LONDON — Eurostar passengers travelling between London and the continent could face higher fares thanks to a U.K. government tax raid on the Channel Tunnel.

Eurotunnel, the company which owns the under-sea link, says a business rates revaluation on its infrastructure will effectively treble its payments and see it paying 75 percent tax on new investments.

The infrastructure firm says costs will be passed onto operators through higher access charges for trains using the tunnel — raising overheads that are likely to be passed onto passengers.

Rail operator Eurostar said the plans “would be at odds with the Government’s ambition” to promote rail travel.

Rail freight will also be hit as Eurotunnel warned plans to bring an east London goods yard back into operation would have to be cancelled.

It comes as the U.K. braces for a budget of tax rises, with Chancellor Rachel Reeves expected to focus on smaller, specific revenue raising measures after cancelling a planned general hike in income tax.

‘Nothing left to invest’

Eurotunnel says the Valuation Office Agency (VOA), which sets business rates for the government, hasn’t been transparent about the rise in its payments, which from April are set to go from £22 million to £65 million.

The company says access charges are decided by a set formula taking business rates into account, and that they would inevitably rise as a result.

“All of the users of the tunnel pay for access. When business rates go up, that’s split amongst the different users,” John Keefe, director of public and corporate affairs at Eurotunnel, told POLITICO.

“At this stage, the numbers aren’t one hundred percent known, because we’re hoping we can talk a bit more with the government about this and about bringing a bit more pragmatism into it. But there is a mechanism whereby everybody contributes.”

Higher charges for tunnel users would also hit Virgin Trains, the new challenger operator hoping to start running competing services to Paris, Brussels and Amsterdam through the tunnel by 2030. The second operator got the green light just last month with the aim of reducing fares and increasing competition on the key international rail route.

“Since 2017 we’ve had, over three valuations, a nine-times increase in the valuation. This time it’s gone up, multiplied by three, from £22 million that we pay at the moment to £65 million, which is the ask,” Keefe said.

“It needs to be based on what business can actually pay, generate and pay and still invest. Because if you take all the money in business rates, there’s nothing left for investment. So there’s nothing left for growth.

“While we’re hearing leading up to the budget, ‘growth, growth, growth, growth, growth’, nobody can invest at that level.”

Eurotunnel also complains that the VOA’s calculations are “opaque beyond belief.”

“They say, ‘here’s the number.’ And you go, ‘why did you get the number? How did you get to that number? What numbers are you using?’ And they go, ‘there’s the number’,” Keefe said. POLITICO has contacted the VOA for comment.

Freight investment paused

Eurotunnel was planning to reopen Barking rail freight yard in east London to make running freight on trains through the tunnel a more attractive proposition — in line with the government’s own target for a 75 percent increase in rail freight.

But Keefe said: “The sums just don’t add up when you’re paying a 75 percent marginal tax rate. So it’s unfortunately going to be frozen.”

A spokesperson for Eurostar, the high-speed rail operator, said: “Our priority is enabling more people to travel sustainably, which includes offering affordable lead-in fares and products, and we remain fully committed to our growth plans regardless of the VOA review.

“Eurostar continues to engage with the Government and the Valuation Office Agency and is determined to find a positive way forward. However, a three-fold increase in business rates for Channel Tunnel users for the second time would be at odds with the Government’s ambition of economic growth, pioneering European rail connectivity, and encouraging low-carbon rail travel.

“Throughout our conversations, we have urged fairness by treating international rail in the same way as domestic rail in business rates terms. Nevertheless, Eurostar continues to commit to its own ambitious growth plans and investments including €2bn in new fleet and new destinations of Frankfurt and Geneva direct from London.”