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(page revised 18 December 2018)

SEVERN CROSSING - TOLL FREE from 18 December 2018

Background
The Tolls That Had Been Payable
Campaign Against the Tolls
Report And Accounts for Severn River Crossing Plc
VAT & Taxes On The Severn Crossing Tolls
Link: Severn Bridge Company site   Scrap the Severn Crossing Tolls on Facebook.

BACKGROUND

  • The Severn Crossing has two bridges - opened in 1966 and 1996. The crossings, like Dartford on the M25, are just the cross river section of an otherwise untolled motorway (1966 crossing is part of the M48 and the 1996 crossing is part of the M4). The crossings were tolled since the first one was built in 1966. The toll was only payable in the east bound direction (England to Wales), there was no toll payable in the other direction and the tolls were sometimes described as a tax on entering Wales.

  • The First Crossing was handed over, gratis, to a consortium - Severn River Crossing PLC - who built the Second Crossing. They were allowed to toll both crossings, and to do so for up to 30 years or, if it came sooner, then the point at which they had collected tolls of £995,830 thousand at July 1989 prices, known as the 'Required Cumulative Real Revenue'. Allowing for the VAT taken by the Government and for inflation, the amount of tolls collected to 3 November 2017 when the target was reached would have been about 1.8 billion pounds.

  • In 2017 there were 14,829,360 toll paying vehicles travelling westbound. Allowing for vehicles going in the other direction and a small number of toll exempt vehicles, there would have been about 29.7 million crossings.

  • The income in 2017 net of VAT was £126.8 million. This was split between £108.6 million to the company up to 2 November 2017 when the cumulative income reached the 'Required Cumulative Real Revenue' figure, and £18.2 million that went to the Government between 3 November 2017 and 8 January 2018 when the concession ended and the crossings were formally handed over to Highways England. The total tolls payable for the year 2017 (excluding the 8 days in 2018), including the VAT would have been £150 million.

  • The tolls were removed from Monday 17 December 2018, following promises made during the 2017 General Election campaign.
    This was our Press release "Severn Tolls End On Monday, Time For Other Tolls To Go"

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    THE TOLLS THAT HAD BEEN PAYABLE

  • Tolls on the crossing were increased in January each year using a formula based on the RPI. As at January 2017, Category 1 (cars and small buses up to 9 seats)) had to pay £6.70, with tolls of £13.40 for Category 2 (Small Bus up to 17 seats, Double Cab Pickup, and Goods vehicles up to 3,500KG) and £20 for Category 3 (Buses with 18 seats and more, and Goods vehicles from 3,500KG). Motorcyclists, pedestrians and cyclists did not pay.
    There were 'Trip tags' available for people who paid in advance and topped up their account with a direct debit. Crossings were charged on a pay as you go basis. There was no discount but the tag would automatically lift the barrier.
    There was also a 'Season' tag which gave unlimited crossings, the charge per month as at January 2017 was £117.92 for cars (tags were also available for larger vehicles).
    There was even a 'Shared' tag which was the same price as the Season tag nut it could be used by up to five cars (only one within any 24 hour period).

  • At the point, 8 January 2018, at which Highways England became responsible for the crossing, there was no longer any VAT payable. So the Government reduced the tolls to £5.60 for Category 1, and £11.20 for Category 2 and £16.70 for Category 3. The monthly Tags were reduced to £98.56, £197.12 and £330.66.

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    CAMPAIGN AGAINST THE TOLLS

  • About 2002 a "Campaign Against Severn Tolls" was started by John Warman (then a Lib Dem councillor from Neath and Port Talbot, but he switched to Labour in 2011). In 2004 CAST was one of the groups that founded the NAAT. John has lobbied Westminster MPs and in 2009 petitioned the Welsh Assembly. Their 'consideration' of P-03-187 stretched out to 2014.

  • In 2010 the Commons Welsh Affairs committee considered the tolls - Committee Publication page for this Inquiry. This was our written evidence. John Warman and John McGoldrick for the NAAT gave oral evidence on 9 November 2010 - Transcript of Oral evidence - Q 274 to 330.

  • In 2012 there was an inquiry into Cross-border road and rail connectivity in Wales - Committee Publication page for this Inquiry. The Severn Crossing came within the scope of the Inquiry but the NAAT did not make a submission.

  • In 2013 there was a follow up by the committee of the Severn Tolls Inquiry held in 2010 Committee Publication page for this Inquiry follow up. This was our written evidence.

  • In 2014 the Welsh Lib Dems declared that they wanted the Severn tolls abolished. There was a debate on 12 November in the Welsh Assemby. Part of the Lib Dems motion was "4. Calls on the UK Government to abolish the tolls on the Severn Bridges once the existing construction and repair costs are paid off". Labour, Plaid Cymru and the Tories amended the resolution and in effect voted against abolition of tolls.

  • In November 2015 there was a Commons debate in Westmnister Hall. The motion that was carried was "That this House has considered tolls on the Severn bridges." - and decided nothing.

  • In May 2017 during the run up to the General Election on 8 June 2017, there were leaks from the Labour Party manifesto. One leak was that, working with the Welsh Government, Labour would remove the Severn tolls. There was nothing in the Tory manifesto, but Teresa May immediately made the same pledge.

  • Pledges are sometimes broken but on 21 July the Government announced that the tolls would go at the end of 2018.
    Drivers and businesses had hoped that when the Government said that tolls would be removed "in 2018", they meant January 2018 not nearly into 2019. The delay meant more money taken from the users of the crossing which was most unfair when drivers already contributed one billion pounds a week in fuel and road taxes.

    There was no reason given for extending the tolls for a year after the end of the Concession, but if an excuse were to be offered then it would probably be on the lines of the Government building up a reserve to pay for future repairs. Of course, as with any other major highway, the upkeep of the Crossing should be part of the Government's normal expenditure. But what makes this extension of the tolls even worse is that this and previous Governments have been deceiving the public.

    Drivers think that all the tolls they have been paying have gone to cover the cost of the crossing. The real situation is quite different.
    The Government had been collecting income and corporation taxes from the company running the concession, and from 2003 to 2017 the Government had also been taking a big slice out of the tolls for VAT.

    We calculated that the total tax take from the tolls by the end of 2017 was £400 million. That was bad enough but the Government also shared in 'windfall' profits from refinancing of the concession. The crossing was meant to help communication and the economy, it was not meant to be a money spinner for Governments.

  • On 14 September 2017 the Welsh Secretary announced that there would be a small reduction in tolls during 2018 following the end of the tolls concession in the run up to full abolition at the end of the year.
    Even with this reduction in toll prices, as the concession will have ended, the Government were in 2018 taking another £130 million from the pockets of drivers and putting it into their own pockets.

  • On 14 September 2017 the Welsh Secretary announced that there would be a small reduction in tolls during 2018 following the end of the tolls concession in the run up to full abolition at the end of the year.
    Even with this reduction in toll prices, as the concession will have ended, the Government were in 2018 taking another £130 million from the pockets of drivers and putting it into their own pockets.

  • There was speculation as to when the tolls would end. Would drivers have to wait till 31 December 2018? Eventually on 2 October it was announced that the tolls would end two weeks earlier than the year endBBC "Severn tolls to be axed earlier than planned on 17 December".

  • What the Government said the day that the tolls ended -"Toll free Severn provides festive boost for communities and business - UK Government brings an end to over half a century of charging".

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    REPORT AND ACCOUNTS FOR SEVERN RIVER CROSSING PLC

  • The last ever accounts were those for 2017 (up to 8 January 2018) that were published on 24 May 2018- Companies House - Severn River Crossing PLC - 2017 report and account

  • The 2016 accounts were signed off in March 2017 and published by the DfT in July. DfT - Severn River Crossing PLC - 2016 report and accounts

    The Company had paid off all its debts and had to pay £16 million in tax to the Government (excluding the VAT).

    The report said "It is anticipated that the maximum toll revenue figure (‘RCRR’) set out in the Concession Agreement with the Secretary of State for Transport will be reached within 12 months of the signing of these accounts." That would make it about March 2018, but the Comapny were probalty erring on the safe side amnd our guess is that they will have got their full share of the two billion punds of tolls by end of 2017.

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    VAT & TAXES ON THE SEVERN CROSSING TOLLS

    One of the particular issues with the Severn Crossing was the imposition of VAT from 1 February 2003. MPs were told that this would not affect the tolls. This was not true. The VAT is being kept by the Chancellor and the tolls will have to be collected for a longer period to make up for the £230 million of tolls that will go as VAT rather than being used to repay the concessionaire.

    Rhodri Clark reported our findings in the Western Mail on the 5 May 2005:- "Fury as government extends Severn tolls".

    We tried to get Westminster MPs interested in this can of worms, but they seemed either to not understand or not to care. We had some hope early in 2006 that the Public Accounts Committe would take an interest in this as they had said that they were concerned about what was happening where "PFI" schemes were refinanced. In the event they also either did not understand what was happening or did not care.

    The total amount of VAT from its imposition in 2003 to the end of 2017 (when the Concessaion is expected to end)will be about £227 million. In addition over the whole of the concession period (1996 to 2017) the Government has been charging tax on the deemed profits of the Company, we estimate that this will amount to £174 million. Thus the Government by tolling have not only avoided the costs of the bridge they have also gained about £400 milion in taxes.   Our calculation of taxes.

    The introduction of VAT and the questions raised about the effect on tolls

    1. European Court of Justice ruled in September 2000 that VAT must be imposed on privately operated tolls. The Chief Secretary to the Treasury, AndrewSmith, then said:-
    "..We have always opposed the principle of charging VAT in this area and fought hard to keep all toll charges free of VAT. We are determined to protect motorists from the impact of this unwelcome ruling. I have asked Customs and Excise to hold urgent consultations with operators of those tolled bridges and roads affected to devise a scheme of Government support to offset the cost of VAT. It will be fully funded..."
    Between then and January 2003, it appears that there must have been discussions between the various parties.

    2. Then between December 2002 and January 2003, there were a series (*) of statements and questions in the Commons about what was happening. The most significant road said to be affected by the VAT ruling was the Severn Crossings. For this and the other toll roads affected, the Government ministers told Parliament that in some unspecified manner, the road operators would be reimbursed the VAT and that roads users would not be affected. The amount of the reimbursement was said to range between £250,000 and £300,000 a year.

    3. Michael Meacher later asked a question about all PFI deals, to which Paul Boateng gave an answer on 31 March 2004. Mr Meacher did not get all that he asked for. But the answer included that there had been a "refinancing gain" on the Severn Crossing scheme. The amount of the gain was said to be £63 million, with the Government's share being said to be £25 million.

    4. Mr Boateng's answer appears to have been noticed by Lembit Optik, the Lib Dem spokesman on Welsh affairs. There was then a story (no longer on web) by Rhodri Clark in the Western Mail on 24th July 2004. The story said that the Severn River Crossing company had gained £38 million. But a spokesman for the company denied this and said that the £38 million was used to offset the cost of the VAT on the tolls.

    5. We raised this issue with the DfT at the end of September 2004, but did not receive answers that were satisfactory to us. We were eventually told by DfT that they were waiting for information from someone in the Treasury. After a very long delay, we learned the name of the Treasury person and contacted him in early April of 2005. He told us that the information that the Treasury had came from Partnerships UK and that their information in turn came from someone in the Highways agency.

    6. We then contacted the person in the Highways agency who replied that the figures did not come from the Highways Agency and that he did not agree with them. He did say that the refinancing had been solely to compensate for the VAT (though it seemed strange to us that if refinancing was possible, then they only proceeded because of the VAT). In any case, it seemed that no one knew what was going on and that the information given to MPs was inaccurate and misleading.

    (*) On 19 December 2002, there was a written statement to the Commons from the Economic Secretary to the Treasury, John Healey:-
    "On 12 September 2000, the European Court of Justice ruled that privately operated tolls should bear VAT. The Government will implement this ruling with effect from 1 February 2003, once consultations with toll operators have been concluded. At the time of this ruling, the Government made clear its intention that motorists should not pay higher toll charges as a result of the imposition of VAT. Our intention remains that tolls will not increase on account of VAT being levied from 1 February."

    Christopher Chope MP then asked the Chancellor of the Exchequer:-
    "If he will list the privately operated tolls which will be subject to VAT from 1st February".
    The answer on 7 January 2003 from John Healey was:-
    "The Government is aware of 10 bridges operated by non-public bodies where the tolls will become subject to VAT from 1 February if the bodies are liable to register for VAT. These are Aldwark Bridge, Clifton Suspension Bridge, Dunham Bridge, Rixton and Warburton Bridge, Severn River Crossing, Skye Bridge, Swinford Bridge, Shrewsbury (Kingsland) Bridge, Whitchurch Bridge and Whitney on Wye Bridge. As I made clear in my written statement of 19 December, the Government's intention remains that tolls will not increase on account of VAT being levied from 1 February. The Department for Transport and the Scottish Executive are consulting with toll operators on the details, and suitable arrangements will be in place by 1 February. In addition to these, tolls levied by private landowners to cross their land will also become subject to VAT. There is no central record maintained of this type of toll."

    Mr. Chope then asked the Chancellor of the Exchequer:-
    "Pursuant to the Written Ministerial statement of 19 December, on VAT on privately operated toll roads, how he intends to ensure that tolls will not increase on account of VAT being levied from 1st February 2003."
    The answer from John Healey was:-
    "As I made clear in my statement, the Government's intention remains that tolls will not increase on account of VAT being levied from 1 February. The Department for Transport and the Scottish Executive are consulting with toll operators on the details, and suitable arrangements will be in place by 1 February."

    On 28 January 2003, Christopher Chope raised the matter again:-
    "To ask the Secretary of State for Transport what his estimate is of the annual cost to his Department of reimbursing VAT to private operators of tolls on the basis being consulted upon at present."
    The answer from Mr. Jamieson was:-
    "Current estimates are that the annual reimbursement will range from about £250,000 to £350,000."

    Mr. Chope then asked the Secretary of State for Transport:-
    "What arrangements will be in place on 1 February to ensure that privately operated tolls do not increase by reason of the incidence of a VAT liability."
    The answer from Mr. Jamieson was:-
    "My Department is currently consulting with owners of privately operated statutory tolled undertakings on a reimbursement scheme, which will allow qualifying operators to recover VAT included in tolls. The scheme will be in place before any payment under it will need to be made. The concession agreement at the Severn crossings has been renegotiated to eliminate the need to increase tolls because of the introduction of VAT."

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