UK: Paying For Our Roads: The Dead Hand Of Public Opinion

Last Updated: 2 April 2013
Article by Ian McCulloch

The Government has to find a new way to pay for our roads.  Although the motorist pays more than is spent on our roads, the revenue from fuel duty and vehicle excise duty (VED) is falling every year.  Cars are consuming less petrol or they are being powered in other ways.  This trend is inexorable and gathering speed.  Reversing it by exponential increases in duties is not considered to be a fair or sustainable option.

The Government probably has a good idea of what it needs to do.  The choices are limited.  The weight of professional opinion is leading it in one direction.

Our roads could continue to be paid for by the taxpayer alone – but not on the current basis.  Such is the state of our public finances that the government cannot turn to other sources of revenue to make up the growing long term shortfall.  There are no growing surpluses elsewhere.

It would help to contain the problem if the Government were to transfer our strategic road network to a separate utility company or other independent body that would be subject to regulation.  This model has been adopted in the water industry and for our railways.  It creates private sector delivery of public (government) policy with accountability (including greater customer focus) and cost control - in short, better value for money.  It could be a 'Network Road', accountable to a different "ORR" or "Ofroad".

If the rail model is followed, the Secretary of State could periodically issue a 'high level output specification' (HLOS) and a 'statement of funds available' (SoFA) setting out the outputs that the Government expects from the road network for the funds that will be available – a bargain of more assured financing in return for delivery of clear objectives, which enables longer term planning.

Theoretically, it should be possible for these benefits to be delivered entirely by the public sector.  The Cook Report should result in a reconditioned and more customer-focussed Highways Agency.  Experience and the economics of the issue suggest, however, that this will not go far enough.

The step change that is needed is one that will let private finance make up the shortfall left by the taxpayer's diminishing contribution.  Currently, this is not possible unless it is for a new road or a new crossing (bridge or tunnel) because there is no means of providing the private sector with a return on its investment.

'Return on investment' means revenue.  Revenue means some form of access charge, road user charge or toll.  These are different forms of charging for the use of the road rather than the vehicle.  They are likely to be fairer, more proportionate and more sustainable than the current form of user charge - fuel duty – because they can be tailored to the type of vehicle, the time of day and the road that is being used.

The change could be made revenue-neutral overall at the time of the change by corresponding reductions in fuel duty or VED.  A consequence could be that local travel would become cheaper (lower fuel duties and VED) and long distance travel could become more expensive (access charges to the strategic road network).  Whether or not that should be the aim, the change would at least give the Government choices where at present it has none.

Doing nothing is not an option except in the very short term.  It is only the flat-lining of traffic levels caused by the weak economy that is giving the government some extra time to come up with an alternative.  As the economy recovers, traffic will be on the increase again, roads will need more repair and the road network will need to be enhanced.

So what is holding back the government?  A year ago, David Cameron heralded innovation in the way our strategic roads might be funded.  In December 2012, the National Infrastructure Plan confirmed that the government is examining new ownership and financing models.  We were to hear more by the time of the budget this year.  It was then postponed until after the budget.  Now, we are having to wait until the summer for a consultative Green Paper.  Once again, it is the five-year electoral cycle that is inhibiting the development of long term strategy.

Change can mean winners and losers, which engenders fear of change.  Fear of change and negative public perception, coupled with a party political system that encourages opposition rather than consensus, are the dead hand that is applying the brake on progress and causing the government to veer off course.

It is easy to accuse the government of cold feet but any government that is ahead of public opinion proceeds at its peril.  Equally, doing nothing is not a real option.  Eventually, the positive argument for change and the argument against the status quo have to be advanced.  It is a huge communication challenge.  It will take a long time.  What benefit is there in deferring it?  The sooner informed public debate begins, the sooner a broad spectrum of public and political opinion can coalesce around the optimal form of change that is needed.  The Government should not be put off its stride by by-election results or other short term setbacks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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