Should roads be privatised?

School’s expert on transport economics Professor Roger Vickerman comments on road privatisation proposals.

He said: ‘Prime Minister David Cameron has announced proposals to investigate ways of bringing private capital into developing and running Britain’s road network. The popular reaction to this was predictable: another example of selling off the nation’s assets and paving the way to mass tolling. But in fact this is nothing new. For years the Highways Agency has let both new road developments and major improvements to private contractors under the Private Finance initiative. Most users probably have not noticed the signs alongside some of our major routes indicating who actually runs the road on behalf of the Highways Agency. This has had the advantage of bringing forward schemes which would have been delayed if they had to wait for public funding. The contractor receives a payment – a ‘shadow toll’ – based on usage and paid for out of the taxes road users already pay. In fact these payments are increasingly smart as they make adjustments for road availability encouraging the contractor to maintain roads to a high standard and minimise disruptive roadworks. All the Cameron statement seems to envisage is that a wider range of potential investors will be invited to bid for ownership; the current ones are essentially the contractors who would bid to build the road anyway. If this results in a better road network then is there a problem?

Three issues arise. First, the road network needs to be planned as a whole so it is vital that there is a national roads strategy within which investors can bid to build the most profitable parts. Profitability here reflects the use of the road and use of a road reflects its importance to the regional and national economy. This would enable public money to be used to ensure adequate maintenance of the non-core network, the local roads with all the potholes. But the key need here is a strategy.

Second, any road strategy has to be part of a national transport strategy. We have heard a lot recently about high-speed rail and possible new airport runways (or even a wholly new airport off the North Kent coast); the problem with the debates on each of these is that they are too often held in isolation. Transport is not simply a set of competing networks; these networks have to be joined up as we rarely make a journey, especially a longer distance one, which does not blend together two or more modes of transport. Piecemeal development of our networks has led us to the situation we are in now in the UK with an infrastructure which lags behind our major competitors and has an adverse effect on both national and local economies.

Third, why such a paranoia about tolls and why such an adamant rejection of tolling by the Prime Minister? The problem with the current system of paying for the use of roads, which would not change under the current proposals, is that they fail the economist’s two major tests: they are inefficient and inequitable. We pay for roads through the annual vehicle licence and fuel taxes. In fact we pay rather more in these charges than is spent on the roads. But these charges do not account for how we use the roads so we pay broadly the same whether the road is in a congested urban area, a congested inter-urban motorway or a rural road. The variation in fuel consumption in these situations does not adequately account for the differences in total costs when we include the time of drivers in the costs. Rail users have to pay more for use of the network at busy times, and we know how airfares can vary according to pressure of demand, so why not road users? Is it right that we provide road capacity to suit the needs of all drivers regardless of the importance of their journey? Is it right that poor rural households pay the same in road related taxes to drive on uncongested lanes as rich urban households? And is it right that roads may be built at the expense of other uses of public funds. Of course any move to direct tolling would imply the need to reduce the other taxes currently used to fund roads.

What is the solution here? Once again we have piecemeal announcements about transport with an emphasis on headline grabbing issues about funding rather than a proper articulation of a national transport strategy covering all modes of transport. And that transport strategy should include clear statements about who should pay – it has been clear that the strategy for rail is to shift the burden more to the user, why not for roads? But first we need transparency about who pays and who benefits and then we might have a sensible and informed debate rather than the special pleading for rail commuters, the motorist etc.’

Roger Vickerman is Professor of European Economics at the University of Kent and Director of the Centre for European, Regional and Transport Economics. He is also Dean of the University’s Brussels School of International Studies.