Highways England takes financial hit on Severn bridges

03/01/2019
Chris Ames

Highways England has suffered a hit to its finances of around £45m after responsibility for the Severn Crossings was transferred to it without additional funding, Highways has learned.

The two crossings - the original (M48) Severn Bridge and what is now the M4 Prince of Wales Bridge – came back under public control in January 2018 after tolls on the bridge reached the financial target of just over £1bn at 1989 prices.

At this point, responsibility for maintaining both bridges transferred from Severn River Crossing plc - a consortium of four share holders: two providers in John Laing and Vinci and two banks in Bank of America and Barclays Capital.

The consortium had built the second crossing under a design, build, finance and operate contract. It has now handed responsibility to Highways England.

The Department for Transport (DfT) has confirmed that ‘the maintenance and operational costs for the crossings are subsumed into the overall RIS1 [Road Investment Strategy] settlement for Highways England of £15bn for 2015-2020,' which means that no additional funding was provided.

The DfT had originally proposed that it would halve tolls on the crossings (payable by westbound traffic) but abolished them entirely from last month under a 2017 Conservative manifesto commitment - which reversed the department's longstanding policy that 'users of estuarial crossings should pay for their upkeep'.

The DfT’s January 2017 consultation on the issue gave a number of other reasons why abolition was not proposed at that time. These included additional traffic and that it would 'put at risk the future of the Crossings'. It stated: ‘The Crossings cost approximately £15m each year to operate and maintain’.

On this basis, Highways has calculated that the costs of maintaining and operating the bridges between January 2018 and March 2020 will be approximately £33m.

In addition, the consultation stated that ‘Highways England estimate that likely resurfacing of the Severn Bridge after the end of the concession period will cost in the region of £12m’.

A spokesperson for Highways England told Highways that this work will go ahead after tests in the spring to determine the appropriate technical solution.

Although the consultation also stated that ‘the Government is committed to using toll revenue to fund the operation, maintenance and debt repayment associated with the Crossings’, the DfT’s 2017/18 accounts stated: ‘Income from river crossings charges increased in 2017-18 as control over the Severn River Crossings transferred to the Department from Severn River Crossing plc in January 2018…. The Department retains the income from these charges.’

Although Severn River Crossing plc was responsible for repaying the costs of building the second crossing, the DfT stated that: ‘During the course of the concession the Government incurred approximately £63m to cover the costs of fixing latent defects on the Severn Bridge and this money still needs to be recovered.’ It appears that the reference to ongoing ‘debt repayment’ referred to this sum.

The DfT told Highways that this £63m was recovered. This is likely to have been generated from the toll income of approximately £100m between January and December 2018, which Highways England collected on behalf of the DfT.

From 2020 to 2025 Highways England will receive £25.3bn from the National Roads Fund, which is itself funded from Vehicle Excise Duty.

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