Examinations of Witnesses (Questions 140-159)|
MR CHARLES GEORGE QC and MISS JOANNA CLAYTON, BIRCHAM
The Petition of David Loudon, John McGoldrick and
MR JOHN McGOLDRICK examined
140. How close is the relationship with the local
That is very close. There are details in this exhibit of the
links that we have with district councils and those links are
reinforced through formal consultations and regular liaison at
member and officer level. For example the Chair of the Authority
and the Chief Executive attend meetings of the body known as the
Merseyside Coordinating Committee. We have officers networked.
My colleague the Chief Executive chairs a Committee of district
chief officers dealing with the production of the local transport
plan and I serve on the Finance Directors Forum for Merseyside
141. If we now move on to the Queensway Tunnel,
the first one to be built, could you just explain how it was to
The original intent in four local acts passed between 1925 and
1933 was to finance the tunnel partly by borrowing and then partly
by tolling users, the scheme was to meet the construction costs
in part by grant but then by borrowing and then putting the cost
of debt charges and operating costs on to the users. I understand
there was an option considered at that time to have some local
assistance from rates but I understand that was initially rejected,
although subsequently had to be relied on.
142. I think that tunnel was constructed in 1925,
it opened to traffic in 1934, what was the financial history of
the early years?
In the early years the tunnel was making a loss. The traffic
that was attracted proved to be lower than was originally thought
and as a result of that the tunnel was making a loss up to and
during the war years until roundabout 1947.
143. It is probably helpful if we turn to your Exhibit
B4, is it not, page 5.
Exhibit B4 provides a summary of the finances of the tunnels,
as you can see, for a period of 33 years or so from 1934 to 1967/68.
The losses I am referring to are in the column head "losses"
which is about two thirds of the way across the page.
144. If we go to the righthand column where
it says "total traffic" we can see it starting at two
million a year, then it built up to 18 million by 1968 but there
was a very, very slow increase in the period up to the mid50s.
That is absolutely right. The traffic of the tunnel really began
to take off, as it were, at the beginning of the 1950s coincidently
with the growth in private car ownership.
145. Running at a loss, as we can see, in the period
up to 1947 in the column "losses".
Those losses were financed initially from local rates. As I hope
the Committee can see the losses ceased in 1946/47 and the tunnels
then became profitable in the sense that they were able to make
substantial contributions to the fund and even pay taxation.
146. What was the consequence of the traffic building
The average traffic growth from the late 1940s through to the
early 1960s was in the region of 7.5 per cent per annum. Even
though the tunnels' finances were buoyant the traffic had grown
by the early 60s to about 13 million vehicles a year and it was
causing more and more congestion on approach roads, more and more
difficulties in terms of ventilation which necessitated extensive
improvements. It was clear by the early 1960s that the Queensway
Tunnel was rapidly approaching its peak capacity limit and creating
gridlock in Liverpool and Birkenhead.
147. What was the remedy to the gridlock?
What effectively happened was that there was a series of local
consultations and the general opinion or widespread support was
given to the concept of building a second tunnel to be paid for,
I must make the point, by continued tolling. This in the early
1960s was a concept that was adopted at a range of other crossings
round the country, they include the first Dartford tunnel, the
Forth Road Bridge, the Severn Bridge and the Tyne Tunnel.
148. When was the new tunnel, the Kingsway Tunnel
The first tube opened for traffic in June 1971 and the second
tube in March 1974.
149. Is that opening in 1974?
It opened for traffic in 1974.
150. How was the new tunnel financed?
Entirely by borrowing as a result of which the crossing rapidly
slipped back into operating deficits during the financial year
1968/69. The intent permitted in the enabling legislation was
that operating loses would occur temporarily and would be financed
by a practice known as capitalisation, which is reborrowing.
This is a practice that was commonplace in the legislation affecting
all of the tolled crossings provided in the late 60s and early
70s. The idea was that reborrowing the losses would provide time
for the traffic to escalate. Unfortunately, however, everything
that could go wrong went wrong with Mersey Tunnel's finances in
the late 60s and the early 1970s. Inflation substantially increased
both the construction cost of the new tunnel and the operating
costs, interest rates increased considerably and far from growing,
as was expected from building a new tunnel, the traffic largely
remained static in the face of increasing fuel prices and indeed
151. Mr Wilkinson pause there for a second and just
let us spend the last three minutes or so before lunch looking
at some of your exhibits. Could we go to Exhibit B5 first and
just explain that to their Lordships?
Exhibit B5 shows the total traffic using the Mersey tunnel from
when it opened in the early 1930s to the present day. The blue
shadow on the exhibit is the traffic through the Birkenhead tunnel,
the yellow is the traffic which started to come through the Kingsway
Tunnel and the top line gives you some idea of the volume of traffic
growth at different periods. The 7.5 per cent per annum which
I referred to from the late 40s through to the early 60s is quite
clearly shown in the slope on that blue line.
152. If we turn over the page to B6 we can see the
debt mounting, could you just explain what is happening there?
Yes, my Lord. Once the Kingsway Tunnel was built and began its
operations, as I indicated earlier, the operating loses were capitalised,
financed by borrowing so that the accumulation of the debt of
constructing of the tunnel and on the debt on its operating deficits
meant a rapid increase in total debt, which you see on the upward
slope and that blue line there.
153. If we look at the line for 1986 that is the
time Merseytravel took over the tunnel when the old County Council
was abolished and you were on a rising graph of debt and it goes
on steeply upwards until the early 1990s when it peaks. Do you
see that there?
Merseytravel inherited the structures with a debt of about £100m.
I hope the exhibit shows you the debt eventually climbed to £140
million but is now back below 100m. At this point in time that
solid line on that exhibit.
154. MR GEORGE: If we come to the appetizer
before lunch it is Exhibit B7.
155. CHAIRMAN: Before we move on to B7 you
mentioned earlier Mr George, I think you said that the majority
of debt was with the local authority, is that entire debt from
the local authorities?
156. MR GEORGE: I will leave that to Mr Wilkinson.
My intent in due course is to introduce Exhibit B20 which explains
precisely to whom the debt is owed, the interest rates and such.
157. If your Lordship goes to Exhibit B20 I think
your Lordship will probably find the answer to your question.
In item two there you have the Current Annual Debt Charges and
the figures outstanding. The last item, MDCs, that is what the
28 has come down to. The biggest item is an item owed to Wirral
Borough Council, the second item down. Then your Lordship can
see the Department of Transport. We will come back to that later,
those are the figures.
158. CHAIRMAN: I understand the Department
of Transport, I understand the Wirral, I do not understand PWLB.
The Public Works Loan Board.
159. CHAIRMAN: Mr George, I apologise I have
taken you off track.