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The Financial Risks and Declining Viability of the Lower Thames Crossing

Edited October 16, 2024

The Lower Thames Crossing (LTC), once seen as a crucial infrastructure project aimed at reducing congestion and promoting economic growth, is increasingly being questioned for its financial and environmental impact. Originally conceived as a public-private partnership, the government has now shifted to fully funding the project through public money, raising important questions about its overall viability and the need for road projects to deliver traditional financial returns.

Despite this, the new government is reportedly revisiting the idea of securing private investment, though the obstacles that initially made it unattractive remain significant. Moreover, in a worrying trend, the Labour government seems to favour creating new bureaucratic entities over addressing fundamental flaws in how such projects are conceived and managed.

The "Amazon Effect" and the Creation of Yet Another Quango

In a recent announcement, (CityAM) the Treasury revealed plans for a new infrastructure body aimed at overseeing nationally significant projects, following the debacle surrounding the HS2 project​ ​. However, this move appears to be another instance of what might be called the “Amazon effect”—an approach where instead of fixing the root cause of problems, the government opts to create new initiatives, effectively throwing away the existing framework to start afresh, just as one might discard and replace a broken product rather than repair it.

This new quango is, in essence, an attempt to make it easier to push through mega projects like the LTC, without addressing the inherent issues that plague them—such as poor design, escalating costs, and loss of investor confidence. These issues have not only led to delays but have also increased public opposition. The previous government had to turn to public funding after private investors walked away, deterred by these same concerns. If the LTC is anything to go by, a new oversight body will likely struggle to resolve these deep-rooted problems.

Economic Costs of the Existing Dartford Crossing

The need for the LTC stems from the chronic congestion at the Dartford Crossing, which is estimated to cost the economy £200 million annually. This figure, frequently cited by proponents of the project, represents the economic losses due to delays, increased fuel consumption, and other inefficiencies caused by the traffic bottleneck. These economic costs provide a strong argument for alleviating congestion in the area, but they also raise a fundamental question: should public infrastructure projects be justified solely in terms of financial returns?

A Questionable Return on Investment

The projected cost of the LTC has ballooned to £9 billion, while the return on investment is estimated to be just 22p for every pound spent. This poor return undermines the financial case for the project, particularly in the eyes of private investors. In traditional project management terms, such a low yield makes the LTC a risky and unattractive investment. Private backers typically seek high returns on large infrastructure projects, and the combination of rising costs, public opposition, and a limited financial payoff likely deterred private sector involvement.

The new Labour government seems to believe that a new infrastructure body can solve these issues, but this misses the point. The LTC’s poor financials are not due to a lack of oversight but to the inherent problems in the project’s design and execution. Creating new layers of bureaucracy won’t fix inadequate project frameworks, and it certainly won’t restore private investor confidence.

The Role of Public Funding in Infrastructure

However, the shift to public funding raises broader questions about how we view and fund public infrastructure. Roads are public utilities, and taxpayers already contribute to their maintenance and improvement through taxes. Given this, why should road projects be expected to generate a direct financial return, especially when their primary purpose is to remove costs from the economy—such as the £200 million annual hit caused by the Dartford Crossing’s inefficiencies?

The expectation of a return on investment, while understandable in private-sector projects, seems misplaced when applied to essential infrastructure. The primary goal of the LTC is to ease congestion and improve economic efficiency, not to generate profits. The pressure to frame it as a high-return project has arguably distracted from its core purpose: improving public transport infrastructure for the common good.

Rising Costs and Public Opposition

One of the reasons the LTC’s return on investment is so low is the escalating costs associated with environmental mitigation, planning delays, and construction complexities. Environmental groups like Transport Action Network and Campaign for Better Transport have fiercely opposed the project, arguing that it will increase carbon emissions by 6 million tonnes, further exacerbating the UK’s climate challenges. This opposition has not only delayed progress but has also contributed to rising costs, as additional measures are needed to counter environmental impacts.​ (Labour Outlook).

These spiraling costs and delays are symptomatic of a deeper issue: poor project planning and execution from the outset. Yet the government’s solution—a new infrastructure body—is unlikely to address these fundamental flaws, which have already made such projects unattractive to private investors.

The Declining Long-Term Benefits

Even if the LTC temporarily alleviates congestion, studies suggest that traffic levels would return to their current state within five years. The project’s long-term benefits are thus in question, casting doubt on whether such a massive investment is justified. If congestion relief is short-lived, the justification for such an expensive project diminishes, and its financial and environmental costs become harder to defend.​ (CiTTi Magazine).

Conclusion: The LTC and the Future of Infrastructure

The Lower Thames Crossing illustrates a deeper debate about how we fund and evaluate infrastructure projects. While the government’s shift to public funding may allow the project to move forward, the combination of rising costs, a poor return on investment, and public opposition has significantly reduced the LTC’s appeal. Moreover, the expectation that public infrastructure must deliver financial returns, rather than simply remove costs like the £200 million lost annually at Dartford, seems increasingly out of step with the essential purpose of roads: to serve the public and support the economy.

Instead of addressing the underlying problems that have led to cost overruns and investor hesitation, the Labour government seems content to create yet another quango to oversee these mega projects. This approach ignores the root causes of failure—such as inadequate design and spiralling costs—and risks repeating the same mistakes. If the LTC moves forward under public funding, it will remain a contentious issue, with its long-term viability and effectiveness still very much in question.