Written evidence from Mersey Gateway Crossings Board on Behalf of Halton Borough Council (SRC0035)
1 Background
1.1 The Mersey Gateway Crossings Board (the Board) was established in 2013 as part of the project plan to deliver and operate the new Mersey Gateway Bridge. The body is a Company limited by shares owned by Halton Borough Council and has an operating remit determined by a long term contract with the Council, as required by a funding agreement between the Council and the Department for Transport (DfT).
1.2 This submission is an addendum to the submission made by the Liverpool City Region and deals with the more detailed information referred to in that submission relating to the Mersey Gateway Bridge (MGB) project. To assist the Select committee, the Liverpool City Region submission is attached at Annex 1.
1.3 MGB achieved Financial Close (when contracts with the private sector were executed and funding arrangements confirmed) in March 2014 and the new crossing is now under construction with a planned opening in autumn 2017. The project is a recent example of the delivery of a Strategic River Crossing that may assist the Select Committee in its investigation.
2 How well does local and national Government work together to plan and deliver river crossing projects?
2.1 Although Halton Borough Council is the lead authority for the development and operation of the Mersey Gateway Bridge, the Department for Transport (DfT) has been involved since the early 1990’s when it undertook studies to determine whether there was a need to provide additional strategic highway capacity across the Mersey to the west of the M6 (see Figure 1).
2.2 Strategic River Crossings
2.3 This early work concluded that there was not a case for a new trunk road river crossing but left the door open for a new crossing to be proposed locally. Halton Borough Council responded by investigating possible routes for a new crossing, receiving widespread political support from local authorities and businesses across the region. The DfT has retained a role in the Project as a funding provider for both development and scheme costs.
2.4 The DfT managed its investment interest through the Local Transport Plan Major Scheme process that continues to be refined and changed, and recent developments reflect the move towards ‘localism’ with the aim of increasing central Government delegations. However, a relationship based on specific projects where the DfT is funder and the Council is seen as a delivery agent of Government will always create tension due to conflicting interests and priorities but both parties have worked constructively to mitigate this in delivering MGB.
2.5 MGB is a large infrastructure project with construction and land cost at around £600m and it did not fit well with the Local Transport Plan Major Scheme Programme which is dominated by projects under £50m. When MGB first received preliminary funding approval from Ministers in March 2006, the funding offer was conditional on the scheme being suitable for tolling where the investment from the DfT was capped. The funding offer made the Council responsible for delivering the project through a complex statutory planning regime and for managing a lengthy and challenging procurement process, whilst maintaining the contribution from the DfT within the agreed cap. The Council recognised from the inception of the project that tolling was the only sustainable funding regime to ensure the continuing support from Government over a delivery period from 2006 to 2014 when the DfT funding contribution was actually committed.
2.6 Construction work is now underway, with a projected opening date of September 2017. This outcome is extremely positive and is testament to the commitment of Halton Borough Council and its partners in advancing the scheme. In achieving this success the local Project Team were supported effectively by the policy and project finance teams in the DfT. However, there is no doubt that the process has been lengthy and complex, entailing significant negotiation and risk on the part of the scheme promoter, given the uncertainties and high costs associated with pursuing a major scheme business case.
2.7 Such undue pressure on local promoters has in part been addressed by Government during the delivery of MGB as infrastructure received higher priority in the economic recovery plan, which led to the National Infrastructure Plan (NIP) being established across central Government departments. Mersey Gateway became a priority project within the NIP, which resulted in delivery support being extended from the policy team in DfT to other Government departments, notably HM Treasury. The status of MGB as a priority in the NIP also gave the project access to the Treasury (IUK) Infrastructure Guarantee Scheme that provided resilience in a market where the appetite for private sector investment in infrastructure remains uncertain, as discussed below.
3 What are the best methods for financing additional river crossings/should strategic river crossings be tolled?
3.1 The finance question is connected with the funding arrangements available to deliver a project and this often raises the question of whether tolling is an appropriate and suitable funding option. Hence our comments deal with these two questions together.
3.2 From the outset the Council recognised that the £600m required to fund the land and construction cost for MGB was not available through conventional capital grant arrangements from the DfT. A significant local contribution would be required to make the project affordable and to support the project delivery against potential tension and changing priorities in the partnership between local and national Governments as discussed above.
3.3 Although controversial, tolling was accepted by the Council as the only pragmatic funding option that would sustain project delivery. In short, the Council and the local community faced a choice between living with the day to day inconvenience to transport and travel as a result of poor service from the congested existing Silver Jubilee Bridge or to accept a tolled crossing as the only funding option available to provide the new capacity so urgently required. Furthermore, if tolling was to be an effective funding mechanism, in this case the proposed charging regime would need to apply to the new crossing and the existing Silver Jubilee Bridge, which is currently not tolled.
3.4 This funding strategy proved effective in maintaining the support of successive Governments set against a deteriorating national economy not seen in modern times.
3.5 The political acceptability of tolls has been assisted by the fact that the nearby Mersey Tunnels have been tolled for many years and this presented a local benchmark for the preparedness of users to pay tolls for Mersey Gateway. From the outset the funding strategy capped toll charges for Mersey Gateway at the levels charged for the Mersey Tunnels, even though higher charges would have been capable of providing more funding through tolling than actually delivered in the funding arrangements put in place. It is important that when considering tolling that the charges that could be applied take into account the whole scope of benefit cost appraisal and not simply set at the level required to cover all project cost. Such an approach is likely to produce a hybrid funding mechanism of part toll revenue and part funding from other sources such as Government grants, which was the case for MGB.
3.6 The hybrid funding for MGB was made up of the toll revenue forecast based on the maximum toll charges assumed where projections were made over the first thirty years of operation, including the four year construction phase. This produced a fixed assumption for the amount of toll revenue available to contribute to the funding required to deliver the project.
3.7 The Council then produced a whole life cost model that projected the total funding required to sustain construction, operation and maintenance over the thirty year term. The whole life cost model identified the gap funding (on top of the toll revenue assumed) required to deliver the project and this gap funding became the maximum revenue grant that the DfT was committed to at the commencement of procurement. The maximum commitment was expressed in net present value terms which provided flexibility over the profile of year on year payments to help bidders sculpture the overall revenues efficiently to offer best value. The Council was incentivised to reduce the gap funding (i.e. the revenue grant) by retaining 30% of any margin secured at Financial Close with the DfT benefitting from the balance in savings made.
3.8 The combination of toll revenue and revenue grant produced the maximum revenue stream that was available to fund the project over the thirty year term. This provided the revenue to finance the project and the following comments address how the Council decided to use this revenue to finance MGB.
3.9 The Council recognised the value the private sector can bring to managing risk on a complex project like MGB. The procurement process was structured to provide maximum scope for transferring risk to the private sector on best value terms. The use of private finance formed part of this risk transfer strategy.
3.10 The outcome for MGB is a combination of private finance, Council prudential borrowing and finance secured through the recently introduced Treasure Infrastructure Guarantee Scheme. This combination was seen as the right solution for MGB given the market conditions at the time of procurement and it demonstrates that future projects could benefit from taking a flexible approach to their financing arrangements, and the support of national Government to assist in bolstering the project credit rating can pay dividends in securing better value for money from private finance markets.
4 How can the public sector attract greater investment from the private sector for the delivery and maintenance of river crossings?
4.1 The finance arrangements discussed above require the project to be attractive to the following sources of private sector investment.
4.1.1 Equity Investors: normally provided by the major international construction companies with the specialist design, construction and maintenance skills required to deliver major civil engineering structures with high levels of confidence of success in terms of time, quality and cost. Attracting equity is the key to delivering a successful project through a competitive process. Companies capable of delivering complex infrastructure are often scarce and operate internationally. The equity resource in suitable companies is also limited and in a competitive market the most attractive projects will be chosen for investment. Promoters of River Crossings need a keen commercial appreciation of how to structure a procurement opportunity that attracts a competitive interest from equity investors. This may stretch the skills normally available in national and local Government institutions seeking to promote River Crossings.
4.1.2 Senior Debt Providers: such as banks and financial institutions who have an investment appetite for infrastructure projects where returns are often spread over twenty years or more. The financial crisis reduced the market capacity for this investment but conditions are improving. The investment is exposed to project risk and hence promoters need to make the project attractive to this market.
4.1.3 Senior Debt supported by Public Sector Guarantee: such as investors in Treasury gilts or local authority bonds where the investor takes the risk of national or local Government default and the guarantor takes the project risk. This option is very useful as it provides some resilience when delivering projects when private sector investor appetite for project risk is uncertain. The Treasury Infrastructure Guarantee Scheme was an important initiative for MGB as it enabled procurement to be approached with confidence that sufficient finance would be delivered in uncertain market conditions.
4.2 To attract investment into MGB the Council provided the resources to establish a Project Team that had the potential to deliver a class leading performance. This required considerable investment in the Project Team but the outcome delivered savings in the overall budget that justified the investment made.
4.3 The combination of experience, resources and empowerment enabled the Project Team to quickly establish a reputation with potential investors and biddings groups leading to reciprocal trust. These confident messages were fed back to the consortium boards and their lenders, which consolidated the commitment of all investors to the procurement competition.
4.4 The structure of procurement was influenced substantially by the market consultations undertaken prior to inviting formal expressions of interest.
4.5 For example prior to commencing procurement the Outline Business Case recognised that there was a compelling case on value for money grounds against the procurement of a conventional concession arrangement (where the private sector takes the toll revenue risk). The Council had undertaken extensive traffic modelling to understand the current demand on the existing free to use Silver Jubilee Bridge and had taken a prudent view on the amount of traffic that would pay tolls drawing on the evidence of the nearby tolled crossing at the Mersey Tunnels. The combination of understanding existing demand and a prudent view taken on the preparedness of existing users to pay tolls reinforced the view of both the Council and the DfT that the baseline toll forecasts were robust.
4.6 Transferring this uncertainty to the private sector as part of a concession arrangements was however likely to either fail due to risk transfer not being bankable in the current project finance market, or lead to very inefficient financing and investor arrangements embracing contingency measures designed to absorb severe downside outcomes. Also, the market soundings had revealed a very thin appetite for demand risk transfer from both sponsors and lenders and running an effective competition on this basis was a real concern.
4.7 The market appetite for investing in the toll revenue stream remains a matter of conjecture but evidence collected suggested that a procurement that relied on this investment being attractive to the market was too risky. Also, the concept of incentivising bidders to grow toll revenue was not consistent with the Council objective of minimising tolls.
4.8 The Council also retained the view that the private sector was best placed to deliver the new crossing at value for money, based on a fixed cost and programme specification (i.e. a conventional DBFO with service availability requirements) and the private sector also had the professional and commercial expertise to operate an end to end toll service based on open road tolling collection. Prior to commencing procurement the Council had investigated how these operational functions normally embraced in a concession contract could be reflected in an integrated PPP but where the Council (supported by Government) retains demand risk.
4.9 Based on this robust preparation, a decision was taken to launch procurement based on combined contracts:
4.9.1 The Project Agreement (or DBFO) prepared to attract the full market interest in limited recourse project finance where the private sector takes availability risk (but not demand risk) underpinned by the 30 year contract term to transfer substantive whole life asset cost risk.
4.9.2 A Demand Management Participation Agreement (DMPA) which specified the end to end toll collection service with pain/gain arrangements for delivering toll revenue to the Council with a seven year contract term.
4.10 Finally, the Council supported flexibility in the procurement process through the production of a design guide, which explained where the Council had already identified potential areas for value engineering, and the boundaries within which design flexibility could extend.
4.11 Attracting the right investors and running an efficient and controlled procurement were the main reasons for delivering MGB substantially below the budget agreed with the DfT.
5 How can technology be used to improve strategic river crossings for road users (e.g. better management of traffic flows)?
5.1 MGB has adopted a modern Open Road (or Free Flow) tolling service that saved at least £20m in construction cost but introduced greater risk over the enforcement of toll collection. Transferring revenue collection risk to the private sector mitigated this risk and this may be a precedent for future projects?
5.2 As experience in operating Open Road tolling in the UK increases, the options for using varying charging regimes to achieve traffic or environmental objectives (such as air quality) will become available.
January 2015
Annex One
Liverpool City Region submission to Transport Select Committee Inquiry on Strategic River Crossings
0. Context
0.1 The Liverpool City Region (LCR) Combined Authority is pleased to respond to the Transport Committee’s call for evidence on the issue of strategic river crossings.
0.2 The LCR Combined Authority was established in April 2014, and comprises the Leaders of Knowsley, St Helens, Sefton and Wirral councils, the Mayor of Liverpool, and the Chair of the Liverpool City Region Local Enterprise Partnership. The Authority has statutory responsibility for strategic economic development, transport, employment and skills and housing.
0.3 As a City Region bi-sected by the River Mersey, the issue of strategic river crossings is of direct relevance locally, and cross-river connectivity is vital to economic growth and accessibility.
0.4 Operationally, the Combined Authority is the owner of the two tolled Mersey Tunnels, which link Liverpool and Wirral. These are operated on its behalf by Merseytravel.
0.5 Halton Borough Council is the lead authority for the development of the new Mersey Gateway Bridge between Runcorn and Widnes, which will address the bottleneck presented by the existing Silver Jubilee Bridge between Runcorn and Widnes. Both crossings will also be tolled when the new crossing opens in 2017.
1.0 How well does local and national government work together to plan and deliver river crossing projects?
1.1 In general terms, the approach to planning and delivery has tended to be inconsistent as successive Governments grapple with the transport infrastructure required to support a modern and competitive economy. This reflects the fact that many river crossings have been developed in piecemeal fashion over time and through different funding, delivery and operating regimes. Strategic river/estuary crossings are expensive investments and can only be justified where benefits are at least commensurate to these higher costs. Providing the funding, in whole life terms, and demonstrating a robust business case, are both particularly challenging where proposed crossings are not located on the strategic road or rail networks where planning and delivery rests on the capacity of local government. A core issue concerns the lack of a clear, national strategy for strategic roads and crossings, linked to the lack of a national spatial plan. The establishment of a National Infrastructure Plan (NIP) and assigning Major Project status to specific projects within the NIP would reduce planning risk and speed up the pre-construction delivery procedure.
1.2 Government policy for adopting tolling or road user charging to ease affordability pressures appears inconsistent. Queensway and Kingsway Mersey Road Tunnels are operated as private tolled roads by Merseytravel. This stems from their promotion and development by the constituent local authorities in the 1920s and 1960s, respectively. The Kingsway Tunnel, opened in 1971, although not a trunk road, forms a strategic link, providing a virtual continuation of the M53 motorway between Chester and Liverpool. However, other nearby strategic crossings, e.g. the M6 Thelwall Viaduct or A55 Conwy Tunnel are of equal importance as strategic links, yet form part of the UK’s un-tolled trunk road network. The rationale for these differences is generally unclear and confusing to the travelling public, but comes as a result of these crossings being developed at different times, under different funding regimes, and by different bodies.
1.3 The Mersey Gateway scheme demonstrates that the inconsistent use of tolling evident in the past continues today. The project is an example of a locally developed large-scale, strategic river crossing, where the project was not part of the Strategic Road Network. After an unsuccessful campaign to promote the Mersey Gateway as a trunk road scheme, Halton Council took the initiative to deliver the project as a local major transport scheme under the Local Transport Plan funding arrangements.
1.4 The scheme received preliminary funding approval in March 2006, the offer being conditional on the scheme being suitable for tolling where the investment from DfT was capped. The funding offer made the Council responsible for delivering the project through a complex statutory planning regime, and for managing a lengthy and challenging procurement process. Construction work is now underway, with a projected opening date of May 2017. This outcome is extremely positive and is testament to the commitment of the local authority and its partners in advancing the scheme. In achieving this success the local project team were supported effectively by DfT’s policy and project finance teams. However, there is no doubt that the process has been lengthy and complex, entailing significant negotiation and risk on the part of the scheme promoter, given the uncertainties and costs associated with pursuing a major scheme business case. Such pressure on local promoters has, in part, been addressed during the delivery of Mersey Gateway which coincided with DfT placing greater emphasis on supporting the promotion of major projects which led to the NIP being established. Mersey Gateway became a priority project within the NIP, which resulted in delivery support being extended from the policy team in DfT to other government departments, notably HM Treasury,
1.5 Despite the move towards increasing the support available to local authorities seeking to promote large infrastructure projects, the conditions of such support still places major delivery risk on the local authority. Such a risk also raises issues of equity, particularly in the case of small local authorities that are bisected by large rivers or estuaries, often disproportionately affected by existing traffic conditions.
1.6 To explore this in more detail, the funding agreement between Halton Council and DfT placed the financial risks involved with the project delivery with the Council. The funding commitment was heavily conditioned, providing Ministers with opportunities to exit the funding agreement during the lengthy delivery programme. This increases the uncertainty facing local promoters where termination of funding leads to large abortive costs being settled. The delivery risk tends to fall away when central government funding is committed, but this commitment is often delayed until construction contracts are about to be executed. In the case of Mersey Gateway the funding commitment was delayed until Financial Close (when contracts were awarded to the private sector) and at this stage the Council faced a minimum potential abortive cost of circa £40m built up over eight years.
1.7 The differing approaches to the development, management and operation of strategic river crossings have resulted in inevitable differences in their operating and management regimes; there is no consistent concessionary travel scheme on private tolled roads, and vehicle classification systems also vary by crossing. Tolling systems are often developed in isolation, without consideration of other existing crossings, and how they can be fully integrated. Neither is there any strategic approach to toll levels nationally, with significant variations in tolls that do not necessarily reflect the relative strategic importance of the crossing. This is an area where government influence would be helpful.
1.8 Many existing tolled strategic river crossings are also governed by separate, locally promoted legislation, making changes to the management or operating regimes of the crossings is only possible by amending each individual piece of legislation. This makes the implementation of national policy objectives difficult, e.g. the ability to vary tolls to incentivise low-emission or electric vehicles.
2. What knowledge, resources and experience does the public sector need to deliver large, strategically significant river crossing projects?
2.1 Large infrastructure projects require dedicated delivery teams to be established. The dedicated resources should have professional and commercial competence covering a wide range of disciplines. Public sector organisations are unlikely to have this competence and skill in-house and need to recruit and/or commission experienced staff to ensure effective and efficient project direction and preparation.
2.2 The public sector has demonstrated a mixed performance when delivering large infrastructure projects. Quality assurance in project management, such as the peer review undertaken at project inception, tends to focus on the competence of the project team operating under effective governance arrangement. Securing a remedy to the shortcomings identified is often far from straightforward as experience is in short supply and comes at a premium beyond the usual scale of remuneration available in the public sector.
2.3 Halton Council faced such a challenge when establishing a delivery capability for the Mersey Gateway Bridge project. Recognising that it was essential to mitigate the potentially expensive delivery risk, the Council set out to put in place a dedicated team under the control of an experienced Project Director, commissioned to deliver the project through the planning and procurement process. The project team were responsible to the Council Chief Executive (as Senior Responsible Officer) who chaired the Project Board with overall democratic control being exercised by the Council’s Executive Board. The original governance structure was reinforced by central government advisers as preparation moved to the procurement stage. Such a commitment is essential to safeguard the project and to maximise the likelihood of a successful outcome. Some form of centralised support for the public sector to assist in establishing delivery teams efficiently would be welcome by councils facing similar challenges in the future.
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 It is clear that strategic river crossings can help to facilitate new development and regeneration, by improving transport connectivity and access to labour and to markets. It is considered essential that strategic river crossings are delivered in response to a clear and convincing need, and in response to a robust evidence base. There can be a tendency for aspirational, large-scale proposals such as river crossings to be driven as “solutions searching for problems”, rather than as facilitators of sustainable growth driven by clear evidence and need.
3.2 However, the integration of new strategic river crossings with house building, urban regeneration and business opportunities also highlights the importance of the land use planning system as a facilitator of this aim. Planning can drive growth in a holistic and integrated way, and consider the needs of all forms of transport in addition, thus ensuring that transport is prioritised according to spatial need, and that appropriate funding sources can be targeted. It also supports the Government’s clear ambition to close the economic gap between the north and south, and ensure that regeneration occurs in town and cities.
3.3 It should also be noted that revenue generated from existing tolled crossings can assist in regeneration schemes for the local area, and used to assist transport regeneration schemes and the wider road network. The Mersey Tunnels Act, for example, allows surplus toll income to be used for transport measures that support the Local Transport Plan, and to provide transports solutions to serve new employment sites.
3.4 Evidence from the LCR also highlights the value of a tolling regime as a way of supporting local shopping centres; half of retail spending by Wirral residents stays within Wirral, and should the tolls to be removed, it is estimated that a net £80m of retail spending would be lost from the Wirral, equivalent to some 600 retail jobs (fte). Up to 85% of these job losses would occur within the less affluent East Wirral wards, which already suffer from higher levels of unemployment.
4. Do existing cost-benefit analysis methods adequately capture any potential transformative effects of new river crossings?
4.1 The standard methods used to evaluate the cost benefit of substantial changes to travel and transport cost, arising from a new strategic crossing, are challenged. The step change in travel and transport opportunity after providing a new river/estuary crossing is very difficult to predict. The established methods and policy tend to underestimate the benefits of providing new connectivity and releasing supressed demand for travel, resulting in an unfavourable comparison with more incremental improvement such as evaluating the likely economic impact of widening a motorway or a managed motorway scheme. The improved connectivity as a catalyst for regeneration is not therefore likely to be a major factor in justifying a project using the current methodology and more evidence is required to address our understanding of how such improvements in the transport network can support regeneration. Providing such regeneration is sustainable for reasons other than economics. In the current circumstances the case for strategic crossings may be underestimated, resulting in a lower priority for investment when ranked against other types of improvement schemes.
4.2 The funding agreement for Mersey Gateway Bridge requires a robust ‘before and after’ evaluation which has now been developed into a comprehensive evaluation plan. The evidence base will be improved by these studies and future decisions will benefit from more robust assumptions. The lead time for the evaluation report is, however, several years which will be a frustration to those currently looking at similar projects.
5. What are the best methods for financing additional river crossings?
5.1 Most large estuary and river crossings completed in recent times have been funded substantially through user payments that support a project finance structure being deployed. Such project finance arrangements are based on the public sector taking out loans to fund construction and operation and using the revenue stream from road user charging to service debt repayments. Experience suggests that the public sector model is questionable in value for money terms and results in longer debt repayment periods than envisaged when investment was committed.
5.2 Since the delivery of crossings at Dartford (M25) and the Second Severn, risk has been transferred to the private sector to improve value for money and to ensure debt is repaid as planned. The two schemes mentioned above were delivered as concessions, where the private sector was responsible for almost all the delivery operation and financing risk with the public sector role limited to that of enabler. Since the financial crisis, however, the investor appetite for taking demand risk (the risk that toll revenue will turn out as expected) has all but disappeared; new forms of allocating risk to the private sector are now taking place.
5.3 Consequently the contracts awarded for Mersey Gateway Bridge are based on the concept of a public private partnership; the private sector is responsible for delivering and operating the new crossing, including a modern open road tolling service, at a fixed cost to the public sector. Once the new crossing is open and the tolling service is operating satisfactorily, the Council payments for these specified services commence using revenue from the tolls collected, plus government grants. The private sector operator uses these payments to service the private finance debt invested to deliver and maintain the infrastructure. These integrated contracts are designed to place risk where it can be managed, and to incentivise the private sector to assist the public sector in the management of its retained risk. More information on the contracts developed for Mersey Gateway Bridge can be made available to the Committee if required.
5.4 For more conventional public sector-led schemes, funds will typically stem from central Government, either via the Highway Agency, in the case of a trunk road scheme, or via a scheme that draws down devolved monies from the Local Growth Fund, Integrated Transport Block or similar.
5.5 There is also the potential for crossings to be funded using development contributions via Town and Country Planning legislation, including the proposed Community Infrastructure Levy (CIL). The advantage of such a funding approach is that it clearly links the need for a crossing with new development pressures and opportunities. It also ensures that the public sector does not bear the costs associated with transport pressures exerted by a new development.
5.6 As a point of principle, however, for schemes that are nationally significant, linked to a clear strategy or policy framework, it is reasonable that Government should seek to fund additional river crossings, supported by road user charging where appropriate.
6. How can the public sector attract greater investment from the private sector for the delivery and maintenance of river crossings?
6.1 The Mersey Gateway Bridge experience reflects the current market appetite for investing in major infrastructure projects. The project has been delivered with significant savings when compared with the project budget, but the public sector is exposed to toll revenue being lower than forecast. The private sector has taken on significant delivery risk and the Council has received a competitive price for managing these risks. Information on the detail of the integrated contracts can be provided to the Committee if required.
7. Should strategic river crossings be tolled? How should tolling be implemented? How can technology be used to improve strategic river crossings for road users (e.g. better management of traffic flows)?
7.1 It has been Government policy since 1945 to levy tolls, and that estuarial crossings should be paid for by the user rather than the taxpayer. This has been justified because the users benefit from the exceptional savings in time and money that costly facilities make possible.
7.2 In principle, tolling has significant merit as it ensures that the costs fall to those who benefit from the scheme, providing a guaranteed income stream to maintain the asset. Tolling also provides a powerful element of demand management which has been proven to be extremely effective in managing pressure and trip making prosperity. Local evidence suggests that without tolls on the Mersey Tunnels, the traffic demand could increase by up to 40%; if additional tunnels users were to travel during the morning peak, the average delay would increase to approximately 20 minutes for both directions and be experienced by approximately 80% of tunnels users. The cost of additional congestion to the economy, based on a 40% increase in demand, could be some £12m per annum.
7.3 Toll systems are clearly contentious, however, as they present the user with an additional cost over and above fuel duty and road fund licensing. Many tolling methods also provide a physical barrier to the smooth flow of vehicles, which can create local congestion and disturbance. Tolling will always constitute a political barrier to the development of a new crossing, unless efforts are made by Government to move to a form of national road user charging, and which would need to replace fuel duty and road fund licence as a minimum.
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