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Ministers have given the go-ahead for a £10bn road tunnel between Kent and Essex called the Lower Thames Crossing after years of delay, with the private sector expected to finance much of the project.
Transport secretary Heidi Alexander on Tuesday approved a development consent order for the long-awaited project.
The 14-mile road and tunnel will be the first wholly new Thames river crossing east of London in 60 years.
The decision was reported earlier on Tuesday by the Financial Times.
The government is looking for positive announcements to make ahead of Rachel Reeves’ Spring Statement on Wednesday, which is expected to be gloomy, with growth forecasts to be slashed and deep departmental spending cuts.
The chancellor had backed the project in January, saying it was “infrastructure our country desperately needs”.
One official said the project would be a “key strategic route” for drivers, freight and logistics, improving connectivity between southern England and the Midlands and unlocking regional economic growth.
“This demonstrates this government’s commitment to delivering the vital infrastructure the country needs,” they said.
The scheme has become a symbol of Britain’s sclerotic planning system, with more than £1.2bn spent on the project despite construction not having yet started.
The money has been spent on planning, consultations, traffic modelling, environmental assessments, legal and advisory fees and land purchases.
The planning document for the project runs to 359,070 pages, equivalent to nearly 300 times the complete works of William Shakespeare.
The cost of the tunnel project has already risen from between £5.3bn and £6.8bn when it was first agreed in 2017 to a current forecast of about £10bn.
It is expected that construction will start in 2026 or early 2027 ahead of a planned opening by 2032.
“For far too long governments have dodged making a decision on the Lower Thames Crossing,” said Jim Dickson, Labour MP for Dartford.
“This decision will unlock economic growth across the country and finally deliver a solution to the traffic chaos faced by my constituents on a daily basis.”
The government is yet to decide what method of private finance to use on the project, with a decision expected later this year by the Treasury.
A proposal to have a “regulated asset base” (RAB) model — in which private investors would collect toll revenues from the road to pay back their investments over the life of the projects — is favoured by the Treasury, according to people with knowledge of the discussions.
This option would cost the Treasury £200mn more in upfront costs than if the government paid for the scheme directly, according to a recent National Highway document.
The model, which has been used on London’s new Tideway sewer, would require nearly £2bn of taxpayer funding to attract £6.3bn of private investment, taking the total cost of the project to at least £9.4bn, the figures show.
National Highways says there is likely to be a “market interest for the regulated private entity delivery option”, citing projects that use the same structure including the Sizewell C nuclear plant.
The most expensive method of financing the crossing would involve a private finance initiative-style scheme, National Highways found.
The UK government stopped using PFI deals in 2018 when then-Conservative chancellor Philip Hammond ended the decades-long practice that began in 1992 under Tory premier Sir John Major.
The new form of PFI is dubbed “design, build, finance, maintain and operate” or “DBFMO”. This model would cost taxpayers an additional £1bn, taking the total capital cost to more than £10bn.
Under this option, taxpayers would pay £4.7bn for the tunnel, while a special purpose vehicle set up by investors would draw in £4.3bn in private finance for the roads, with shareholders receiving the toll income over a licence period of 25 to 30 years.
