Publication of the Inspector’s Report has been anticipated for a very long time. We welcome the report’s recommendation to construct the A3 tunnel and the Ministers’ decision that they are “minded to accept” these recommendations. We note though that the report will not please everyone and appreciate the disappointment that will be caused by the decision to close the old A3. Although this will not be universally popular we would not want this aspect of the report to mean a delay or cancellation in the construction of the tunnel. Importantly, we are pleased to see that despite increased costs to the scheme it remains value for money with a cost benefit ratio of 2.8. This is the underlying reason for our support for the construction of the tunnel remaining unequivocal. We do however, have a number of specific issues that we wish to be addressed regarding the increased costs and updated economics of the scheme and these include:● The staggering increase in costs of £131.3 million for the construction of the project seems very high and a fuller explanation than is provided would help to justify such an increase. In particular we would like to see how much of this is accounted for by Treasury rules concerning “optimism bias” and whether these rules have been applied evenly and consistently to all large road infrastructure projects.● As delays are cited as one of the main reasons for the rise in costs we would urge all parties to ensure that there are no further setbacks that would continue to drive costs upwards. We are particularly determined that the scheme should be completed prior to the 2012 Olympics as they will generate huge extra traffic in the area.● There seems to be a lack of detail regarding the changes to the value of benefits of the scheme and such information would help fully explain why the cost benefit ratio remained unchanged.The rest of this document outlines these concerns in more detail and details our thoughts on the increased costs and updated economics of the scheme.Increased costs to the schemeSince the public inquiry into the scheme began in September 2004 the cost of the project has risen significantly to £370.9 million. This is the latest in a long-line of increases to the scheme that have occurred ever since funding for the project was secured by the South East of England Development Agency in March 2001 [1]. At this stage SEEDA managed to secure £107 million for the upgrade of the A3. When Balfour Beatty were awarded the contract in October 2002 they stated that the costs for design and construction of the upgrade would be £132 million and that when design fees, surveys and land acquisition were included then this would rise to £150 million [2]. The cost of the scheme continued to steadily rise until the welcome announcement by the Department for Transport in July 2006 that saw £320 million allocated to the project [3]. This funding is extremely welcome and is a result of the high priority given to this scheme by the South East Regional Assembly, SEEDA and local communities. We hope that the project continues to maintain this status of being a “high priority for funding” project. We are concerned however, that the cost of the scheme has increased by quite so much since the close of the public inquiry in February 2005. As the Highways Agency state in the guidance document for this consultation they have identified factors that would suggest the estimated costs have increased from £239.6m to £370.9m. [4] This represents a staggering increase of £131.3 million for the construction of the project. This is a 54.8% increase on the estimated cost of £239.6 million before the public inquiry. Compared to Balfour Beatty’s original estimated costs of £150 million it is an 87.5% increase. We note the increased costs of the scheme are broadly in line with those that would be faced by the alternative options. The following table demonstrates this: Scheme Cost at public inquiry (£m) Current cost (£m) Change in costs (£m) Change in costs %The Scheme 239.6 370.9 + 131.3 54.8OA3 246.8 380.8 + 134 54.4OA33 243.5 376.8 +133.3 54.7OA34 238.0 370 + 132 55.5OA20 281.6 347.4 + 65 23.1The increased costs faced by the scheme would therefore also be faced by all of the others with the exception of route OA20. We agree with the Planning Inspector that although the costs for this alternative (OA20) would be less than the scheme it would have “particularly severe effects on the landscape and on biodiversity” [5] and as such should not be pursued. It would appear therefore that compared to the alternatives the scheme does not now cost proportionately more than any of the others available. It is important however, that both the Highways Agency and Balfour Beatty ensure that we are kept informed of the reasons behind such a significant increase. Although we welcome the initial explanations provided we would hope that further details will be made available soon. The explanations provided so far are as follows:• Additional inflation costs due to the delay in the start of the scheme and construction inflation running at about twice that originally allowed for. • Changes to Workplace Exposure Limits for Nitrogen Oxides and Respirable Crystalline Silica for workers involved on tunneling works. We accept that these are valid reasons for an increase in the costs of the project but are concerned about the lack of detail regarding how much each factor has caused costs to increase by. As the Highways Agency explanation states construction inflation has been running at about twice the rate allowed for when the original contract was awarded. With construction inflation levels expected to continue at similar levels it is certainly true that this would account for a certain level of cost increase. An indication of to what extent inflation alone is behind the rise in costs would ensure a more transparent process.We are also concerned that previous delays incurred by the project are cited as one of the main reasons for the most recent increase in costs. We urge the Government to give the final recommendation for the scheme to go ahead and thus avoid any further unnecessary expenditure. Any further delay will no doubt add further inflationary pressures to the estimated levels of cost and place the whole project in jeopardy. Any further delay would also exacerbate the cost increases associated with the rising price of the raw materials required for the scheme. Volatility in the prices of oil, steel and copper are partly behind the increase in costs of the scheme and this factor is unlikely to lessen in significance over the next few years. It is therefore important that the Government does not delay in announcing its final decision to accept the Planning Inspector’s Report. We also accept the fact that complying with new Health and Safety regulations surrounding exposure to Nitrogen Oxides and Respirable Crystalline Silica is a potentially costly exercise. However, further details on the “more expensive machinery” [6] that is required and detail on the predictions behind the slower rates of progress would be welcome. We are concerned that mention of slower rates of progress might mean long delays regarding the eventual completion date of the tunnel. Together with the potential delays associated with this additional consultation we seek assurances from both the Highways Agency and Balfour Beatty that this slower progress associated with complying with these regulations will not prevent the completion of the tunnel by 2012. The Government must recognise that the tunnel is desperately needed and accept the recommendations contained within the Planning Inspector’s Report to allow work to start by 2008 at the latest. We also note the fact that if final approval for the scheme is granted soon and work is allowed to begin earlier in 2007 then the tunnels could open in 2011. We urge the Secretary of State to take the appropriate action to ensure that this remains a possibility.Regarding the increase in costs of the scheme although we are concerned that there has been a significant increase of £131.3 million for the construction of the scheme we hope that this does not cause a further delay in construction of the tunnel. We would welcome further information on the calculations behind these increased costs but do recognise that there are a number of valid reasons for such a rise. We also seek reassurances that there will be no further delays to the scheme that could drive the overall cost of the scheme even higher.Cost benefit ratio and value for moneyWe welcome the fact that despite the increased costs the scheme has incurred since the public inquiry it still represents value for money. We note that the cost benefit ratio of the scheme after the public inquiry is the same as it was before hand at an average of 2.8 [7]. It is vital that this positive economic cost-benefit ratio remains in this same range in order to demonstrate the value for money that the scheme will bring. We agree that the scheme will bring safety and journey time benefits on the A3 as well as improving the environment in Hindhead through improvements in noise and air quality. With the scheme still representing value for money we would therefore see no reason for the Government not to fully accept the Planning Inspector’s recommendations and thus grant approval for the scheme to begin construction.We note that the cost benefit ratio for each of the alternative schemes, with the exception of route OA20, have also remained the same. As we have previously stated we do not believe that route OA20 is a viable option for the reasons laid down by the Planning Inspector’s Report. Therefore, the cost benefit ratio of the proposed scheme compares as favourably with the alternatives as it did before the increase in costs. For this reason we are strongly in favour of the construction of the scheme as is proposed because it represents value for money for the community. The present value of benefits for the scheme has increased from £490.6 million to £500.1 million. [8] We regret that there is no real detail provided to explain the reasons for such an increase and would welcome any additional information that could be provided. The explanations for the increase in costs help to demonstrate that many of them are necessary and equally it would be useful to see the reasoning behind the increase in the value of benefits. We feel it is important to fully demonstrate how the present value benefits have increased sufficiently to keep the cost benefit ratio at the same level. We would like to emphasize the wide ranging benefits that the tunnel would bring to the region. This section of the A3 is an appalling transport trouble spot and the Devil’s Punch Bowl has been particularly scarred by this traffic. It is the only section of the route between Portsmouth and Glasgow that has no duel carriageway and it has the only traffic lights between the two cities. Improving the situation at Hindhead would open up the region to an estimated £10 million a year boost to the economies of Hampshire and Portsmouth and thus the area would act as the economic gateway to the whole region. The tunnel is desperately needed.With the scheme therefore still representing value for money and the alternative options not benefiting from a greatly enhanced cost benefit ratio we urge the Government to grant final approval for the scheme. ConclusionWe largely welcome the Planning Inspector’s Report and the Ministers’ decision that they are “minded to accept” the recommendations within it. We note that there will be some disappointment regarding the decision to close the old A3 but do not wish to see this delay or cancel the construction of the tunnel.Although we have a number of concerns regarding the significant increase in costs of the scheme, we note that the cost benefit ratio for the scheme has remained at 2.8 and as such it remains good value for money. In principal we accept the explanations provided for these increases but would hope that further information will be made available to justify completely justify the additional expenditure. Additional information would also be welcome regarding the figures for the present value of benefits offered by the scheme. The Highways Agency and Balfour Beatty should thus conduct the remaining stages of their preparation for construction of the tunnel in an open and transparent manner in order to keep the residents of both our constituencies informed.In light of our remarks on the increased costs and updated economics of the scheme we would urge the Government to grant full approval for construction of the tunnel as soon as possible to ensure that it can commence by 2008 and be completed by 2012.