Severn Crossings Toll

Geraint Davies Excerpts

Thursday 19th May 2011 Westminster Hall

[David T. C. Davies]

I must admit that that was a surprise to me. It would, of course, have been feasible to do it, but a Conservative Government in the Welsh Assembly—which was, sadly, not to be—would have had to pay back all the money to Severn River Crossing. That would have been a significant amount of money. I am not sure whether the policy applied to heavy goods vehicles—I believe that it applied just to cars—but it would still have been significant. The point is that SRC could not simply have been told to freeze the tolls without compensation being paid, because its shareholders would have had every right to take the Welsh Assembly Government to court. There would have been some practical difficulties in implementing that policy, because I presume that it would have been up to the Welsh Assembly Government to negotiate the rate directly with SRC. I am not sure how far down the line the negotiations went. It would have been feasible, but it would have been a challenging proposition. Sadly, it will not come to pass, because of the efforts of the hon. Lady’s party.

[Geraint Davies (Swansea West) (Lab/Co-op)]

The point is that the Welsh Assembly Government had no locus or power to set anything. These things are set by the UK Parliament, which cannot be changed now. Surely the Government can announce, however, not that we can change the toll now, but that in 2017 the toll will go down to £1. If they did that, it would trigger inward investment now, not then, because people would plan for the future. They could establish their business now in south Wales, so that after 2017 their costs would go down. That is what the Government should do.

[David T. C. Davies]

Once again, the hon. Gentleman has anticipated some of my comments.

Before I turn to 2017, we should have a quick discussion about the impact on the economy. There is, as the hon. Gentleman will recall, mixed evidence about this. There is no hard evidence that the current level of the tolls is having a detrimental impact on the economy. Let me quickly add, however, that there is plenty of anecdotal evidence, which most of us would accept, particularly in relation to areas such as haulage and tourism. I worked extensively in the haulage industry and the situation is not all bad, because a haulage company in Wales competing for business that is local to south Wales has an advantage over an English company in Avonmouth, which would find it harder to compete. Similarly, shopkeepers in towns such as Chepstow might be concerned that, if we got rid of the Severn bridge tolls, it would lead to even more people crossing over and going to Cribbs Causeway, when the current numbers are already causing a problem.

Having said all that, I think that there is an impact on the economy. I do not think that it is as bad as some people have suggested, but there is a negative impact. To give some evidence for that, I remind Members that the previous Government froze the Humber crossing tolls because they felt that the level of those tolls would have made the impact of the economic downturn worse. It is sad that, having decided to do that on the Humber, the previous Government did not feel that they could make the same commitment to the River Severn. If any Opposition Members want to tell me why Wales was discriminated against in that fashion, I would be more than happy to hear their comments.

What we need is hard evidence so that we can put a proposal for 2017 to the Government. I welcome the fact that the Welsh Assembly Government, who do wonderful things on occasions—they are not all bad; like all things, they have advantages as well as disadvantages—are conducting an in-depth assessment of the impact of the current level of tolls on the economy. They will hope to get evidence from the Department for Transport. It was our strong recommendation that the DFT work with the Welsh Assembly Government on this and offer them every assistance and co-operation, and I very much hope that it does.

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[David T. C. Davies]

The right hon. Gentleman has far more knowledge of what happened in 1991 than I do. However, if we had asked for a more advantageous and flexible Bill from our point of view, I presume that SRC would have asked for more than £1 billion. I was not party to the negotiations, but I imagine that it would not have simply rolled over and given way that easily—I do not know. What I know is that it is all up for grabs after 2017 or thereabouts. It is important, first of all, that we have hard evidence about the impact on the local area.

The hon. Member for Swansea East—

[Geraint Davies]

West. We have not had the boundary changed yet.

[David T. C. Davies]

I apologise. The hon. Member for Swansea West (Geraint Davies) made a point about the potential level of the toll after 2017. I think that he will agree that it was a back-of-the-envelope calculation, and I am sure that it can be corrected. I shall address the figures to which he has alluded. The current annual revenue from all the tolls is about £76 million a year. The current cost of maintaining the bridge is £15 million. I estimate, therefore—this is purely a back-of-the-envelope calculation—that it would be feasible to levy the toll at about £1.50 and still be able to maintain both bridges. Obviously, there may be other factors that the Welsh Affairs Committee has not been made aware of.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

I would like to make a few quick comments before my voice breaks again. The importance of the report, as I have already suggested, concerns inward investment and prosperity for Wales. The simple fact is that if we want to attract inward investment into Wales, multinational companies in particular need to be able to assess, years in advance, the likely costs they will face in networking European markets. I urge the Government to make their intentions clear, so that that can be done.

I share the view of the Welsh Affairs Committee Chair, the hon. Member for Monmouth (David T. C. Davies). We should aim to minimise the toll, subject to operational and maintenance costs, and look again at off-peak fares in terms of traffic management and the balance between car and van traffic and larger trucks—the balance between inward investment and trade versus tourism. That is not easy, but we should make a general statement of intent now. We want to see a substantial reduction in a tax on trade and inward investment into Wales. I respect the point made by the Minister from a sedentary position asking why Labour did not do that. If that was a mistake, then that is a reason not to repeat it.

As we approach 2017, it becomes more and more important that we make those signals—generally at first, and then specifically down the road. The Welsh Affairs Committee is focusing strongly on the various parts of inward investment—visiting Germany and so on. The crossing is a crucial artery for investment into Wales. The electrification of the railways is also crucial. People will know that I have stood up for the electrification of the railways from Cardiff to Swansea, as well as to Cardiff. The railway line and the road are the two main axes for getting trade into Wales.

The point was made that there is some uncertainty about the economic impact. The Welsh Assembly is supposed to be doing an assessment of that. The fundamental economic analysis is obviously that this is clearly a tax on trade and inward investment. Taking on board what the Chair of the Committee said, it works both ways. The fact is, however, that it is not worth it for people in Newport to pop over to Bristol to do some building work there, because of the toll. The toll impedes the development of ambitious small businesses. A company opening its headquarters will look at the marketplace. Clearly, more people live on the English side of the River Severn than on the other side. In terms of cost-management, they are better off locating on the English side. That stands to economic reason, so there is a dramatic impact.

I was disappointed by the evidence we heard from Ieuan Wyn Jones. He was meant to be in charge of economic development for Wales, but happily he is not any more. He seemed to have the idea that some of the reduction in price, which should go to motorists, inward investors, and the traffic of people and products, should be taxed away and spent on other pet projects in Aberystwyth, or wherever. That misses the point that the fundamental driver of the Welsh economy is trade.

As it happens, my father used to be in charge of economic development in the Wales Office some time ago. There was an analysis at the time to show that Wales is not just one great economy. Essentially, it is two economies—south Wales with the south-west, and north Wales with Liverpool. A moment’s thought would lead us to that conclusion. The study made clear the interdependence of the south-west and south Wales. Therefore, having a brake or a tax on that relationship harms both economies. We know from the first principles of economics that trade is beneficial, so it is not a good idea to say, “Separate these two and they won’t have to compete with each other.” Trade is mutually beneficial. Again, I urge the Minister to encourage the Treasury to signal the direction of travel and to give us greater clarity.

In places such as Swansea, which I represent, we have the enormous growth of the university as a research and development, technologically driven entity with global reach and attraction. Companies such as Tata Steel, Rolls-Royce and now Boots the Chemist have moved their research and development to Swansea, and they are looking to develop products with a global reach. Part of that is being able to link to European networks and beyond, and part is the cost of moving products and people between Wales and England and beyond.

The issue is not a minor one, with people who happen to live in Cardiff getting annoyed; it is about our strategic position on inward investment and the development of the Welsh economy, which is so important for all of us. I look forward to the Minister’s response.

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[The Parliamentary Under-Secretary of State for Transport (Mike Penning)]

It is a pleasure to serve under your chairmanship, Mr Davies, in this ground-breaking debate. I wish I had been the first ground-breaker this afternoon, but the Under-Secretary of State for Wales got in first. It is a pleasure to be here, and to respond to the Select Committee’s genuinely excellent report. I had the honour and privilege to give evidence to it early in my time as a Minister.

When I looked at the history of Ministers in my Department, I wondered whether I would be here today. The average life expectancy of a Transport Minister is eight months, and I have been in the post for a year and a day. I am either doing something very wrong, or the Prime Minister has forgotten about me.

To be honest, I was pleased with the report in many ways, not least because it removed some of the myths to which my hon. Friend the Member for Monmouth (David T. C. Davies), the Committee Chairman, alluded. I will try as best I can to respond to the debate, instead of reading out a speech that was written for me, and I will do that as a Minister for the United Kingdom.

The two bridges are national assets, and owned by no one, except that the second one is temporarily owned by the company that was set up to facilitate it. The freehold land that it sits on is the responsibility of the Secretary of State for Transport, and the toll booths in Wales are also his responsibility. The analogy is interesting. I have a map that shows the boundary between England and Wales. The original bridge is solely in England, and the new bridge, as it is still called, is predominantly on English soil and water.

That is unimportant, because the bridges are national assets, and I fully respect the concern of the Welsh community, particularly in south Wales, about the importance of the bridge and its efficient working. I also respect the concern about the contract that was entered into when I was still a fireman; most of us here, although not me, were very young in the early days of the private finance initiative, to which my hon. Friend the Member for Monmouth alluded. With hindsight, would we be in such a position today? Of course we would not, whether or not the previous Government were still in place.

As colleagues who know me are aware, I am not hugely party political. Nevertheless, I could not help thinking that we had 13 years of a Labour Government and although 2015 is approaching, we are only one year along from when the previous Administration were in place; the hon. Member for Swansea West (Geraint Davies) alluded to that point from a sedentary position. What work did the previous Administration do to bring in some of the technology that I will talk about in a moment, and what is going to happen at a later date, possibly in 2017? I will touch on some of those points in a moment, but the issue depends on the funding that the users put into the bridge as we go forward.

The Chair of the Welsh Affairs Committee is a good friend of mine, but he alluded to a tax on Wales. In reality, it is a tax on anybody who uses the bridge. There is an extensive haulier community in my constituency, and I am the Minister responsible for roads, freight and so on. Hauliers from England, Scotland and Ireland, and those from continental Europe, who also pay the tolls, might take issue—although perhaps only fractionally —with the comments made by the Chair of the Welsh Affairs Committee. I understand, however, how emotive the subject is.

Let me touch on some of the points raised. I will not repeat the brilliant history lesson provided by my hon. Friend the Member for Monmouth—again, I am praising the Chair of the Welsh Affairs Committee—because there is no point going over it again. We all know where we are, and many hon. Members know the situation better than I, despite what I have learned over the past year since taking this position. I, too, sat in queues at the tolls for many years when Wembley stadium was being rebuilt and the wonderful Cardiff stadium was used. I sat in that stadium on many occasions, supporting the England rugby team. I will leave the results for others to comment on.

For me the key questions are where we are now, what we can do in the short term and what is the long-term proposal for the bridge. I listened to earlier comments about technology. It is ludicrous that in the 21st century, technology is only just arriving at the toll booths on the crossing. However, some of the comments made during the debate about what can and cannot be used at the tolls were not factually correct; if my officials are wrong, I apologise. The hon. Member for Newport East (Jessica Morden)—I apologise if I pronounce some of the constituency names wrongly; my Welsh is not brilliant and as a cockney lad I was not taught it at school. I mean no offence. [Interruption.] I admit that I picked the easy name first.

A debit or credit can be used at a manned toll booth. It can be used at any time, but it depends on whether the booth is manned. The Chamber will be pleased to know that according to information that I received today, it will be possible in July to use non-PIN card technology at the booths. That is crucial because the use of PIN technology creates delays. I will come on to further technology later in the debate, but my information suggests that that will happen in July—I was told it would happen in the summer, and “July” is written in brackets after that.

The company has an agreement with the banks, but we have had to assist with that to obtain that sort of technology. As hon. Members will imagine, banks prefer PIN technology because of the risk of fraud. We have resolved that issue, however, although there was some surprise about that, not least because we had to get through European legislation. Nevertheless, we succeeded in doing so and in July people will be able to cross using non-PIN card technology, which will help enormously—I am sure hon. Members will hold me to that, and I will hold the company to account should it not happen.

The removal of the 30 seconds that would be added to a transaction through the use of a PIN will help speed through the just under 4,000 vehicles per hour the booths are capable of dealing with. Interestingly, the capacity of the M4 is greater than that when everything goes correctly. I hope that in five hours’ time when the right hon. Member for Torfaen (Paul Murphy) makes that journey, the severe tailbacks that were reported to me earlier will have gone—I am joking; as I understand it, the road is clear although information comes in regularly.

The other day, I was pleased to announce a huge investment of £100 million in the M4/M5 managed motorway network. That money comes from the central fund, and will dramatically change the traffic situation on that side of the bridge. As hon. Members know, my background is in the fire service, and I was very sceptical about managed motorways when I first looked at the technology; to me, hard shoulders are dangerous areas that were designed for a reason.

Nevertheless, when the managed motorways system was piloted on the M42 under the previous Administration, it was massively over-engineered at the time, but it worked. We have since moved the engineering down, and rolled the system out around the country. A £100 million investment is being provided in difficult times to the M4 and M5 around the Bristol area. Colleagues will know how difficult the bottleneck on those two major arteries can be, and that will be alleviated once the roadworks are finished. That is always a problem—it is no pain, no gain when it comes to roadworks.

While we are talking about pain, most colleagues will receive a letter from me tomorrow stating that we intend to start work on the road surface of the new bridge. Work will start—I can give the exact date—on 9 June and run until 14 July on the eastbound carriageways, and between 6 September and 11 October on the westbound carriageways. That is due mostly to the fact that the inside lane in both directions is severely worn and will have to be completely replaced.

We looked carefully at how to manage the obvious disruption that will take place. Options included a contraflow system and shutting the bridge while work is carried out. The option that we went for will extend the work—overall it will take about five weeks to put a new waterproof membrane on the bridge and surface the road—but it will leave at least one lane open each way. We made the decision not to shut the bridge or use a contraflow system that would have caused more expense and extensive delays. There will be delays, for which I apologise, but investment must be put into the bridge because of its age, and that will be done. It is a reflection of the amount of traffic that the bridge carries.

The only party political point that I will make during my speech will be to touch on the recent elections and my Welsh colleagues’ proposals to fund the costs of the toll increases through the Welsh Assembly. It is entirely up to the Welsh Assembly whether or not it wishes to use its funds in that way. If the Conservative party had been elected, it would have been its decision how to run the economy in Wales, just as today’s Administration make those decisions. If the Conservative party—or any other party as the hon. Member for Pontypridd (Owen Smith) said earlier—decided that it wanted to fund the cost of the difference between the toll today and the proposed increases under the contract agreement, that could be negotiated with the United Kingdom Government. My door is open to the Welsh Assembly, under the respect agenda to say the least. I wrote to my counterpart in that Assembly—I must now write again because the holder of that position has changed—and offered my assistance.

I am speaking on behalf of the Department rather than the Treasury, but if that money were used to offset the difference, the contract would not be affected and would remain in place. The only difference would be that money would be recouped from the Welsh Assembly rather than directly from the tolls. It is a complicated legal issue. It sounds simple, but it is quite complicated. Did I know about this? I have to be perfectly honest: the answer is no. However, that does not mean that we would not get into negotiations or provide every assistance for that to happen.

All the discussions that we have had to date, including in the Select Committee, have been based on whether there could be a reduction in the toll at night or a reduction in the toll for local residents. I must admit that the position is much more complicated in this case than it is in the case of the two other major bridges that are often cited. Could there be no increases whatever? Everything comes down to the fact that a contract is in place that says that the company is allowed, after costs, to recoup X amount of money before the bridge is handed back into the full ownership of the Secretary of State.

If I were the company, would I want to negotiate any changes to the present contract? Probably not. So what we are talking about is an increase in the time that the tolls would be there. At every stage when I talk about the tolls and the bridge and we have these discussions, it is a question of a balance between the length of time that the bridge is out of our ownership, based on the contractual agreement that we have, and when it could come back into our ownership and decisions could be made.

It would be wrong of me to say that we are not thinking about what will happen at the end of the concession agreement. Of course, we are thinking about what will happen. However, as I have said, this is a national piece of infrastructure and a cross-departmental matter. It is a national asset. I am sure that the Welsh Assembly and the Welsh people will understand that we will have to consider what happens to the bridge in the context of the investment going into our networks. However, no decision has been made.

[Geraint Davies]

Naturally, the debate focused on whether we could reduce the toll to £1 up to 2017, but I infer from what the Minister has said that if the money was forthcoming—for example, from the Welsh Assembly or from anywhere else—to pay down the debt now, the bridge would move into public ownership earlier than 2017, in which case we could have lower tolls now, although perhaps not a toll of £1. Can the Westminster Government now pay down that debt from their own money, with a strategy of recovering the money that they pay it down with by reducing the toll now to somewhere between where it is now and £1, so that we could have a lower toll sooner, albeit not as low as £1?

[Mike Penning]

This is where I wish that I had not joined the Army at 16 but had gone to university and become a corporate lawyer. We can discuss the legalities in quite simple terms. Nothing at all can be done without the agreement of the concessionaire, so should the company decide that it does not want to do what has been suggested, that will be a fact. We are trapped in a contract; everyone knows that and the Committee examined the matter in detail.

I can see the logic of where the hon. Member for Swansea West is coming from, but the Welsh Assembly subsidising what would be the increase this year would not cause the contract to be terminated earlier, because all that would happen is that the same money would be recouped from the Assembly or whoever wanted to pay it as would be recouped from tolls. Thus the length of time would be exactly the same. I will write to the hon. Gentleman—the lawyers are probably panicking as they listen to the debate—to clarify exactly what the legal position is. However, I am certain—this is what all the advice says—that if the company that was formed specifically for this purpose does not want to play ball, there is nothing that we can do.

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[Mike Penning]

No. That would be a spending commitment, and I do not have the authority in my lowly position to dream of ever giving one. I know that the hon. Gentleman would not want to put words into my mouth, but the answer is no. The only way of funding that before 2017 would be through the concessionaire, and the discussion would be about whether it is willing to fund it under the existing contract—I doubt whether it would be. If we did not allow the company to increase the toll, it would look for an extension or—this is within the contract, and it would have every right to do so—to seek compensation from the Treasury. That, too, is unlikely.

By a miracle, a document has appeared before me. It says that SRC is prepared to negotiate extending the TAG scheme for car sharing. Naturally, however, it will not want to be financially worse off. That may not fully answer the question asked by the hon. Member for Newport East, but it is the best that I can do. I want to be as open as I can about this. I shall write to SRC saying what I was told during the debate and asking the company to clarify its position. I shall share that information with colleagues. It is only right and proper to do so.

I realise that I still have plenty of time, but I have no intention of filibustering—not least because Members wish to disappear. However, I have a speaking engagement in London this evening, so I am more than happy to continue.

In conclusion, I welcome the Committee’s report, and I shall work closely with the Welsh Assembly Government in analysing the economic effect of tolling. As my hon. Friend the Member for Monmouth rightly pointed out, there is little hard evidence that the bridges have had an economic effect. I do not say that they have not, but the Committee made extensive efforts to find evidence and did not, despite Chinese whispers among local communities. As I have said, the Welsh Assembly has publicised the fact that some 700 companies have located in the region over the past 40 years, long before the Welsh Assembly was formed, so something must be right. I believe that that evidence is shown on the Assembly website.

I realise that the crossing is a vital piece of national infrastructure. I am proud that my portfolio predominantly covers the whole of this great nation of ours. It is for me to work with and alongside the various devolved Assemblies and Parliaments. At the same time, however, I must ensure that they understand that it is a Department for Transport piece of infrastructure—a Westminster one—despite knowing how emotive it is to the local communities in Wales and those on the other side of the bridge in England.

I have listened carefully to the hauliers. I listen to them nearly every day, and they are an amazing group of people. Perhaps I think that because I hold an HGV licence and used to drive lorries when a fireman—like most firemen, I used to drive part-time when off duty.

The key is fairness. If tolls continue beyond the existing agreement, and if free-flow tolling comes in, it would be wrong in my opinion that the tolls should remain one-way. That unfairness would have to be addressed if we had free-flow tolling and if the toll was increased. A number of truck drivers have told me that they go into Wales one way and come out the other because of the toll. Not only is the Treasury losing income, but it is another unfairness that needs to be addressed, although it is difficult to deal with it now, because of the way it is set up.

I hope that I have not delayed anyone’s journey home. Indeed, we will finish a fraction early. I hope that I have answered most questions, at least in general terms. I have been as honest as I can, as I was when giving evidence to the Select Committee. I pay tribute to the Committee on its conclusions, even if we do not fully agree on certain aspects. I was interested to note that all who are here today are Welsh MPs, yet the subject has a significant effect on the UK as a whole.

[Geraint Davies]

I wonder whether the Minister could signal in the most general terms whether he anticipates the direction of travel for the toll post-2017 to be significantly downwards. It would be interesting information for inward investors.

[Mike Penning]

As I have said, I do not intend delaying the Chamber. The answer is no. I cannot give an indication, and the hon. Gentleman can probably understand why.

On that point, I hand over to the Committee Chair. I hope that I have paid the report due credit.