Monday, January 07, 2008

Bridging Finance


Victorian engineering wins


So who's going to pay for the new Forth road bridge (nearest in the pic)?

In case you missed it, the existing Forth road bridge (middle one) is falling apart. And the damage is so bad, Scotland's SNP government has decided it will be cheaper to build a whole new one alongside. So at an estimated cost of £3.25bn -£4.22bn, that's exactly what they're going to do. The new bridge will supposedly open in about 2016, and the old bridge will be closed.

For taxpayers, alarm bells should be ringing.

First, how come the existing bridge is falling apart so badly it can't be economically repaired? The thing is only 40 years old and was supposed to have a design life of 120 years.

We've been told it's being pounded from carrying more than its theoretical vehicle capacity. That was 30,000 vehicles per day, whereas today's traffic is approaching an average 40,000, with weekday peaks of up to 60,000. Then again, the Golden Gate Bridge now carries 100,000, having initially carried less than 10,000.

But the key reason the Forth bridge is falling apart doesn't seem to be traffic per se, but corrosion. A couple of years back they took a close look at the cables and discovered 22 of the individual wire strands (out of 11,000) had snapped. As we can all imagine, that's somewhat less than ideal in a suspension bridge, and in this case, it turns out to be terminal.

But why did they design it like that? Hadn't they realised the Forth estuary is a tad on the damp and salty side? And how come they'd never thought of looking inside the cable coverings until a couple of years ago?

I'm no engineer, but the old GG seems to have managed to survive an equally damp and hostile environment.

Second, how come the cost has already escalated from the initial 2005 wishful thought of £500m (A Darling when Scottish Sec), through last June's £1.5bn (government appointed consultants), to today's £3.25-4.22bn? And which end of that range do you think it will be? Given our normal rules of thumb on project over-runs (eg see this blog), we reckon the final cost will be £5-8bn.

Third, who will pay?

The previous bridge was tolled, but the Scottish government has already said it's against tolling in future.

So who does that leave? Scottish taxpayers? Yes, certainly them. But given the way Scotland depends on fiscal transfers from England for c10% of its national income (see previous blogs), I have a horrible feeling the Major and I will also be called upon to dig deep. And we don't want to.

And finally, there's the question of financing structure. Given the bare fiscal cupboard, this has to be another PFI deal.

PFI is well established for bridges and can work pretty well (eg the Dartford Bridge and Second Severn crossing). Because of their local monopoly, operating risk is contained, and pricing should be correspondingly keen. Except that is, with the Simple Shopper representing us at the negotiating table, none of us should expect anything approaching a fair commercial deal.

A combination of tax-funding and PFI would therefore be alarming. Taxpayers- especially English taxpayers- should insist the bridge is fully tolled.

How fortunate we are that our wallets are not in the hands of a Prime Minister from one bank of the Forth and a Chancellor from the other.

OMG, they are.

PS Just for fun, here's an Open University style home movie of that famous Tacoma Narrows bridge collapse. Its replacement opened in 1950 (built on same foundations and anchorage points as the original), and it's still going strong- albeit with a second parallel bridge alongside to handle traffic growth.

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