Saturday, September 22, 2007

Hole lot of debt

More on the second Tyne road tunnel. The New Tyne Crossing Project Board has just announced that it's begging to be allowed to extend it's borrowing limit to £130 million and increase tolls. Since the second tunnel was given the go ahead by Alistair 'Rock' Darling in 2005, the project has rocketed up in price from £185m to today's announcement of £260m. Given that turf hasn't yet been cut, it's reasonable to expect costs to rise still further.

It's the kind of increase that would make the 2012 London Olympic committee proud.

Given the fragility of the wholesale markets at the moment, who is going to lend that kind of money, and if someone does, what guarantees will they want? The concessionaires can rely on HSBC and the Bank of Scotland, the Tyne & Wear PTA probably as yet don't have such luck. The current tunnel was bailed out in the 1980s when Newcastle City Council loaned the Tyne Tunnel money (interest free) to refinance the latter's loans because of the volatile lending markets at the time. £4.1m is still outstanding to Newcastle City Council.

Unfortunately veteran tunnel toll campaigner Stan Smith is too poorly to respond to this news, and there is little chance of local councillors having the nerve to call the Tyne & Wear PTA to account, so the announcement will probably go without challenge.

At a time when the finance industry is in such turmoil our politicians should be especially vigilant of dependence on debt. If the new tunnel does go awry, will the public be expected to bail it out again?

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