THE cost of the planned M4 relief road, now predicted as up to £1.4 billion, will increase further once VAT is taken into account, a Welsh Government official has confirmed.

Last month it was revealed the cost of the so-called black route, which involves a new stretch of motorway running south of Newport, had increased by about 10 per cent to around £1.3 billion after a number of concessions to the Association of British Ports, which runs Newport Docks, pushed its price tag up by £136 million.

And, speaking at a meeting of the Welsh Assembly’s Economy, Infrastructure and Skills Committee this morning, the Welsh Government’s director of economic infrastructure Simon Jones said the final cost of the scheme would be higher once it was established how much VAT would have to be paid.

“The VAT situation is quite complex with that road because VAT applies to some parts of the scheme but not other parts of the scheme,” he said. “So there are conversations taking place with HMRC at the moment to understand just what the VAT implications of the scheme are.”

Mr Jones also confirmed the predicted cost of the scheme was now predicted as “between £1.3 billion and £1.4 billion”.

Pressed further on the VAT situation by Llanelli AM Lee Waters, Mr Jones said: “There will be an element of VAT, but the scale of that we’ve not been able to nail down yet.”

Labour AM Mr Waters responded: “But it’s reasonable to assume the £1.4 billion will be higher once whatever VAT you decide you have to pay is taken into account?”

Mr Jones replied: “There will be an element of VAT.”

Questioning the government official further, Mr Waters asked: “So it’ll be more than £1.4 billion?” to which Mr Jones repeated: “There will be an element of VAT, yes.”

Mr Jones replied: “So that’s a yes.”

The black route, the Welsh Government’s preferred solution to congestion on the M4, would bypass the congested Brynglas Tunnels but cut straight through Newport Docks.

As a result, a suite of measures, including a massive new bridge, to mitigate the impact on the docks were announced last month, pushing the overall cost of the scheme up by £136 million.

Commenting on the increased cost at this morning's meeting, economy and transport secretary Ken Skates said: “I understand members may be concerned by that level of investment, but that investment will ensure Wales becomes a more attractive place for investors.”

A public inquiry into the project is due to resume later this month.