The Road Network and Public Debt
October 21, 2011
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The road network and public debt – on the face of it, two unrelated topics. One is an under-resourced, often ignored asset, vital to the social and economic well-being of the nation, as much of an essential service as other utilities such as the water, power and communications industries. Public debt meanwhile rises inexorably especially taking account of pensions and PFI liabilities – all in all it is potentially catastrophic to the UK’s future prosperity.
Yet there might be a straightforward way in which transformation of the former could help put a significant dent in the latter.
Ask almost any of Britain’s 34 million drivers and they will tell you a tale of woe about a recent road journey: the potholes, the congestion, the road works. They will also question how the long-standing lack of spending on roads (currently amounting to only £9 billion a year) can be squared with the huge amount of money the Chancellor collects in motoring related charges – around £48 billion from fuel duty, Vehicle Excise Duty and company car tax.
There are few naïve enough to believe these taxes will ever be hypothecated and everything collected from drivers returned to maintaining and enhancing the roads, yet there are equally few who think the current arrangement is equitable. For all the talk of high speed rail and exorbitant train fares these are essentially side-shows to the big transport question of the day – how do we ensure adequate funding for the road network on which more than 90 % of passenger miles, not to mention freight trips, take place in this country?
A long-standing part of the problem has been that these budgets have been at the whim of short-termist political thinking. The Highways Agency, for example, suffers a hand to mouth existence because there is no long-term budgetary arrangement for it, in contrast for the railways there is a five year funding settlement overseen by a designated regulator. In the water industry there is an obligation on companies to plan for demand a quarter of a century hence. Such duties are once again enforced by a regulator.
Is there not an argument that the governance of our roads should also be altered to place the network at arm’s length from Whitehall? The money might still come from the Treasury, but funding might additionally come from the private sector. Whilst we were in Opposition John Redwood and Simon (now Lord) Wolfson put forward a proposal that would see the management of elements of our road network leased to private firms allowing them to collect a regulated maximum tariff whilst in return investing considerably in improving Britain’s road infrastructure. At the far end of the road governance spectrum is the full privatisation model. This is where we come back to the national debt. It has been (very conservatively) estimated that a sell off would raise at least £100 billion. In national lottery terms that is what is called a life-changing sum of money. This would make a huge positive difference to what is essentially the nation’s mortgage, reducing the capital owed and cutting interest payments.
Full privatisation might lead to Pay As You Go (PAYG) driving where motorists are charged on the basis of a combination of time, place and distance travelled. The knee-jerk response from motorists is probably to honk their horns in horror, yet such a system would not be a supplementary charge, but a replacement of the existing method of tax collection. A regulator – Offroad, perhaps? – would set limits for these charges and also ensure an appropriate amount was spent on road infrastructure.
It is not as if we as electors and taxpayers are not used to paying for a multitude of other services on a metered basis. Water, gas, electricity and phone bills, even plane and train fares, all charged on the basis of time and level of consumption.
Naturally there are considerable privacy concerns that must be addressed if a PAYG system is to be introduced onto our roads. Comparable to the introduction of Oyster Cards on the London Underground but with far greater potential for misuse, there must be robust and comprehensive safeguards given that the government is able to pinpoint the exact location of a person’s vehicle at any time of the day or night. Currently only tagged criminals are tracked in such a fashion. There is also the fear that such satellite technology could be used as a “police informer” to issue parking and speeding fines. Many civil liberties campaigners will feel that no Government should be in possession of a tool of such immense power.
PAYG would help to address the big issues facing our road network. With traffic officially estimated to grow by a third by 2025 an already congested network is, in many key places, going to be at significant overcapacity with the resultant jams, carbon dioxide emissions and wasted time this implies. The idea is to streamline the multitude of motoring taxes to manage demand. Even if this did not cut overall traffic it should act to smooth it out, spreading it out beyond the normal rush hours. PAYG is likely to raise the tax burden on a great many businesses but in theory this would allow inland freight, seven-eighths of which is moved by road, to be transported far more efficiently and reliably whilst reducing the tax burden on those who use their vehicles for leisure purposes outside peak times.
PAYG would also be of benefit to the Treasury. In a relatively short time period the rise and rise of ultra-low carbon vehicles will mean that the tax take from fuel duty will fall. PAYG offers another way of collecting a consistent and constant flow of money from drivers.
The previous Government was scared off PAYG after almost two million people signed a Downing Street website petition against it. Yet many drivers would stand to benefit from such a system. In truth such a scheme would take around a decade to introduce, but it has the potential to halve congestion. The stark reality is that by 2025 business is projected to “lose” 656 million man-hours to congestion meanwhile total time wasted in traffic jams in England alone is set to hit 2.5 billion hours.
Despite the Liberal Democrats including road pricing in their election manifesto, the Coalition has ruled out any progress towards a scheme in this parliament (other than a vignette system for lorries). Perhaps this might be a ripe subject for the fabled reopening of the Coalition agreement!