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TOLLED BRIDGES REVIEW: PHASE ONE REPORT - 29 OCTOBER 2004:

7. Implications of Change

7.1 Policy Implications

There is a commitment in the Partnership Agreement to ending the discredited tolling regime at Skye. However, there is no commitment to making any changes to the existing toll regimes at the Forth, Tay or Erskine bridges.

When the tolls were introduced on the bridges, they were all used to fund the construction and/or ongoing maintenance of the bridges. However, given the traffic conditions we now experience in some parts of Scotland, it is important to consider bridge tolls in the wider context of congestion charging and road pricing. Account also needs to be taken of the Executive's aspirational target of stabilising road traffic levels at 2001 levels by 2021 - which is ultimately about limiting road traffic's impacts on the environment and cutting congestion.

Road pricing is used for demand management purposes where demand outpaces supply (i.e. demand for scarce road space) which results in congestion and pollution. It provides an economic incentive for motorists to either pay the charge for their journey, or change their route, mode or time of travel to avoid the charge. Road pricing can also raise revenues for transport infrastructure and services, and address environmental impacts.

Bridge tolls can be seen as a sub set of road pricing - although their objectives may be considerably narrower (as with the historical reasons for the tolls). Care needs to be taken with setting toll levels, however. In a perfect world, the toll would be set at an optimum level which meets the objectives for the area, road or bridge. In the case of tolled bridges this is likely to be a balance between addressing access, demand management (if this is required), ensuring efficient use of the associated road and public transport network, and funding the ongoing maintenance requirements of the bridge. However, decision makers also need to take account of what is deemed publicly acceptable, and toll levels may be lower in practice than this optimum level. Given the relatively broad nature of this review, we did not seek to find this optimum toll level for each bridge. We have simply considered some of the likely outcomes of making changes to the tolling regimes.

Responses to the consultation during this review expressed no consensus on the future of tolling at the four bridges. Some respondents felt that all tolls should be removed. Others felt that the tolls should end once construction costs had been repaid. Yet others supported the continued levying of tolls as a means of managing congestion, encouraging modal shift, funding maintenance costs and funding local transport projects.

The review has found that all the bridges operate in a different traffic context with some bridges suffering severe congestion (Forth and Tay), others suffering little or no congestion (Erskine and Skye). Reduction or removal of the toll on Erskine offers the potential opportunity to relieve some congestion in the associated city centre ^cc. Removing the tolls on one bridge, therefore, does not imply that this would be appropriate for any of the other bridges.

While each bridge is different, and toll levels should not necessarily be set at the same price, the review has flagged up a number of issues where a more cohesive approach could be taken. This could amount to a set of principles being applied to Scotland's tolled bridges - that would provide more certainty for bridge users, and better reflect the environmental and economic issues associated with bridge management.

Principles that require further consideration in Phase Two should include:

• The treatment of Blue Badge holders
• The use or otherwise of discount schemes
• The classification of vehicles
• Treatment (exemptions or discounts) of public transport vehicles and high occupancy vehicles
• Whether toll levels should have a direct relationship to the level of wear and tear on the bridge caused by different vehicle type.

7.2 Financial Implications

Tolling revenue is the product of the tolling tariff and the number of paying vehicles. As the tariff changes, the tolled route becomes more or less attractive and the number of paying vehicles will increase or decrease accordingly. Using traffic flows from the tolling scenarios modelled by MVA, the impact of changes on current tolling income was assessed for Erskine, Forth and Tay Road Bridges.

7.2.1 Erskine Bridge

Tolls from the Erskine Bridge contribute around 5m pa to the Executive's transport programme and any change to the tolls will have an impact on that figure; removing the tolls completely would remove that 5m contribution from the transport programme.

The results of modelling work conducted in Phase One indicate that only a marginal increase in tolling income would be gained by increasing the 60p each-way toll to 1, as significant numbers of vehicles would divert to alternative routes.

Although additional traffic was generated by the 50% reduction in tolls, tolling income reduced significantly. As it presently costs around 7p to collect each 60p toll, the cost efficiency of toll collection costs would be eroded by a reduction in tolls levied.

A significant decrease in tolling income resulted from changing the 60p each-way toll to a 1.20 northbound only toll, as significant numbers of northbound vehicles would divert to alternative routes.

No significant change in tolling income resulted from the tolling differential by vehicle type, with cars paying 50p in each direction and HGVs paying 1 in each direction.

Although not modelled by MVA, a decrease of around 25% in tolling income may be expected by removing tolls at weekends based on daily flows at Erskine Bridge shown in section 5.1.

7.2.2 Forth Road Bridge

Any changes to the tolling regime will affect the amount of revenue available for FETA to meet the ongoing care and maintenance costs of the Forth Road Bridge and to provide funding for schemes to improve cross-Forth crossings.

The results of modelling work conducted in Phase One indicate a significant increase in tolling income would be generated by increasing the current northbound-only tolls from 80p to 2 for cars and from 2 to 5 for HGVs, despite a sizeable reduction in northbound vehicles. The increase in revenue is no greater when tolls are set at 5 (cars) and 7 (HGVs) as the model shows even fewer vehicles using the Bridge. An increase in tolling income would enable projected costs to be met independently of external financing but cannot exceed sums required to operate and maintain the bridge and pay for cross-Forth transport improvements.

Halving the level of the tolls led to a significant fall in revenue, despite some increases in traffic levels. A decrease in tolling income would severely limit FETA's ability to support cross-Forth transport improvements and increase its dependency on external financing, including direct support from the Executive, for bridge maintenance and, possibly, bridge operations.

7.2.3 Skye Bridge

The financial implications of achieving the Partnership Commitment to ending tolls at the Skye Bridge are currently being discussed in negotiations with Skye Bridge Ltd. Those negotiations are commercially confidential and are not discussed further here.

7.2.4 Tay Road Bridge

Any change to the current tolling regime will affect the amount of tolling income available to the Tay Road Bridge Joint Board to meet its financial obligations.

The Tay Road Bridge Joint Board is confident that, with the capital maintenance programme funded mainly by capital grants, current tolls are sufficient to meet the debt-free requirement by 2016/17.

The results of modelling work conducted in Phase One indicate a significant increase in tolling income would be gained by increasing the current southbound-only tolls from 80p to 2 for cars and from 2 to 5 for HGVs, despite a reduction of approximately one-third of southbound vehicles. The increase in revenue did not significantly increase further when tolls were set at 4 (cars) and 6 (HGVs) as the proportional fall in vehicles using the bridge was different.

Any reduction in tolling income will increase dependence on Executive funding to meet maintenance costs, and may additionally limit the Joint Board's ability to provide for Bridge operations. Removing the tolls altogether would lead to a loss of around 3.4m per annum based on 2003 tolling income and resultant dependence on the Executive both for repaying loans and for bridge operations and maintenance.

Reducing the toll to 40p for cars and 1 for HGVs led to a large fall in revenue, although there was an increase in traffic. While increases in tolling income would reduce dependence on Executive funding to meet maintenance costs, increased revenue will not necessarily lead to the early repayment of loans where current loan terms would make this unfavourable. Within their current remit, the Tay Road Bridge Joint Board is unable to employ annual surpluses for local transport improvements in the same way as the Forth Estuary Transport Authority.

7.3 Legal Implications

The tolling regimes on each bridge were set up under different Acts and using different tolling orders which all have different criteria for modifying or removing tolls. The following sections summarise the legal steps needed to make any changes to tolls at each bridge.

7.3.1 Erskine Bridge

The Toll Order currently in force at Erskine is the Erskine Bridge Tolls Order 1992 ^dd. This sets the level of tolls at the Bridge. The Erskine Bridge Tolls Act 2001 extended the tolling period to 1 July 2006.

Section 1 of the Erskine Bridge Tolls Act 1968 enables the Scottish Ministers to levy, vary or revoke tolls and Section 2 provides that the Scottish Ministers may make an Order as to "the classes of vehicles", "the scales of tolls" and other provisions in accordance with which tolls are to be levied. Tolls for the Erskine Bridge can be levied at different rates and by reference to different circumstances such as the day of week, time of the day and probably also the number of occupants of the car.

Before a varying Order can be made the Scottish Ministers must publish a draft of the Order and specify a period for objections. The Scottish Ministers must hold an inquiry if an objection is pursued by a Local Authority or bodies with a substantial interest in the bridge (such as commercial undertakings and frequent users of the bridge). If any other objection is received and not withdrawn then the Scottish Ministers may hold a local inquiry if they think fit. After holding the inquiry the Scottish Ministers may make the Order either with or without modification.

If the Toll Order is revoked it would not be possible to make any further Toll Order in the future without further primary legislation as section 4(3) of the 1968 Act provides that Toll Orders can only extend a period of tolling. They cannot be used when there is no Toll Order in existence.

It should be noted that any measure which requires a tolling regime to operate on Erskine Bridge beyond 1 July 2006 will require the current tolling period to be extended using powers in section 4(3) of the Erskine Bridge Tolls Act 1968. The extension would be effected by Statutory Instrument, subject to affirmative resolution in the Parliament.

Schedule 2 to the Act requires that total tolls collected should not exceed the total sum of the capital costs (with interest) of the bridge, the ongoing costs of operating, maintaining and renewing the bridge both during the tolling period and afterwards, and interest on annual shortfalls. The Schedule 2 calculation for the year to 31 March 2003 shows that tolls collected since the Bridge opened have fallen some 260m short of exceeding the cap. This suggests that Schedule 2 does not operate as an effective cap on tolling.

7.3.2 Forth Road Bridge

The relevant provisions on tolling are contained in Part V of the Forth Road Bridge Order Confirmation Act 1958.

Scottish Ministers, FETA, any of the constituent councils of FETA or any person with a substantial interest in the Bridge can apply to revise the tolls. Any proposed increase or decrease to tolls requires a Revision of Tolls Order. Before a varying Order can be made a draft must be published and an objection period set. The Scottish Ministers must hold an inquiry if any objection is pursued and the objector asks for his or her representations to be heard at inquiry. An inquiry into FETA's current proposal to increase Class 2 tolls from 80p to 1 will begin on 6 December 2004.

To remove the tolls the Tolling Order could simply be revoked; however, this would likely prevent any subsequent Toll Order in the future without further primary legislation.

Sections 44 and 45 of the 1958 Act do not specify the basis upon which tolls can be charged. Section 43 simply refers to "traffic using the bridge". The 1958 Act does not prevent differential tolls; it simply does not specifically authorise them.

The question could be put beyond doubt by an amendment to the 1958 Act. This would probably have to be by primary legislation.

7.3.3 Skye Bridge

The contractual arrangements entered into with Skye Bridge Limited preclude Scottish Ministers from changing the current tolling regime without the concessionaire's consent. Further, there is no voluntary termination clause in the Concession Agreement although the agreement does provide a formula for calculating compensation where there is a "change of law" which would prevent the concessionaire from performing its obligations under the contract. Such a change of law would require primary legislation and, aside from timetabling difficulties (and consequent risks to the deliverability of the Transport Bill), the Executive could attract criticism by promoting legislation simply to terminate a contract which could be achieved by other means. This could discourage others from entering into future PFI contracts. The "change of law" option is therefore deemed undesirable.

The Partnership Agreement commitment to ending tolls at Skye Bridge therefore requires some form of agreement with the Concessionaire and options are presently subject to negotiation. The Toll Order ^ee for the Skye Bridge sets the maximum tolls which may be charged. If the Concession Agreement is ended it is therefore possible to remove tolls by agreement with Skye Bridge Ltd. However, the tolling order should be amended and revoked at a later stage using negative resolution procedures. In brief, the 1992 Toll Order would need to be amended to redefine the tolling period (it currently specifies it as 27 years), and then repealed. The 1997 and 1999 Variation Orders would also need to be repealed.

7.3.4 Tay Road Bridge

The current toll levels were fixed by the Tay Road Bridge (Revision of Tolls) Order 1995 which remains in force until it expires or is revoked or modified by a further order. No expiry date is specified in the Order.

The Tay Road Bridge Order Confirmation Act 1991 permits Scottish Ministers to make a toll revision order on their own initiative or after written representations by the Tay Road Bridge Joint Board, its constituent Councils, or any body of traders or owners/users of vehicles or any person who is, in the opinion of the Scottish Ministers, a proper person for the purpose.

Scottish Ministers have a wide discretion as to whether or not to make an order revising the tolls. The test is that they may make an order "if they think fit" but they must hold an inquiry if they think it is necessary or desirable, or where asked to do so by the Joint Board, its constituent Councils, or any person pursuing an objection.

Tolls could be removed by revoking the tolling order. However it would not be possible to make any further Toll Order in the future without further primary legislation as the 1991 Act provides only for the revision of authorised tolls. It cannot be used when no authorised tolls are in place.

The Tay Road Bridge Order Confirmation Act 1991 does not specify the basis upon which tolls can be charged. It allows the Scottish Ministers to increase or decrease the tolls but neither specifically authorises or prohibits differential tolling. As with the Forth Road Bridge's tolling regime, options for introducing variable tolling provision would initially require further legal consideration.

Sections 43 and 44 of the 1991 Act do not specify the basis upon which tolls can be charged. Section 43 states that the Joint Board "may demand, take and recover in respect of traffic using the bridge….the tolls authorised". As with the Forth Road Bridge, this does not prevent variable tolling rates - it simply does not specifically authorise them.

7.4 Key Points

• Reducing or removing the tolls on any bridge will require another stream of funding to be identified for that bridge to cover any shortfall for maintenance
• Originally each of the tolling regimes was established to pay for the construction costs and maintenance of the bridges. Each of the bridges is now in a different situation with regard to the original costs
• The Tolling Order at Erskine Bridge will expire on 1 July 2006 unless a separate extension Order is promoted, or the existing Order is revoked before this date. Erskine's tolling legislation is flexible enough to allow for different rates of tolls to apply in different circumstances although any variation may require a public inquiry if a relevant objection is made. Revoking the tolls would prevent the reintroduction of tolls at a future date without primary legislation. Continuing the current tolling regime is likely to generate annual surpluses which would be credited to the Executive's transport programme, while ending the tolls would result in a projected loss in excess of 5m per annum. Schedule 2 of the Erskine Bridge Tolls Act 1968 places a limit on the tolls collected by assessing them against a "notional debt"; economic changes since 1968 have meant that the framework for defining that notional debt produces an inappropriately large figure.
• The Tolling Order at the Forth Road Bridge will expire on 31 March 2006 unless varied, extended or revoked. Any variation to the existing tolling regime may require a public inquiry if a relevant objection is made. Revoking the tolls would prevent the reintroduction of tolls at a future date without primary legislation and result in substantial maintenance costs for the Executive. Continuing the current tolling regime is expected to be insufficient to meet future maintenance costs and a decision on FETA's application to increase Class 2 tolls for this reason will follow the scheduled public inquiry.
• The period of tolling on Skye Bridge is linked to the concessionaire's recovery of agreed costs which in turn is linked to the level of Bridge traffic. Scottish Ministers cannot unilaterally amend the existing tolling regime nor terminate the Concession Agreement. The current discount scheme allows Scottish Ministers to adjust amounts paid by Bridge users by making good the value of discounts to the Concessionaire from public funds.
• Should the Scottish Ministers seek to revise the existing tolls at the Tay Road Bridge, any variation may require a public inquiry if a relevant objection is made. Revoking the tolls would prevent the reintroduction of tolls at a future date without primary legislation. Continuing the current tolling regime is expected to be sufficient to repay outstanding debts within appropriate timescales and to write off the debts owed to the Executive, while ending the tolls would render the Executive liable for servicing these debts and for Bridge operations and maintenance costs.

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