The Skye Bridge Story |
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A case study of public private partnership |
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Much of the proposed motorway network, such as that from Waterford to Dublin, would be build under the Public Private Partnership (PPP) scheme. This means that some of the funding for the road will come from the private sector. In return the private sector will be able to toll some or all of the road. It has not yet been announced how much money will come from the PPP scheme. Tolls will be payable on certain sections of the route. What does this mean? How will the PPP affect the financing of the road? What are its long-term consequences? Who will ultimately pay for the road and will it be value for money for the Irish people? One way of answering these questions is to look at the implementation of the Private Finance Initiative (PFI) in the United Kingdom (the PFI is the equivalent of the PPP) and in particular at the construction of the Isle of Skye Bridge in Scotland. The Isle of Skye is separated from the British mainland by no more that 1 mile at the closest point. Up until 1987 there was a ferry service connecting the two. There was general agreement between all interested parties, the Scottish Office, the local community and local businesses, that the ferries were not adequate to serve the island and that a bridge was needed. The problem lay in the fact that the Scottish Office claimed that it did not have the money to build the bridge, estimated at £25m, and thus proposed to use the PFI scheme to fund the development. Private investors would build the bridge and surrounding infrastructure and would put a toll on the bridge to recoup their investment. In theory the efficiency of the private sector would build the bridge on time and under budget and after a maximum of 25 years the tolls would end and the bridge revert to public ownership. In practice things happened very differently. The Cost of the Project
The bridge was not
supposed to cost the Scottish Office anything.
It was to be paid for by the private sector in its entirety.
But soon after the contracts were signed the Scottish Office
agreed to pay £6m to construct the short approach roads.
A further £3m went on advisors fees, survey work, land
purchase and staff costs. After
contracts had been finalised a public enquiry was held.
During this enquiry construction had to be halted.
This cost the Scottish Office £2m, paid to the private
consortium building the bridge.
Following the public consultation a further £4m was paid to
the builders as compensation for delays and design changes.
Then a final payment of £3m was made to compensate the
tolling company for offering lower tolls for regular users.
Thus the Scottish Office, on a project that was supposed to cost it
nothing, paid a total of £18m. But the total cost
to the Exchequer was higher still.
The old ferry service that had been running between the
island and the mainland had been returning £1m a year profit.
Part of the PFI deal was that the ferry service would be
terminated, thus depriving the Exchequer an estimated £1m per year
in projected revenue. And
finally, the bridge would raise £21m in tolls.
This would not be paid to the private consortium from
taxpayer’s money, but it would still be paid by the people of
Scotland. The Isle of
Skye is one of the poorest areas in the United Kingdom. The following
table is an extract from the House of Commons Public Accounts
Committee report into the financing of the bridge.
Source: National Audit Office Note 1: These figures are expressed in constant 1991 prices discounted at 6% a year to 1991 base year. This is how toll revenues are measured within the Skye concession contract and allows the figures to be compared on a common basis The Experience of
the Local Opposition Group.
Soon after the opening
of the bridge locals to the Isle of Skye found that they were paying
one of the highest tolls per mile in the world.
They were promised that the tolls would only rise at the rate
of inflation: in the first year they jumped 30%.
They organised a non-payment campaign.
The Crown Prosecution Service (CPS) treated non-payment as a
criminal rather than a civil issue.
Instead of hearing the cases at a local court on the Isle of
Skye, the CPS heard them at Dingwall, 120 miles from Skye (and on
the other side of the bridge).
In order to defend themselves some Islanders had to turn up
at court 15 times. Failure
to make a round trip of 240 miles and turn up in court earned the
defendants 11 days in prison. At
the height of the campaign one of the leaders had his car stopped by
police 20 times in the same week.
He was never charged with any offences. The Scottish Office then
paid the Tolling company £3m to offer a reduced rate to regular
users of the bridge. But
they did this by selling a book of non-transferable 20 tickets,
valid for one year only. Not
many locals made the crossing 10 times in a year, so the scheme, in
effect, made the crossing more expensive. Six years after the
bridge was opened local opposition is still strong.
Tolls for less that a mile cost £5.70 and the bridge is now
owned by Bank of America (the same bank that gave the Scottish
Office financial advise on the project during the planning phases). Before the 1997
election, Labour was strong in their opposition to the tolls.
They marched with the protesters and took out ads in local
papers promising to work for the abolition of the tolls. Once in power they refused to renegotiate the tolling
agreement and denied ever having promised the abolition of the
tolls. Conclusions The Scottish Office was
heavily criticised by the House of Commons Public Accounts Committee
for the following reasons:
Some of the mistakes made in the project will not be made in Ireland. But the essence of the scheme is the same. Private companies will be very aggressive in looking to maximise profit. That is what they are designed to do. They will be looking to run the toll roads for profit rather than for the benefit to the population. And if we pay for a road through taxation or through tolls, we still pay for it. It is a question of which option will be better value for the Irish people. From the experience of the Skye Bridge case, PPP will end up costing us more. |
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