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Government cash for Mersey Gateway up for negotiation

Backers of the Mersey Gateway crossing were this week locked in negotiations with the Department for Transport (DfT) over the government’s cash contribution to the PFI scheme.

NCE understands the project will now receive a direct government capital grant in place of PFI credits for a portion of the scheme as originally planned.

The 2.4km long, six-lane toll bridge will bridge the River Mersey between Runcorn and Widnes and was due to get £123M in credits towards the £430M total cost.

Since the coalition government came to power last May it has become a flagship project that was touted as one of the major transport schemes safe from hard government cuts.

Client Halton Borough Council was expecting the eventual build, finance, maintain and operate concessionaire – due to be advertised for in the spring – to raise the full cost through PFI with the assistance of the credits acting as a central government guarantee.

However, central government is moving to offer the project greater certainty with the cash, although it is yet to decide exactly how much funding it is prepared to give.

“We can’t confirm what the funding will be from government”

Steve Nicholson

The council’s Mersey Gateway project director Steve Nicholson said that while the public inquiry that approved the crossing in 2009 said the project was due to receive up to £123M from the Treasury in PFI credits, this had now changed.

“We can’t confirm what the funding will be from government but it’s unlikely to have any PFI credits in it,” he said. “It will probably have funding in terms of capital grant, so that will reduce the PFI debt.”

The PFI debt will be repaid by tolls on both the existing Silver Jubilee Bridge – operated by Halton Borough Council – and the new crossing. Nicholson said that these will likely be set at the same level as the tolls charged on the Mersey tunnels, currently £1.40.

Treasury guidance in its PPP Technical Update 2010 published in December warned against public sector capital contributions to PFI projects. But it added that “concerns about affordability have led to proposals from authorities to make capital contributions to projects and to pay them earlier, in some cases prior to completion of construction (to lower the external financing requirement)”.

It added that all proposed capital contributions will be assessed as part of the business case approval.

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