Channel Fixed Link (Hansard, 22 January 1986)

§ Mr. Ridley

I am happy to do so. The text of my letter to Sir Brian Shaw is as followsThank you for your letter of 1 November about the Channel Fixed Link. It is very helpful to know the shipping industry's general approach to the Link. As you are no doubt aware, four proposals from promoters were accepted on 31 October and these are now being assessed in detail by a joint Anglo/French team of officials. I can assure you that a cardinal aim of the assessment process will be to ensure that the requirement in the Invitation to Promoters, that no proposal should involve any public subsidy or commercial guarantees from the Government, is fully met. 211W The British and French Governments have a clear interest in ensuring, before any go-ahead is given, that any project they select is not liable to fail, for whatever reason, and is financially robust. As part of the assessment, therefore, we are examining critically the promoters' forecast costs and construction timetable, their assumptions on traffic, tariffs and revenues of all kinds, and their financing proposals. Any failure of the project would thus represent a failure of the Government's assessment too. I recognise, of course, that one can never be entirely certain that financial difficulties will not arise in a project of this complexity. However, I can assure you that, even if such unforeseen problems were to arise, there would be no question of Government support. In such an event it would be for those with a financial interest to organise a restructuring package. But this would have nothing to do with the tariffs finally charged. Any company, whether restructured or not, can be expected to charge optimum prices—ie those which give the best financial return — whether or not this under or over-remunerates the capital employed. If the company has had to undergo restructuring because the project has over-ran, this will not affect the tariffs charged, which will be at the same level as if the project had been constructed to plan. If, however, the company has had to restructure because the promoters failed to forecast market conditions, then it might well be in the operator's interest to adopt a policy of lower tariffs. But the lower tariffs would be a consequence of market conditions, not of the restructuring. So far as competition is concerned, it will be very important to be able to deal with the possibility of predatory pricing—ie pricing temporarily below the long-run economic price level in order to eliminate competition. The Guidelines therefore make it clear that any Fixed Link will he subject to existing national and Community legislation on monopolies, abuse of a dominant position and anti-competitive practices generally. There are, as you are well aware, certain complications in applying national competition laws to international transport undertakings: this aspect is receiving attention, but it does not affect the general position. These laws do not of course mean that the Government will protect any particular transport operation if the need for it, as expressed through market demand, no longer exists. Nevertheless it is far from inevitable that ferry operations will be drastically affected in relation to the existing level of operations, by a Fixed Link. The 1982 Anglo/French Study Group concluded that there could be room both for the ferries and for a Fixed Link, and we are looking thoroughly at these issues again. I can also assure you that the impact of a Fixed Link on the role of the ferries in our defence planning will be fully taken into account before a decision is reached. The promoters themselves were required in their proposals to assess the impact of their projects on employment and the economy. However, as an extension of our own appraisal of traffic forecasts for the Link, we shall assess the effect of each proposal on the level of ferry operations and thence the consequences for our defence capability. I am not in a position at this stage to say how much of our assessment will be published. We have agreed with the French Government that, during the assessment period, the proposals will remain confidential, apart from what the promoters themselves decide to make available. But as you can imagine, Ministers fully expect to answer to Parliament in due course for all the likely consequences of whatever decision the Government takes. Our aim is to reach and announce a decision in January. If the Government decides to go ahead with a Fixed Link, we would hope to introduce legislation which, as you say, would be hybrid in the spring of 1986. The arrangements for such legislation allow those directly affected to petition a special committee. There will of course also be full Parliamentary debate of the chosen proposal. Work is already well underway on the necessary Treaty with the French Government and on the concession Agreement to be signed with any successful promoter. The Government expects that legislation might complete its passage in the spring of 1987 and the Treaty be ratified and construction begin shortly thereafter. I am happy that this letter should, if you so wish, be circulated to your members and made public.