Contingent liability of Mersey Gateway Bridge to be funded by government.
The Chief Secretary to the Treasury on 4 December re-confirmed as part of the National Infrastructure Plan that funding would be made available to the Mersey Gateway Bridge scheme subject to successful completion of procurement and government approval.
As part of that approval process, the government has agreed to provide a commitment to Halton Borough Council (‘Halton’), the promoters of the scheme, to stand behind any shortfall to the level of toll revenue required to meet Halton’s financial obligations and I am today (10 March 2014) laying in the House a departmental minute giving particulars of the contingent liability created. I will also lay a copy of the minute in the library of the House of Commons.
The Mersey Gateway Bridge project involves the construction of a new 1km long cable-stayed, dual-three lane bridge over the River Mersey between Widnes and Runcorn plus associated changes to approach roads. Congestion associated with the Silver Jubilee Bridge is seen as a constraint to economic regeneration and growth both locally, within the borough, and across the wider Liverpool City region and the north west.
The bridge’s construction and maintenance has been procured under a Design Build Finance Operate (DBFO) contract which is on a fixed price basis and under which payments do not start to flow until it opens. The initial development costs, land purchase, decontamination and other project costs will be funded through a grant from the Department for Transport (the department), Halton BC contributions and other third party contributions.
Following operations start, the majority of the funding will be provided through users in the form of tolling of both the new bridge and existing Silver Jubilee Bridge over the 26.5 year DBFO contract. In addition the department is providing a graduated, decreasing resource Availability Support Grant funding over 12 years starting in 2017/18 (following the opening of the bridge) to 2028/29.
As Halton is a small authority with limited resources, to ensure that the scheme can proceed the department intends to commit that in addition to the Availability Support Grant it will stand behind any shortfall to the level of toll revenue required to meet Halton’s financial obligations. Full details of the department’s proposed commitment can be found in the departmental minute.
The likelihood and scale of the Additional Availability Support Grant required would depend on the robustness of the base case toll volumes and revenues and also the scale of the shortfall of the actual revenues against the project costs. In an (unrealistic) worst case scenario where the bridge opens with zero toll revenues, the department would pay all costs. In addition to the committed departmental Availability Support grant, under this scenario the Additional Availability Support Grant which represents the contingent liability would be up to c. £16.6 million in the first year (following utilisation of the £19.0 million liquidity reserve), c. £37.6 million in 18/19 and thereafter rising by an average of c.£2 million per annum. The total contingent liability on this basis over the 26.5 years would be c. £1,698 million (following utilising of the £19.0 million Liquidity Fund).
If the liability is called, provision for any payment will be sought through the normal supply procedure.
Subject to successful completion of all remaining approvals and completion of financial close, construction of the scheme is scheduled to start in April 2014 with the scheme opening in 2017.