Proposed toll reductions for the Severn Crossings

20 January 2017

Article by Sean Evans, National Assembly for Wales Research Service

View this post in Welsh | Darllenwch yr erthygl yma yn Gymraeg

severn

Image from Flickr by Ashley Coates. Licensed under Creative Commons.

On 13 January 2017, the UK Department for Transport (DfT) and the Wales Office launched a consultation on proposals to reduce toll prices on the Severn Crossings. The consultation is seeking views on proposals to introduce reduced tolls, regulatory changes, reduced off-peak charges and free-flow charging before the Severn Crossings revert to public ownership sometime in late 2017 or early 2018.

What’s behind these proposals?

A concession agreement was awarded to Severn River Crossing PLC (SRC) in 1990 which commenced in April 1992 and operates subject to the provisions of the Severn Bridges Act 1992. The agreement authorises the collection of tolls by SRC from both Crossings until a “defined amount of revenue” (currently set at £1,029 billion in July 1989 prices) is generated or for a maximum of 30 years (whichever comes sooner). The UK Government has indicated that it expects the defined amount of revenue to be reached in late 2017 or early 2018, at which point the bridges will revert back to public (UK Government) ownership.

What’s being proposed?

Rather than abolish tolling at the end of the concession agreement, the UK Government intends to “abolish the higher price toll category for vans and small buses, and halve the tolls for all vehicles”, a move it suggests will be a “significant step” that will “make a positive difference to commuters, travellers, and to small business owners.”

The consultation proposals (PDF 559KB) include replacing the current toll of £6.70, for cars and other category 1 vehicles, with a charge of £3.00 as well applying this reduced category 1 charge to small buses and vans currently within category 2 and subject to a toll of £13.40. The toll for large vehicles under category 3 is proposed to be reduced from £20.00 to £10.00.

The proposed changes are set out in the following table:

tollprices

The payment currently required to use the Crossings is a toll which increases annually in line with inflation. The UK Government is proposing to replace this by introducing a Charging Order under the Transport Act 2000 which will “change the legal status of the payment…from a toll to a road user charge”. It suggests that this change of status will enable it to “reduce the amount users pay more easily.” During discussions in Plenary on 17 January 2017, Assembly Members expressed concerns over proposals for road user charging and its legal basis. The Cabinet Secretary for Economy and Infrastructure, Ken States, stated that it is a “very complicated and complex area of legal work” and that the Welsh Government supports abolition of the toll on an economic basis alone.

What are the predicted impacts of the proposals on traffic?

Traffic forecasts commissioned by the DfT and described in the consultation suggest that reducing tolls will increase the amount of traffic using the Crossings up to 17% by 2028.

In response to this, the UK Government is considering measures to reduce the time it takes for tolls to be collected and “ways to manage this effect, including …options for free-flow tolling and day-time only tolling”. Additional considerations include rounding the toll prices down to whole numbers of pounds and continuation of the Severn TAG system at around a 50% price reduction.

The consultation also highlights the UK Governments concerns around the impact of increased traffic congestion in Bristol and along the M4 in Wales but suggests that “reducing the tolls by 50% would allow us to assess the impact… of increased traffic flows.” In Plenary on 17 January 2017, the Cabinet Secretary for the Economy and Infrastructure commented on concerns around modelled traffic impacts noting that “there is a need to ensure that the modelling for traffic flows is accurate” and that his views on the modelling undertaken and wider community impacts will be factored into his consultation response.

What is the UK Government proposing to use Crossing revenue for?

In a letter to Assembly Members and Members of Parliament, the Minister of State for Transport, John Hayes MP, and Secretary of State for Wales, Alun Cairns MP, stated that charges collected under the proposals will not be used for “any purpose other than to support their [the Crossings] operation and maintenance, and to repay the debt incurred by the UK taxpayer to fix latent defects on the Crossings”. The letter contained a further assurance that “the Government will monitor toll prices closely with a view to further reductions if possible in the future.” These sentiments are reiterated in the consultation document which states that toll revenues “will be kept under review to see if they can be reduced further.”

What about talk of abolishing the tolls?

There has been support for abolishing the tolls completely when the Crossings revert to public ownership. A recent Motion, tabled by Mark Reckless AM proposing that the Assembly supports the abolition of tolls, was debated in the Assembly on 16 November 2016 and subsequently agreed as amended with 45 votes for, 0 against and 1 abstention.

The UK Government argues that abolishing the tolls would put the future of the Crossings at risk with estimated annual maintenance and operational costs of around £15 million. However, the proposal to continue tolling has attracted criticism from those seeking the abolition of the tolls who suggest that their continuation represents a tax on Wales that would not be permitted under existing legislation.

The Welsh Government commissioned Arup to conduct research into the impact of the Severn tolls on the Welsh economy. Arup’s report (PDF 3.48MB) (2013), states that economic modelling suggests that removing the tolls could boost the economy of south Wales through increased annual Gross Value Added (GVA) in the order of 0.48% or around £107m. Whilst the report noted that caution should be applied to the precise magnitude of GVA gains, it also indicated that the indirect effects are such that the “overall impact of the toll [suppressed GVA potential] exceeds the direct cost of the toll [maintenance and operational costs]”. However the UK Government suggest that, whilst the “prospect of removing the tolls and funding the operation and maintenance…..through the resultant increases in revenue from general taxation is an attractive theory”, there is “no guarantee that the Government would recoup the equivalent amount of lost toll revenue through general taxation.”

The UK Government also outlines a need to recover costs of £63 million it has incurred during the concession period. In Plenary on 17 January 2017, the Cabinet Secretary expressed disappointment that the UK Government is not considering writing off the debt off, as was the case for the Humber crossing, and stated that the Welsh Government opposes continued tolling. In the debate on the November 2016 Motion, the Cabinet Secretary also stated that “that the tolls should be removed at the earliest opportunity, alleviating the burden on the economy and removing the significant threat they represent to trade in a post-Brexit world.”

Welsh Affairs Select Committee report on the Severn Crossings Toll (2010) suggested that “the toll could be reduced to a fifth of its current level, to approximately £1.50 while allowing the crossings to remain self-financing”. The report recommends that the UK Government “must not be tempted to use the crossings as a ‘cash cow’”. The Welsh Government’s written response to the current Welsh Affairs Select Committee inquiry into the future of the Severn River crossings, states that the tolls should “be in the hands” of the Welsh Government and that charge free passage could provide a potential productivity boost of “over £100 million a year”.