EXCLUSIVE by Julian Whittle Political editor

Last updated 08:18, Friday, 03 October 2008

The bank funding Carlisle’s long-awaited western bypass is in deep financial trouble and has escaped collapse only thanks to a £5 billion bail out.

The Carlisle Northern Development route through Kingmoor Park

But officials are confident that the bypass, the Carlisle Northern Development Route (CNDR), will go ahead.

Construction of the five-mile road is due to start next spring under the Government’s private finance initiative, which uses private sector cash for public sector schemes.

Franco-Belgian bank Dexia was lined up to provide up to £142.8m but this week fell victim to the credit crunch.

A huge cash injection by the French, Belgian and Luxembourg governments on Tuesday allowed it to stay in business.

But Dexia’s chairman Pierre Richard and chief executive Axel Miller have resigned.

Colin Moore, Cumbria County Council’s interim director of client services, is waiting for confirmation that the CNDR money will come through.

He said: “As things stand, our advice is that the bank is committed to the investment although things can change from day to day. We are monitoring the situation.

“The thing Dexia aren’t committed to is the interest rate. We won’t know that until the council awards the [construction] contract in November.”

The CNDR will link the A595 at Newby West with Kingmoor Park and M6 junction 44 at Kingstown.

It will allow vehicles from west Cumbria to reach the M6 and A69 without passing through Carlisle city centre.

Traffic volumes on Castle Way and Scotland Road should fall by up to a quarter when the road opens in 2011.

Councillor Alan Clark, the new Labour cabinet member responsible for transport, stressed that the council was still committed to the scheme. He said: “There are no political differences. It is the county’s premier [transport] scheme and we are keen to get it built as fast as possible.

“It will reduce traffic flows in Carlisle and bring investment to west Cumbria. Carlisle cannot go on as it is.”

The road was first proposed 30 years ago but has been beset by delays as costs spiralled.

The crossing of the River Eden had to be redesigned after the 2005 floods.

Cumbria County Council has been in lengthy negotiations to buy up several hundred plots of land along the route.

The most recent headache was the removal of protected great crested newts.

As recently as June, the then council leader Tim Stoddard said the road was on target to open in 2010.

But the latest estimate is that it will be spring 2011.

The scheme has more hurdles to clear, however, before the bulldozers move in.

The county council’s cabinet meets on Tuesday to agree that the construction contract is awarded to its preferred bidder, Balfour Beatty. That decision has to be ratified by the full council on November 20.

And the Department for Transport and the Treasury still have to approve the final business case.

The contract must be signed by December 2 or the price could go up, putting the whole scheme in jeopardy.

The terms require Balfour Beatty to build the road and maintain it for 30 years.

The company will also maintain another 93 miles of the A7, A6071, A689, A594, A595 and A596 in north Cumbria.

Balfour Beatty will borrow the cash to build the CNDR and, in return, receive an annual payment from the council.

Allowing for the effects of inflation, the payments could total £350m over the 30-year life of the contract.

Most of that will be reimbursed by the Government.

Council officials say there should be no cost to the county’s council tax payers in the first three years.

After that the annual bill could be up to £500,000, rising with inflation.

The exact level of payments will depend on how well Balfour Beatty performs.

It will receive more the more vehicles use the CNDR and the better the road’s safety record.

Council tax payers will also have to fork out for unexpected extra costs in construction.

A report warns there could be “significant” extras associated with the reconstruction of Kingmoor Bridge to take the CNDR over the West Coast Main Line railway.

Most of this work should take place at Christmas 2009 when the railway will have to close for up to four days at a time.

Network Rail could cancel the work at short notice, adding substantially to the bill.