Taxpayers face 75% of rail link bill

CHRISTIAN WOLMAR

Transport Correspondent

More than three-quarters of the cost of the pounds 2.9bn Channel Tunnel high- speed rail link will have to be met by the taxpayer, despite the Government's attempts to get the private sector to foot most of the bill.

Industry sources say bids from the four consortia seeking to build the line all demanded a much higher than expected government contribution. Even the cheapest bids were seeking well over pounds 2bn in public funds.

Although the Government is politically committed to building the line, the new Secretary of State for Transport, Sir George Young, will face an uphill task in convincing the Treasury to allow him to give the go- ahead for the project at the end of this year.

Competition to secure the contract to build the 70-mile link between St Pancras and the mouth of the tunnel near Folkestone is on the basis of which consortium agrees to accept the lowest public contribution. The winner will also take over the running, debt-free, of the potentially highly profitable Eurostar passenger service (EPS) which links London with Paris and Brussels, and is estimated by the Government to be worth between pounds 900m and pounds 1,050m.

Two of the four consortia were eliminated from the competition to build the link because their bids, including the value of Eurostar, were thought to have exceeded the pounds 2.9bn estimated by the Department of Transport to be the cost of building the line. The remaining bidders, Lord Parkinson's Eurorail and London & Continental which includes Richard Branson's Virgin group, are said by industry sources to want well over pounds 1bn in funding as well as EPS. They are also thought to dispute the Government's valuation of EPS.

The disgruntled losing bidders are considering whether to take legal action over the shortlisting process. In May, the Independent revealed from leaked minutes that Eurorail's original bid had not complied with the requirements of the tender document. The consortium was allowed to file a later compliant bid.

The lack of a high-speed link is of growing embarrassment to ministers since France has already built its line to the tunnel and Belgium is due to open a dedicated line in two years. The new link will shorten journeys to the two Continental capitals by around half an hour, make the journey more reliable and provide extra capacity.

The large amount of government money needed to fund the project would also be embarrassing to ministers because it would represent a radical U-turn. As little as two years ago, ministers insisted no public money should be spent on building the link other than a limited amount to support domestic services running between Ashford in Kent and London.

Michael Meacher, Labour's transport spokesman, said the scheme's high cost to the Exchequer threw into question the whole process of involving the private sector:

"It is well known that governments can do things more cheaply than private companies because of their ability to raise cheaper finance, " he said.

"If the private sector is going to fund such a small part of the project it makes a mockery of the Government's insistence on the central role of the private sector."