Taxpayers to contribute more than £3bn to Lower Thames Crossing
Increase comes despite ministers’ attempts to have private sector shoulder most of bill for 14-mile road and tunnel
Taxpayers will contribute more than £3bn to the Lower Thames Crossing despite ministers’ attempts to have the private sector shoulder most of the cost of the most expensive new highway in British history.
The cost of the project, the first wholly new crossing across the river Thames to the east of London in 60 years, has risen from an estimate of between £5.3bn and £6.8bn in 2017 to almost £11bn, the Treasury has confirmed.
The 14-mile road and tunnel will be funded primarily through private finance, under a model also being used on the Sizewell C nuclear plant, but taxpayers are putting in cash to de-risk the project for investors.
In the Budget last week, chancellor Rachel Reeves announced a fresh £891mn towards the scheme, taking total taxpayer funding to £3.1bn, of which more than £1.2bn has already been spent, according to Treasury officials.
The government hopes it will secure about £7.5bn of private capital, up from a figure of £6.3bn set out in March by National Highways, the public body responsible for the scheme between Kent and Essex.
The Department for Transport said: “The Lower Thames Crossing will bring transformational benefits across the entire country, cutting congestion and driving growth by connecting ports and business hubs.”
The government will start seeking private investors in the spring for the project, which is aimed at reducing congestion on the Dartford Crossing to the west of the planned route. Construction is also expected to start next year, with completion due in the early 2030s.
Michael Dnes, head of transport policy at consultancy Stonehaven, said the LTC would draw investors but the project’s appeal would depend on accompanying tolls.
“Historically, almost every big bridge and tunnel in the UK has outpaced their traffic forecasts,” he said.
The project will be delivered under the “regulatory asset based”, or RAB, model, which allows the project to raise debt and equity, generating returns for investors during construction and from tolls once it is complete.
It will be privately owned and operated in perpetuity, rather than on a fixed-term concession like other privately financed road schemes, such as London’s recently opened Silvertown Tunnel.
First agreed in 2017, the LTC has been slowed by Britain’s complex planning system. Its planning document runs to more than 300,000 pages.
Matt Palmer, LTC executive director, said: “The funding from government gives us the green light to start building the Lower Thames Crossing next year and puts it on track to open in the early 2030s.”
The Dartford Crossing, part of the M25 and the only route across that part of the Thames, was delivered under a 20-year private finance initiative scheme from 1989 but paid back investors in 14 years.
Since 2009, it has been run on a separate 30-year contract by Connect Plus (M25), a consortium of investors including Equitix, Dalmore Capital and Balfour Beatty, some of whose members could potentially invest in the LTC.
The Second Severn Crossing, which connects England and Wales, was delivered via a 30-year concession that started in 1992 but paid back investors in 26 years, despite the owners having to pay large amounts in unexpected maintenance. It was transferred to public ownership in 2018.
Construction prices in the year to September were 2.9 per cent higher than a year earlier and 30.7 per cent up on September 2019, before coronavirus struck, according to official data, suggesting the cost of construction skills and materials may account for a small share of the increase in LTC funding.