Severn Bridges (Tolls)

Stephen Kinnock Excerpts

Tuesday 21st July 2015 Westminster Hall

[Jessica Morden]

I agree wholeheartedly. There is probably now a case for a broader campaign to make such points, encompassing local government, business, chambers of commerce and so on.

Owens logistics, which is based in the constituency of my hon. Friend the Member for Llanelli (Nia Griffith) but has a main depot in Newport, is a haulage company that has long campaigned for a reduction in the tolls, on which it spends half a million pounds a year. That money just comes off the bottom line. It is an extra cost that the business has to pay that it cannot pass on to its customers. Owens has been quite open with me that it is thinking long and hard about its business decisions, because if it transferred parts of its operation across the bridge, it would avoid the tolls. That is the sort of decision that businesses in our area are making, which is precisely why we need clarity from the Government about further toll reductions.

The South Wales chamber of commerce told me about the impact that the tolls have on the tourism sector and the logistics industry. As I said, if logistics companies choose to pass the cost on to the customer, it adds to the cost of goods produced in Wales, making them less competitive, or increases the costs for businesses buying goods from England. The chamber of commerce also said that its colleagues in Business West say that it is picking up the fact that businesses are choosing to locate on the English side of the bridge due to the tolls.

Small businesses are also affected. I received an email this morning from a business that rents out marquees and employs 38 people. The cost of the tolls to the business over the summer is an extra £1,000, making it difficult for it to compete with companies on the English side of the bridges.

[Stephen Kinnock (Aberavon) (Lab)]

I congratulate my hon. Friend on securing the debate. Does she agree that the policy for the bridges and their tolls is a classic example of a false economy? The tolls may well create revenue, but a huge amount of additional economic activity is being lost. This disincentive to cross-border trade and activity deprives the Exchequer of much-needed tax revenues through corporation tax, business rates and additional economic activity. If the tolls were presented as a classic example of a false economy, we may get some more traction with the Government.

[Jessica Morden]

I thank my hon. Friend for his well-made point. The Welsh Government certainly agree that lowering the tolls would help to stimulate the Welsh economy.

Other hon. Members mentioned commuters earlier. In my constituency, many people in Magor, Rogiet, Caldicot, Undy and so on commute over to Bristol for work every day. It is a strong commuter area and the tolls’ effect is keenly felt, particularly by those who are looking for work in Bristol but cannot absorb the toll cost. Over the years, I have met people facing a bill as part of the Child Support Agency process, for example, who have said to me, “I work for this distribution company in Bristol, but once I have absorbed the bridge costs, I am on fairly low pay. How am I going to survive?” People’s employment opportunities are being limited. The only concession available on the Severn bridges is the TAG system, which allows four free journeys out of 22 in a month. Taking bank holidays and annual leave into account, that is not much of a bargain. We could do a lot more on that.

Some 12,500 people commute to England from Newport and Monmouthshire. Many of them use the bridges, which restricts their access to jobs and acts as an extra tax. My plea to the Minister today is for a consultation. We are just two years away from decisions being made, so I ask the Department for Transport to give bridge users, businesses and hon. Members a say in how we move forward and help our constituents by getting the tolls down. There is not long to go, so it is high time that we had that conversation. Successive UK Governments have failed—the Welsh Government have done the same—to undertake studies into the bridges’ economic impacts. It is time that we asked the Department for Transport to collect further evidence so that everyone can have an input.

Moving on to the thorny issue of bridge finances, having lived with the Severn bridges in the capacity of an MP for many years I can say that the finances are as clear as mud. Getting clarity is terribly difficult, so I ask the Minister for some figures today so that we can have an informed debate going forward. The concession was established by the Severn Bridges Act 1992, which, in retrospect, was clearly far too restrictive. It allowed the company to whack up the tolls every year, with no one being able to have a say and the Government arguing that they have little flexibility to step in and reduce tolls without incurring taxpayer liability. However, as I said earlier, they did step in in the case of the Humber tolls.

As we know from previous Welsh Affairs Committee inquiries, the company has done very well over the years. In oral evidence given to the Committee in 2013, we heard that the costs of the bridges for Severn River Crossing plc were some £50 million, including depreciation at £38 million and operational costs of £13 million. That £50 million compares with an annual turnover of £81 million. Will the Minister confirm the latest position and update those figures? Having a clear idea of the company’s operational costs and profits would be helpful.

The Government also do pretty well out of the bridges. They receive significant tax receipts from VAT and from the removal of the industrial buildings allowance, which was a tax relief that Severn River Crossing plc used to benefit from. From the answer to a recent parliamentary question, we found out that Severn River Crossing plc paid £154.2 million in VAT to Her Majesty’s Revenue and Customs between 2003 and 2014. However, we have been unable to get a specific figure from the Government on how much they have benefited from the removal of the IBA. Will the Minister commit today to providing that figure? Will the Government be straight about how much they have benefited?

I also hope that the Government will remedy as early as possible the situation whereby they and the company are protected from financial pain but my constituents and other users of the crossings are not. Users always end up paying, while the company is always protected. When the industrial building allowance was withdrawn, the company was allowed to extend its tolling mandate to compensate for that. The same was true of the VAT increase implemented by the coalition Government. In the spirit of fairness, I wonder whether the Government could reduce the tolling mandate given that the Chancellor has announced further reductions in corporation tax, which will further benefit Severn River Crossing plc. The first corporation tax cut will be in 2017-18, before public ownership. How will we ensure that taxpayers do not lose out when the company gets yet another tax reduction?

The main point on which my constituents would like an answer is about VAT. Given that the Government have benefited from the tax income—VAT of £154 million—why are they still arguing for tolling to continue after 2018 at a level high enough to recoup an £88 million debt? Clearly, the Government have done extremely well out of the bridges, so is it not time to pay people back a little by reducing the toll?

I want to allow others to speak, although hon. Members have already raised a lot of issues to do with the bridges. It would be incredibly helpful to know when the concession will end, because that has been a moveable feast—it was 2016, then 2017 and is now 2018. Will the Minister update us on when the Government expect the concession to end and the bridges to come back into public ownership, and on the maintenance of the bridges? A previous Minister said in reply to a similar debate to this that he would keep an eye on what he was inheriting. Will the Minister tell us a little more about what the Government expect to inherit when the bridges come back into public ownership?

May we have a discussion about free-flow technology? In various oral evidence sessions of the Welsh Affairs Committee, the company used to argue that the technology to differentiate between cars and vans was not available. Given that the Government are moving to reduce the cost for vans, surely implementing such technology will be easier. I want a maintenance-only toll, but I also want the Government to add into the mix a re-examination of what concessions might be given locally.

--- Later in debate ---

[Andrew Jones]

Removing VAT will result in a significant cost reduction. Of course, like all Members, I would like cost reductions in all sorts of areas of our economy, but to say that VAT reductions are matters of great insignificance is simply wrong. It should be remembered that further reductions in tolls for some vehicle classes once the crossings return to public ownership were also announced in the March Budget. The Chancellor announced that, when the concession to toll the crossings ends, the higher toll rate for vans will be reduced to the same rate as for cars, which will be a significant benefit to smaller businesses on both sides of the crossings. So we are considering some toll reductions, which is significant.

Our intention is to continue tolling after the projected end of the concession in 2018 simply to recover the costs that have been incurred in relation to the crossings that fall outside the agreement. The current projection of those costs stands at £88 million. We have not made any decisions about the operation and tolling arrangements for the crossings once the current regime ends. The road investment strategy contains the Government’s commitment to working with the Welsh Government and others to determine the long-term future of the Severn crossings. The Under-Secretary of State for Wales, my hon. Friend the Member for Vale of Glamorgan (Alun Cairns), who is sitting next to me, has done excellent work in highlighting the economic impact that the toll reduction for vans and the VAT reduction will have on the area and in explaining the importance of the crossings overall. We have already met to discuss that subject, and I anticipate that we will meet again shortly.

[Stephen Kinnock]

The Minister says that the Government have not yet made a decision, and 2018 is not that far away. As hon. Members said earlier, business abhors a vacuum. Business needs certainty, and it needs to know where its costs will be. Can we please have clarity on when the decision will be made and why it cannot be made within a defined period of time?

[Andrew Jones]

Although 2018 is not that far, it is still three years away. Work on what happens next is under way. We are looking at a potential end date for the concession of around 2018. It is a financial target, rather than a fixed date, which means that we have a requirement to plan appropriately, and I will address that next.