§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fallon.]
§ 12.4 am
§ Mr. Peter Fry (Wellingborough)
When I was first elected Member of Parliament for Wellingborough nearly 20 years ago, a local journalist asked me what I wanted to achieve as a new Member of Parliament. I replied that what was needed was better road communication. My interest in transport infrastructure was one of my first concerns as a Member of Parliament. Now, after 15 years as joint chairman of the parliamentary road study group, my interest has not diminished but has squared to the national scene.
My constituency, lying between the M1 and the A1, and with the long-awaited M1/A1 link to run just north of it, is crucially placed in our road network. Although much has been done to improve communications locally and nationally, problems are beginning to emerge. Congestion is not reducing, and even in medium-sized towns such as Wellingborough or Kettering there are increasingly long queues at peak hours every morning and evening. Any temporary hold-up on any major road can lead to considerable road chaos.
The really important roads, the lifeblood of our country, are becoming hopelessly overloaded. I have the misfortune to use the M1 regularly. Even when the M40 is completed, whole stretches of the M1 will be well over design capacity. It has now reached the point at which my constituents cannot estimate the time that they will arrive in London using the M1 because of the congestion and the fact that the most minor accident, or one motorist applying his brakes too quickly can create very long delays.
On the other side of the county, the A1 is totally inadequate for the purpose which it has to serve. It desperately needs widening and turning into a proper motorway for most of its length. Construction of the essential cross-country link, the M1/A1 link, has only just started, 15 years after the then Transport Minister, now Lord Mulley, announced the original scheme, describing it as the link that was vital to the economy of the country and for trade to the east coast ports and to the continent.
Our present situation and the forecasts for the future are not very encouraging. We have the most congested main roads of all the developed countries in the world. In terms of the average annual and daily traffic flow, we have the worst and most crowded motorways and trunk roads. Despite that overcrowding, car ownership per thousand persons is below that in the United States, France, West Germany, Italy, Japan and, perhaps more surprisingly, Sweden and Norway. But we are beginning to catch up. The economic success of the Government's policy and the real increase in incomes mean that many more people are buying cars and will continue to do so. Even the Department of Transport forecasts that there will be up to 30 per cent. more vehicles by the year 2000. The British Road Federation estimates that the increase will more likely be about 45 per cent. to 50 per cent. No forecasts show that there will be a fall in the number of vehicles on our roads.
313 After the years that I have spent studying transport problems, I have started to ask myself what can be done to alleviate, let alone improve, the situation that we see developing. At present, the Select Committee on Transport, of which I am privileged to have been a member since its institution, is now studying the question of roads for the future. In instigating this debate, I want to make it clear that I do not wish to show any disrespect to the Select Committee. For some time now I have been developing ideas of my own based on observation and experience and I felt that I would like to express them before the Committee reported and before it took evidence on the private funding of the transport infrastructure. Furthermore, I know that my right hon. and hon. Friends will be preparing a paper on this subject and I was anxious to make some contribution before it was published. I want to assure the House that I have not used any of the evidence submitted to the Committee, but I hope to add a little of my own.
Before outlining my suggestions, I must emphasise that I have made two assumptions, with which not everyone will agree. First, I believe that there is a need for new roads because we have already seen the appalling congestion on the major arteries of the country, the M1, the M6 and the M25. That will continue whatever we do about public transport. Secondly, I believe that the Treasury alone will not find enough money to provide the cost of all that is needed. I welcome the increase in transport expenditure under this Government and especially the increase announced in the Autumn Statement. But, realistically, I do not expect sufficient extra resources to be made available to deal adequately with the problem.
Those two assumptions lead me to inquire what can meet the task if public money alone cannot. I accept that already private contributions to some schemes have been significant. Added value or access to a site can be of great advantage to a private developer. Many county councils have been able to obtain large sums to improve local schemes or to build new schemes. Similarly, there have been some large-scale private developments, such as the Dartford bridge crossing, the Docklands light railway and the Channel tunnel, and the Government are to be commended for encouraging such projects. However, as yet there seems to be no acceptable scheme for dealing with the problem of major new roads. The only proposal put forward so far on a major scale was by Tarmac a few years ago for the west midlands, and it was turned down.
The policy until now seems to have been that major road building in particular can be from only public sources and that private investment has been found too difficult to combine with it. I find that a little disappointing in view of the way in which this Government have brought about joint financing, whether of the city technology colleges, the urban development corporations or the renovation of our city centres. One must ask oneself whether there is a means of harnessing private investment with public expenditure to improve our transport infrastructure.
I suggest that before we consider any individual way of doing that, we must make certain provisions. First, no scheme is worth attempting unless there is a clear redefinition of the Ryrie rules, which will mean that 314 transport budget expenditure is not reduced by the input of any private investment, otherwise no additional infrastructure will be made available to us.
Secondly, far more progress is needed to shorten the enormous period between the conception of a new project and its completion. Fifteen years is far too long for the schemes that we need to put into effect. Thirdly, I accept that there needs to be some degree of risk if private investment is to make a contribution.
What would fit those criteria? We should recall that the Chancellor is encouraging us all to save. He has announced a number of new initiatives with the intention of trying to ensure that less money is spent on immediate consumption and that more is put into preparation for the future. My right hon. Friend is lucky that for the first time for many years there is no competition for the need to sell gilts. The Government's—or the Treasury's—opposition to any other such scheme of investment, in competition with gilts, no longer applies. Why can we not use the principle behind the BEST scheme that the Chancellor has already developed, to obtain money for a new transport infrastructure? That idea could apply to a great many transport schemes, even to the high-speed Channel rail link that is mooted for the next few years and could also cover new Underground lines in London and other major cities.
In my view, a developer could attract a considerable amount of money, provided that the investment was tax-free. That would be a suitable initiative. The capital received from that investment could begin to pay for the project and initially would get it off the ground and pay the interest in the early years. Once the project was completed, the developer, whoever that may be—could decide whether to make additional charges which would provide revenue. Such charges could either be in the form of tolls or, if it were a public transport venture, in fares.
I do not think that the proposals that I am going to make are tremendously revolutionary, but money could be made available at an earlier stage than now to bring about many of the needed improvements in our road and transport infrastructure. Once the road is in use, I suggest that there needs to be public investment because no level of tolls is ever likely to be sufficient to cover the maintenance, the interest on the money borrowed or the repayment of the capital. There will always be some gap between what has been raised in tolls and total expenditure. That is why I believe that the public sector must be brought in. It is essential to ensure that any project is approved by both the Department of Transport and the Department of the Environment so that assistance can be given in planning and early implementation. In other words, the scheme should be stamped as a "necessary" one.
Once the road is open, I see no reason why shadow tolls should not be paid according to actual traffic flows. That is where the risk comes in, because obviously not all schemes would reach their full potential at the same time or over the same period. The question of fixing the toll or, in the case of public transport, of fixing the fares, would be a matter of fine calculation. However, as the public contribution increases, so the loan debt could be repaid and eventually the road could revert to the public sector just as is planned for the Channel tunnel.
There are four advantages of this way of going forward. First, saving would be encouraged. Secondly, public spending would be delayed for some years. Thirdly, the 315 cost to the taxpayer would be considerably less than if the whole project had to be paid for from the public purse. Indeed, taxpayers would start paying only when they themselves were using the facility either as drivers or as passengers.
Fourthly—this is the most important point—the infrastructure would be made available much earlier than is likely under present procedures. The mixing of public and private finance in transport infrastructure merits further consideration for that last reason. For far too long—under several Governments—this country has been deprived of that kind of investment. Transport has always been the poor relation after some of the more obvious social needs—education, health and housing.
I give full credit to the Government, the Secretary of State and the Minister for at long last realising the size of the task confronting us. However, I believe that the situation is not standing still, but is actually deteriorating. I believe that the problem is such that—just as in dealing with the economy as a whole—the Government cannot do it all alone. The Government need investment from outside.
My proposals may not be perfect and may not be the eventual way in which the Government will decide to go forward, but I am sure that we must evolve some method of bringing private money into transport infrastructure schemes. If we do not, we face the danger that we shall not be able to deal with the increasing problems of all the modes of traffic congestion.
Failure to do that could be disastrous for our national economy.
§ The Minister for Public Transport (Mr. Michael Portillo)
I congratulate my hon. Friend the Member for Wellingborough (Mr. Fry) on gaining this Adjournment debate. I have listened to his speech with great interest. I had already read the drift of his argument during his questioning of witnesses in the Select Committee on Transport. I agree with my hon. Friend on many points.
In recent years, the private sector has come to play a significant role in providing transport infrastructure, and the Government believe that that process can be taken much further. While the public sector will be the predominant provider of roads for as far ahead as we can envisage, we would be foolish if we did not encourage the private sector to supplement that provision, not least because of its enterprise and management skills. That is necessarily an evolutionary process, but progress so far has been encouraging. An important step forward will be taken when my right hon. Friend the Secretary of State publishes a consultative document on private finance aimed at developing further a private sector in roads. As I cannot anticipate what he will say, I hope that my hon. Friend will understand if I am not in a position yet to say much about the way forward.
I shall say something about the story so far. The area where we have seen most consistent success has been the funding by developers of some or all of the costs of road schemes that can benefit their developments. There has been a fruitful partnership between them and Government at both national and local level. Since April 1986, developers have contributed about £12 million by means of agreements under section 278 of the Highways Act 1980 316 towards the costs of 58 schemes on the national road network. The pace is quickening, and another 50 or so schemes are at an advanced stage of preparation.
Even larger numbers of schemes undertaken by local highways authorities have been wholly or partly funded by developers through agreements under section 52 of the Town and Country Planning Act 1971. Again, the scale of activity is growing.
In many ways, those successes have gone largely unremarked and, understandably, attention has been focused more on the big, privately financed infrastructure projects. The Channel tunnel is the pre-eminent example, but the Dartford bridge, the extension to the docklands light railway and the new high-speed rail link from Paddington to Heathrow are other examples where private sector finance is contributing to the provision of transport infrastructure. The second Severn crossing, the new high-speed rail link to the Channel tunnel and privately operated light rail systems in Manchester, and perhaps in Avon and elsewhere, are further examples of where the private sector may have a major contribution to make.
The Government are determined to move the provision of transport services, and the infrastructure needed to support them, nearer to the market place. It is only in that way that we can ensure that services are responsive to what the customer wants and not to what the centre prescribes. By progressively opening up to the private sector the opportunity to finance, design, build and operate the supporting infrastructure, we can also give full scope to entrepreneurial imagination and the sort of management skills that are not always evident in the public sector.
The question that my hon. Friend raised this evening is whether, as things stand at present, the private sector can be expected to make a contribution to developing the infrastructure that we shall need or whether we need a significant change in the present arrangements to ensure that private investment is readily forthcoming.
My hon. Friend has suggested that the time scales involved in major projects are such that private investors will be discouraged by the long pay-back periods. He has argued that, by offering tax incentives, we can expect the private sector to generate sufficient cash up front to get major private sector projects off the ground. He argued that, even then, revenues from the toll booth or fare box may be insufficient to remunerate fully the large sums involved. Therefore, Government may still need to make a contribution, perhaps based on the volume of traffic using a privately built road or passengers using a railway. I accept that pay-back periods can be long and that what my hon. Friend proposes may offer a solution, but I am not so sure whether the problems warrant special treatment of private investment in one particular area.
I would not want to dismiss my hon. Friend's proposals out of hand, but experience to date suggests the long pay-back periods of major projects may not be as insuperable a problem as perhaps my hon. Friend fears. It has not been a problem with the Channel tunnel or with infrastructure developments which have been firmly in the private sector for many years—Felixstowe is one obvious example—or a more recent development, such as the London City airport.
I do not accept the accusation made by some that we are stifling private finance. The examples I have given are enough to dispel such a notion, but I accept the need for clear ground rules on private finance within which the private sector can operate. To an extent, they are still 317 evolving, but some of the principles governing the introduction of private finance are unlikely to change. Most important—my hon. Friend recognised this—is the Government's belief that a privately financed and operated piece of transport infrastructure should be genuinely private sector.
The promoters must carry the risks associated with transport infrastructure projects, not the Government. The users of the infrastructure should generally reimburse the cost of developments—again, not the Government. That tends to rule out so-called shadow tolls.
There has been some misunderstanding about the Ryrie rules. They are designed to test whether it makes sense to undertake a project in the public or private sectors. If it is to be in the private sector, that is where the risks must be taken and any extra costs resulting from the use of private finance should be offset by the transfer of risk to the private sector. The Ryrie rules have not stopped a number of major privately financed infrastructure projects which might have been built in the public sector, but which were not.
There are some sorts of deal, however, which may masquerade as "private finance" of no benefit to the taxpayer. We are not interested in accounting arrangements which mean public expenditure by another name; or in arrangements simply designed to circumvent controls on public expenditure. We are not attracted to projects which require guarantees from the state.
There are other issues which I know concern potential promoters of private sector infrastructure. "Exclusivity" seems to feature strongly. In my discussions with the private sector, many firms have argued that the originator of an idea should have exclusive rights to it for a period; or should be financially recompensed if someone else uses the idea. Otherwise, so the argument goes, firms will be unwilling to spend time and money developing an idea.
I can see the attraction of this argument, and I confess that it has some merit. On the other hand, there are very strong arguments for competition. As my hon. Friend will recognise, it is difficult to square the Government's general commitment to competition with the case for exclusivity, and I fear that there is no neat answer. Nevertheless, it is clearly a matter of genuine concern to many firms and, even if we cannot agree to exclusivity as such, we must ensure that there is some way in which to recognise the money and effort firms spend on developing ideas.
Additionality is another issue which frequently comes up as a bone of contention, but I am not sure just how 318 important it really is from the private sector's point of view, despite the fact that it is often raised. I suspect that it reflects the fact that many of the promoters or potential promoters of new infrastructure, particularly roads, are construction companies. Seen in their terms, I can understand why additionality should matter. Any construction company worth its salt will want private sector developments to be additional to the public sector programme because it means more business, but there is no immutable law which says that construction companies are the natural promoters of new private roads, for example. Indeed, to judge from the private sector generally, one would expect that not to be the case. The usual experience is that construction companies build what othes want and can finance.
I suspect that in time we shall find the same is increasingly true of privately financed transport infrastructure. Once we get to that stage, promoters will evaluate projects on their merits. They will no longer be seen as simply another opportunity for extra construction activity, and additionality as an issue will lose much of its force.
I should like to say a word finally about environmental issues. If ever we needed reminding about the importance which the public attaches to such questions, the reaction to British Rail's proposals for routing the new high-speed line through Kent has obviously brought it home to us all. It is difficult to over-estimate the interest which the public takes in the environmental aspects of new infrastructure developments. We of course expect the private sector to bring new ideas, but there can be no reduction in the environmental standards which apply to privately financed roads or railways. The public will demand that the same high standards apply as in public sector developments. So will the Government.
It is difficult to do full justice—I apologise to my hon. Friend for this—to the many aspects of private investment in transport infrastructure, particularly at a time when the Government are about to bring forward some proposals. However, the Government have, in the run-up to the new proposals, encouraged a wide-ranging debate over the last year or two, and have been pleased by the interest shown and the quality of the ideas that have been brought forward. Obviously, the Government will respond shortly to that debate.
I thank my hon. Friend for the very keen interest he has shown in those matters, for the opportunity for a debate tonight, and for contributing, I believe very valuably, to the debate with a most interesting and thoughtful speech.
Question put and agreed to.
Adjourned accordingly at twenty-nine minutes to One o'clock.