This morning (the 19th of March) the headlines were full of Prime Minister David Cameron’s comments that private cash is needed to ‘boost’ the road network. This prompted a large amount of praise, alarm, and speculation, depending on who was commenting. One thing is clear, however – people don’t seem to know how the road network is funded at the moment. It is worth noting that some of what people are worrying about already happens.
The first thing to note is that though the government doesn’t actually build or maintain roads, as such – all building and maintenance work is contracted-out to construction firms such as Amey, Carillion and Serco. While the Highways Agency is responsible for carrying out the duty of the Secretary of State for Transport for major roads in England, its main role is to co-ordinate and manage contracts with the private sector to perform the required work.
This is not a new phenomenon. 1966′s Lofthouse committee report ‘Efficiency in road construction’, produced by the National Economic Development Office, outlined a co-ordinated motorway programme. However, from the start of motorway construction a number of different contractors were used, with varying levels of road-building experience. This, coupled with the large number of contracts (up to 100 simultaneously in the late sixties) meant that the role of the government was largely that of co-ordinator.
So far, so expected – after all, it could be considered inpractical for the government to employ hundreds of engineers to work on motorways. While the use of private contractors for construction and maintenance has generally been accepted by the public, what has worried people is the introduction of tolling by the back door, or more generally the suitability of the profit motive in running the road network.
This isn’t a new thing, of course. Most people have heard of the M6 Toll. This 27.5 mile stretch is the UK’s first privately financed motorway. It was built and is operated by Midland Expressway Ltd, which is owned by McQuarie of Australia (25% used to be owned by the Italian state-owned motorway operator Autostrada). The actual building work was done by CAMBBA, a consortium of Carillion, McAlpine, Balfour Beatty and Amec. MEL raised £600 million to finance the scheme, and they currently charge £5.30 for a car and £10.60 for a HGV at peak hours. MEL have 53 years (from 2001) of running the motorway to make their money.
Interestingly, the M6 Toll Road has shown some resistance by British drivers to the idea of paying tolls. Traffic levels peaked in the third quarter of 2006 and since 2008 they have been falling at about 10% per year. Recent figures for 2011 show working day traffic of just over 40,000 – much less than the 74,000 predicted. Where are these cars? Well, approximately 200,000 vehicles a day use the un-tolled M6. This indicates some resistance of drivers to paying tolls where a toll-free alternative exists.
Although tolls paid by drivers are visible, there are also other kinds of toll. You may not have heard of DBFO (Design, Build, Finance, Operate) schemes. These are basically roads built with private capital where the company operating them is paid by the Highways Agency an amount based on the number and type of vehicles using the road, with adjustments made for lane closure and safety performance. These are known as ‘shadow tolls’ – using such roads means that a toll is payable but, unlike the M6, the tax-payer pays. The system could be thought-of as ‘PFI for roads’.
The UK is the largest user of shadow toll roads (with 10 currently in operation) although they are also used by several other countries. They do have advantages, the main one being that drivers do not have to pay for tolls directly, which saves journey time and collection costs, and they also hide the true cost in general taxation (paid for by all, not just motorists). A major disadvantage is that the system does not allow congestion charging to the motorist, which could provide a mechanism to influence driver habits (the road operator itself can face congestion charging, but it’s difficult to see how this would change the behaviour of the motorist).
It will be interesting to hear of the government’s plans in more detail. One must assume that there’s rather more to them than the existing DBFOs, since the government was likely to have anticipated negative reactions and so may have avoided them if it didn’t need to announce anything new. It is interesting to note that, just as with other PFI schemes, they do not generally provide good value for money as government borrowing is much cheaper than private borrowing. Indeed, Portugal dropped shadow tolls in 2004 after five years of operation, stating that the shadow toll system is ‘not compatible with the need to spend on improving and maintaining the other national motorways’. Perhaps this is why the government is planning to announce something new?