flow between the M2 and A2;

•              M2 J5 Stockbury to provide free flow between the M2 and A249 to enable the A249 link between the M2 and M20 to provide relief to the A229 link and additional network resilience;

•              Improvements to A249 including widening and straightening of A249 Detling Hill and 2 underpasses to remove local access;

•              M20 J7 improvements to provide ease of access between A249 and M20.

3.9              It is therefore clear that delivery of a new Lower Thames Crossing to the east of Gravesend (DfT Option C variant with KCC’s route alignment modification and additional tunnelling, plus the route improvements listed above in 3.8) would through an additional strategic river crossing, help to deliver the Government’s priorities of new house building, urban regeneration and new business opportunities.             

4.              What are the best methods for financing additional river crossings? How can the public sector attract greater investment from the private sector for the delivery and maintenance of river crossings? Should strategic river crossings be tolled?

4.1              KCC has clear evidence that there is significant private sector investment interest in a new strategic river crossing on the scale of a new Lower Thames Crossing.  KCC has held extensive discussions with North American private sector investors who regularly finance large scale tolled roads projects and are keen to be involved in the delivery a new Lower Thames crossing. They firmly hold the view that this scheme could be delivered at no cost to the public purse and are hungry for such opportunities.

4.2              Initial discussions with North American private sector investors indicated that they would want a realistic assessment of what is achievable in terms of finances; and the structure of a scheme delivery deal needs to marketable to the private sector. A twenty five year concession is too short and would almost certainly require re-financing, as would a thirty year concession. A fifty year concession was preferred.

4.3              It is vital that the new and existing crossings are linked as the existing toll income would be required to finance the debt incurred from construction of the new crossing. The private sector would want flexibility to increase tolls, possibly by inflation to achieve a minimum coverage ratio of debt. Their preference would be for toll increases to be determined independent of Government in order to remove political interference. Surety of costs is vital for private financiers, as without that, the risks make a proposal very difficult. However, a new Lower Thames crossing guarantees investors a rate of return from day one of opening. To give greater guarantee of cash flow in the first 5 years, it was advised that inflation +2% would be preferred due to the usual tight margins and to allow for mitigation of risk.

4.4              KCC spoke to one particular infrastructure investor, a world leader in developing infrastructure investment as an asset class for institutional investors, who have a proven track record in identifying, investing and managing infrastructure investments around the world. They see a new Lower Thames Crossing as similar to the Golden Ears Bridge across the Fraser River in Vancouver, Canada, which opened in 2009 at a cost of $808 million (£509 m). It is an all-electronic tolled highway with 2011 toll revenue amounting to $38 million (£23.94 m). It is financed by a 35 year concession.

4.5              This investor indicated that they would expect the price of equity to be between 8-9% without construction risk; 11-17% with construction risk; 11-14% with toll risk (where the private sector takes the traffic volume risk and not the Government). In order to make the debt financing work, an ‘availability payment’ would reduce the toll risk and therefore the cost of equity. The Government would keep all toll income and guarantee the private funders a minimum revenue return. They stressed that as the principle of tolling the Thames at this location (outer London) had been established (with the tolling of the existing Dartford Crossing), a dual crossing network would be very attractive to investors and this would reduce the cost of the equity. A crossing located away from the existing location (Dartford-Thurrock) would be preferred by investors to maximise future growth opportunity and ensure network resilience (and hence revenue streams). The concession would need tolling flexibility and 50 year duration, with potential for re-financing.

4.6              They also suggested building in performance measures based around journey time reliability, user satisfaction, safety, etc, into concession arrangements. They indicated that there would be no dramatic difference between a tunnel and a bridge in terms of debt finance. Whilst the risks associated with tunnelling are higher than for a bridge, they are not significant. The geotechnical data is essential to mitigating these. Once all risks are known an advisor would help structure the deal. Long term revenue income is essential to funding infrastructure investment; although immediate yield is also important, i.e. revenue from existing tolling.

4.7              The KCC experience with the North American investment sector clearly demonstrates how investment could be achieved through attracting overseas private sector investors for toll road schemes and thus deliver vital strategic river crossings without the need for public funding. KCC strongly advocates that the Government takes a proactive role in entering into negotiations with private sector investors to fund large scale projects essential to the future growth of the UK economy.

4.8              KCC believes that in general new strategic river crossings should be tolled for a period that will repay the capital construction costs.  Given that this arrangement has existed in the UK for a number of years and is fairly well established with the public; and in view of the significant cost of this type of project, tolling for a set period to repay capital should be an integral part of funding this type of infrastructure provision.  

5.              Conclusions and Recommendations

5.1              KCC has made the case that there is a need for a new Lower Thames Crossing. However, the Government’s lack of decisive action means that the route alignment of the new crossing has still not been established despite a consultation on the corridor options. KCC urges that a new crossing is delivered without further delay.

5.2              KCC has illustrated how a new Lower Thames Crossing to the east of Gravesend (Option C) will help to deliver government priorities, such as new house building, urban regeneration and new business opportunities. This route will unlock more economic growth than additional capacity at the existing Dartford Crossing and provide network resilience. In order to reduce the environmental impact, KCC has developed a route alignment modification and increased tunnelling for Option C. Additional wider network route improvements above that of the Option C variant will also deliver economic benefits from an enhanced strategic route from the Channel Ports to the Midlands and the North.   

5.3              KCC has provided examples of North American investors, as shown by their interest in constructing and operating a new Lower Thames Crossing, which demonstrates how the public sector can attract private sector investment as a method of financing new strategic river crossings and unlock economic growth.  KCC is also supportive of tolling as a means of financing this type of infrastructure.

5.4              Kent County Council therefore recommends to the committee that action is taken by the Government to:

• Make a decision on the route alignment for a new Lower Thames Crossing immediately and act to deliver a new strategic river crossing in the short term.

• Select Option C, subject to the route alignment modifications, increased tunnelling and wider strategic road network enhancements, as the preferred route due to its significantly greater economic benefits and provision of network resilience.

• Engage with the private sector to secure investment for the new strategic river crossing without the need for public spending.

September 2014