Transport Insights

I’m still awaiting a response from the Department for Transport as to whether it is still sold on the privatisation model for the Lower Thames Crossing (LTC), which delay may itself be significant, but in the meantime I have noticed something that brings the delay to the required legislation into sharper focus.

Although inclusion on a King’s Speech doesn’t guarantee that a bill will be in the next session of Parliament, a letter in May from transport secretary Heidi Alexander to Transport Committee chair Ruth Cadbury explicitly said this one would be.

Setting out “the Department for Transport’s legislative agenda for the second Parliamentary session, as set out in the King’s Speech”, Alexander wrote:

The department will also be introducing two new pieces of legislation in the next session.

[…]

Furthermore, our Highways (Financing) Bill will enable a new financing approach to fund large-scale road schemes, supporting the UK Government’s commitment to deliver a modern transport network that helps people get where they need more easily and safely.

So when Lord (Peter) Hendy can only say that the Bill

will be brought forward when Parliamentary time allows

that’s a significant backtracking, suggesting either incompetence or a rethink.

Meanwhile, an “independent” review of the Office of Road and Rail (ORR) looks at the expectation that it will be the regulator for the entity that will build and operate the LTC.

The review, which was actually commissioned by the Department for Business and Trade, states:

ORR expects to take on a significant new role as the regulator for any future roads project built under a regulated asset base (RAB) financing model, with the first application being the Lower Thames Crossing (LTC).

A recommended action is:

ORR, with DfT, to design and populate a robust regulatory framework for LTC RAB financing that supports investor confidence and independent oversight

And an associated risk/ issue/ opportunity is:

The early and visible involvement of ORR in establishing independent regulatory oversight should support investor confidence in the use of the LTC RAB model.

You would think putting oversight of anything in the hands of the ORR would give investors confidence that they will get an easy ride, but the report also suggests that the funding mechanism for ORR’s expected regulatory role “is likely to need different arrangements”, on the basis that:

From an investor’s perspective, a direct funding route to DfT may be seen as introducing uncertainty and scope for influence of ORR that is then factored into their pricing. This is an example of where there needs to be clear separation from government to ensure stability of the regime and give confidence to investors of ORR independence.

You can see the logic here. The main issue for any regulator will be politically sensitive tolls on the LTC and the privatised Dartford Crossings and the issue here is that s/he who pays the piper calls the tune.

My feeling about this report, however, is that it could well be significantly behind thinking in government about whether the LTC will indeed go forward under a model that involves privatising a significant public asset.