05 May 2006
The Commons' Public Accounts Committee this week warned that taxpayers' money could still be called on to plug financial gaps in the construction of the prestigious Channel Tunnel Rail Link because of train operator Eurostar's inaccurate passenger forecasts.
Although revenues from Eurostar UK have increased, they remain below forecast levels, and it is likely that the Department for Transport will have to lend more than the currently estimated £260m to contractor London & Continental Railways to cover future cash shortfalls.
PAC chair Edward Leigh said: 'The Channel Tunnel Rail Link is undoubtedly a magnificent project and a boost to our national prestige, but the economic justification for it remains marginal.
'The link has been bedevilled from the outset by inaccurate forecasting of the number of passengers likely to use Eurostar and the amount of revenue this would generate… It is essential with such projects that, from the start, estimates are realistic and provided by advisers who are clear-eyed about risks to revenue.'
The PAC's report, published on May 4, said that the Department for Transport had tried and failed to ensure that the private sector shouldered a sufficiently high level of risk. It urged the DfT not to weaken the private sector's incentives to maximise passenger numbers.
The report also noted that a high demand for building resources leads to high levels of inflation on construction projects.
Leigh said: 'There are dangers in the sheer number of major infrastructure projects planned for the Southeast: including the Olympics, M25 widening, Thameslink 2000 and the Thames Gateway. It is essential that the Treasury and other government departments manage the risk of making such demands of the construction industry.'
PFmay2006
