Today is the deadline for responses to the department's consultation paper examining how best private finance can be harnessed to public sector funding to help build the Channel tunnel high-speed rail link. A last- minute avalanche of submissions is expected.
About 100 banks, construction firms, consulting and civil engineers, and transport companies were invited to respond to the document, issued four weeks ago by John MacGregor, Secretary of State for Transport.
He can expect some heavyweight advice from the likes of Eurorail, the Trafalgar House-GEC-BICC joint venture set up specificallly to bid for work on the link, P&O, the merchant bank Kleinwort Benson and consulting engineers such as Ove Arup and Sir William Halcrow.
Although the replies will be slim - the department wants observations kept to less than 20 pages - they will provide Mr MacGregor and his merchant bank advisers, Samuel Montagu, with plenty of food for thought.
Having dithered so long over the go-ahead for the 68-mile link, and having suffered so stoically the jibes of the French, whose high-speed link is not only built but in service, the Government is now moving ahead with indecent haste.
Union Railways, the British Rail subsidiary responsible for the link, is advertising for a project manager even before the ink is dry on submissions to the department, and aims to appoint one next month.
Detailed design work is planned to begin next March at the same time as the Government deposits the hybrid Bill in Parliament. Assuming that Royal Assent comes in late 1995 and construction follows immediately, the line would open in 2001.
The best estimate of the capital cost is pounds 3bn. Of this the Government will contribute perhaps pounds 1bn, justifying it on grounds of the benefits the line will bring to Kent commuters. But that figure could yet prove wide of the mark, since it is still to be decided whether the line will end in an expensive underground terminus at Kings Cross or a more modest surface station at St Pancras.
In its consultation document the department set out two main alternatives for private financing. One is to determine the level of public sector funding by means of a competition among private sector promoters to take control of the project.
The other is for the Government to set the level of subsidy it will pay and then raise private finance through a flotation once Royal Assent has been obtained, but before the main construction works begin.
Even before Mr MacGregor has sat down to sift the responses, the strains are beginning to show. A flotation would almost certainly have political attractions for the Government and perhaps those merchant banks and broking houses that would earn commissions and advisers' fees.
But it would have precious few attractions for the private sector promoters Mr MacGregor is now courting, since they would be relegated to the role of contractors.
John Prideaux, chairman of Union Railways, is promoting the idea of a flotation, perhaps including European Passenger Services, the BR division that will operate Eurostar international services from Waterloo when the tunnel opens next year.
Some companies with an interest in the link suspect that, to this end, Mr Prideaux is doing everything he can to retain maximum control over the project despite the Government's stated preference to transfer responsibility to the private sector as soon as possible.
Eyebrows have been raised, for instance, over Union Railways' haste to appoint a project manager - a key appointment that potential private sector promoters would ordinarily expect to have control over.
As the consultation document concedes, the Government is asking would-be partners to make an awful lot of assumptions - about the timetable for the project, the rate at which the risk will be transferred from the public to private sector, how soon the ceiling on the public sector's contribution can be determined and, of course, the overall cost.
In reply, Mr MacGregor is likely to be told that unless a great deal more certainty can be injected into his plans, there will not be much in the way of private sector risk money this side of Royal Assent.
The Government would like to be in a position to hand over a large measure of the risk to the private sector next year. But, as one potential promoter said: 'Ministers seem to want to fix what the respective financial contributions will be at a stage at which they are unfixable.'
Not only will it be an expensive exercise getting the Bill to Royal Assent, but the costs of the project could increase hugely if the Government concedes further environmental protection measures, such as extra tunnelling, during the course of the Bill's passage through Parliament.
The alternative of keeping the project under public sector control until a flotation in late 1995 is also fraught with difficulties. The example of the Channel tunnel - a year behind schedule, approaching double the original budget and its shareholders unlikely to receive a dividend until the turn of the century - is scarcely an enticing one.
'A flotation is altogether too risky a proposition for the markets. It is going to have to be taken on by a private sector promoter with a subsidy from government,' said another company submitting a response.
Then there is the problem of the timetable. If the link is to open in 2001 there cannot be any hiatus between the completion of the parliamentary process and the start of main construction. Even some of those working with Union Railways doubt whether this timetable can be met.
The danger is that, having dallied for so long, the Government may now be moving too quickly in its anxiety to show that partnerships between public and private sectors work. As one consultant observed: 'I don't think the Government has thought anywhere nearly enough about this. There are still too many imponderables and too little information.'
(Photographs omitted)Reuse content