Examination of Witnesses(Question 80-99)|
Mrs Charles George and Miss Joanna Clayton
Thursday 30 January 2003
80. CHAIRMAN: Mr George, on exhibit B9 you show the
safety work programme going to about £8 million in 2004-05
and 2005-06 but then falling in 2006-07 to £3.4 million,
about half the level.
81. MR GEORGE: Yes, Sir.
82. CHAIRMAN: So what you are saying really is not
that it will continue to grow year on year for the foreseeable
future but that it goes up to that level in 2005-06 and then falls
83. MR GEORGE: At present we are predicting quite
a healthy surplus from tolls when we get to that period. What
we do not know, of course, is to what extent there will then turn
out to be a further set of requirements. For instance, the new
Directive has not been looked at and costed out to see what sort
of implications it would have if we went further. What you see
there is simply what we are planning presently in the light of
the 2002 Eurotest. Provided that is all we have to do thereafter
we can simply assume that there will be an ordinary RPI type increase
in refurbishment costs year by year but nothing more.
84. History tends to suggest that just when you have
finished one lot of works one then finds there is another tranche
but I do not believe it is likely we shall have quite this sort
of batch of expenditure coming immediately next. It will come
at some stage but probably not in the latter part of this decade,
it probably will be beyond. The answer is no-one quite knows but
we would simply say those charged with the tunnels' finances,
and indeed the Committee also who are charged now with finding
the system, should be aware that the unexpected does happen and
you suddenly find yourself having to produce many millions more
each year for a period of five years as a result of upgrading.
85. CHAIRMAN: Where there are requirements for spending
on infrastructure, be it road or rail or whatever, in other areas
in the Merseyside as elsewhere, then that safety or maintenance
work would be funded from public funds from the taxpayer in whatever
form the taxes are collected?
86. MR GEORGE: It can only be funded either from
tunnel tolls or from the ratepayers of the Merseyside areas or
from Government grant if the Government is prepared to give grant.
As Mr Wilkinson will explain over the years there have been frequent
appeals to the Government for grants for the Mersey Tunnels and
they have always received a rebuff and been told "It is a
local responsibility sort it out for yourselves".
87. MR CUNNINGHAM: Are you saying you could not borrow
from a bank? Earlier on you mentioned the fact you are using revenue
to fund these developments, are you precluded from borrowing from
banks? Is there a reason why you do not borrow from banks?
88. MR GEORGE: Unfortunately the Mersey Tunnel cannot
just simply go out and borrow from a bank because it is a public
transport authority it is subject to all the borrowing terms.
What it can do is to apply to the Government for permission to
borrow and that is how it has acquired its past very large debts.
It has gone back recently and asked if it may borrow a substantial
further tranche to do these works. So far it has received no encouragement
whatever. It had, so to speak, to cover the position by making
the application, given past history it does not expect that application
will receive favour but certainly it has made the application.
89. Provided it gets the Government's consents then
it can borrow and would normally not borrow simply from a bank
because it would normally be able to borrow on lower interest
rates if it did make its way through the Government borrowing.
The Chancellor of the Exchequer tends not to be very enthusiastic
about that because that then goes into the total Government borrowing
and the aim is to try and keep that under constraint whether it
be this administration or the last administration so all local
authorities find that when they want to borrow for projects there
is always a certain resistance from central Government.
90. CHAIRMAN: So the outstanding debt that I believe
rose to about £140 million in 1991/92 and has now fallen
back to about £106 million or thereabouts ----
91. MR GEORGE: A bit less than 100 now.
92. CHAIRMAN: A bit less than 100 today, okay. That
is actual debt, that is real debt on the books that needs to be
93. MR GEORGE: It has to be serviced.
94. CHAIRMAN: Because the accounts on page B7 did
not strike me as being a set of accounts that I would normally
see since there was always a precise balance between total income
and total expenditure which would strike me as being a constructed
situation on a proper set of accounts.
95. MR GEORGE: I can appreciate that criticism and
96. CHAIRMAN: It is not a criticism, it is purely
a comment on the accounting.
97. MR GEORGE: You are quite right, there is an adjustment
and, therefore, I entirely take the point the Chairman is making.
Yes, although there is the substantial debt, in B18, if I could
ask the Committee to look on there, there is something called
the debt profile showing how it is broken down and who the money
is owed to and the various provisions for the debt. That debt
will finally be paid off in about 2047/48, that is the contractual
terms of the debt. The vast mass of it will have been paid off
by the late 2020s, that is when there will be a big come down
of the debt, others will carry after that. That is assuming we
do not succeed, as Mr Cunningham suggested we may be able to,
in borrowing more. Of course, every time we borrow more we can
do more works but we saddle ourselves with paying it out over
a prolonged period.
98. MR CUNNINGHAM: I was not suggesting anything,
I was asking a question for clarification.
99. MR GEORGE: When I say "suggesting"
I do not by any means mean recommending but at any rate adverting
to the possibility of it. The assumptions for the paying off of
the debt are assuming that we do not borrow more towards funding
of the tunnel, that we will be able to cope with funding the tunnel
for the future out of the surplus from the tolls because if the
Committee allows tolls to rise in accordance with the RPI, which
is what we are seeking, there will be a surplus. The first call
on that surplus will of course be the maintenance and refurbishment
and upgrading of the tunnel and it is only when that has been
done that one can consider spending it on any other purposes,
but you never get to the stage of having any money over for a
proper refurbishment programme or for spending it on other purposes
unless one can ensure that the tolls do continue to rise in line
with inflation. If they do not rise in line with the RPI we are
going to be back to the position of the 1980s with a growing deficit,
at which time not a penny was able to be spent on refurbishment.