Speech to the Westminster Energy, Environment and transport Forum
Before coming up to the platform, I had a quick look through the attendance list. Two things struck me.
One, just how much transport expertise there is in this room, and two, what a diverse and large range of people and organisations have an interest in road travel.
And that of course is as it should be given that 91% of passenger miles take place on the roads. This fact if nothing else should guarantee roads a fair, indeed sizeable, chunk of both policymakers time and taxpayers money.
Yet for all the national significance everyone here attaches to our highways and byways, the DfT is not regarded as a great office of state, but despite the Department’s less than elevated status, recognition of the importance of roads now comes from the very top:
“The problem is clear – we don’t have enough capacity in the places of key demand. There is nothing green about a traffic jam and gridlock holds our economy back.”
Not my words of course but those of the prime minister in March.
In best political fashion the PM’s intervention resulted in the launch of another review, this time jointly conducted by the DfT and Treasury to investigate different options for the ownership and funding of the road network.
This latest study took its place alongside several other recent and ongoing reviews:
1) The Cook review of the Highwys Agency
2) A Treasury review of VED
3) A Treasury review of PFI
4) The DfT’s own review of road strategy
5) The DfT’s development of overall transport strategy
6) A planning review
I could go on and mention the long promised and almost forgotten National Policy Statement on Surface Transport, but I won’t because I’ve run out of breath.
Yet all of these reviews have two issues that are central to them and inextricably linked.
The first is how any need for new capacity will be paid for.
And let us not be deceived.
New road provision, whether provided by the private sector or the public, costs money – at the end of the day somebody pays. However capacity is financed there will be someone funding it, that is, picking up the eventual bill.
To put it another way “We cannot hide from the fact that new infrastructure has to be paid for either by those who use it, by government or by a combination of the two.”
Again, not my words but those of the prime minister.
There is a persuasive argument, understandably attractive to drivers, that the cash should be made available from the Treasury coffers because of the huge sum of money currently generated by road taxation – the chancellor gets £33 billion per annum in VED and fuel duty alone – compared with the £10 billion spent on roads each year.
Failing this there will need to be some form of tolling or pay as you go system.
The coalition government position was that it would not impose tolls for existing capacity. Yet the A14 proposals announced in July more than hinted at the political equivalent of a handbrake turn:
“Study work has confirmed that funding can be generated in part through tolling a length of the enhanced A14, featuring around 20 miles of new or widened road.”
In economic theory this all seems to work in isolation: the numbers could be made to stack up. But as a long-term, more general solution there are significant problems. Inequity for example. Not just that caused by imposing yet another tax on road users but imposing it on just some and not all road users. It essentially becomes a postcode lottery. Live somewhere that requires you to use the A14 or the Dartford Crossing or the Severn Crossing and you get charged extra. Live elsewhere and you ‘only’ have to cough up for existing road taxes.
Still, it could be done, and you could encourage the private sector to be involved. But again, don’t be confused into thinking that pension funds will pay for new roads. They won’t. They might finance the building of them by bank borrowing or selling shares, but they will expect a steady, near guaranteed, return on their investment and that return can only come from the taxpayer or the road user.
Which leads us on to the second big issue. Future demand for travel.
The DfT is unequivocal. By 2035 traffic will be 44% higher than in 2010.
A lot hangs on this being accurate.
Historically there has been a clear link between traffic growth and economic growth. Yet can we confidently predict the future from the past? As individuals are we reaching driving saturation point, indeed actually cutting back on personal mileage because of things like home working and online shopping? Is the trend of young people delaying learning to drive going to work through to create a generation of licenceless adults? Crucially what will be the impact of the ONS prediction that by 2035 the UK population will have grown by ten million?
How travel patterns might evolve are of huge significance and something the RAC Foundation together with Transport Scotland, the Independent Transport Commission and the Office of Rail Regulation are currently funding work into.
The conclusions of this and other work is more than merely academic. Upon it depends not just future plans to cope with rising travel demand, but also the investment decisions of those in the private sector who the prime minister is so keen to see involved in infrastructure provision.
The M6 toll and HS1 should be sobering reminders of the importance of accurately judging demand and what happens when reality does not match expectations. Both schemes fell foul of over-optimistic forecasts on passenger numbers and hence revenue.
Yet while we might argue about the scale of growth the likely-hood is that traffic will go up. When you look at road scheme appraisals today many already have phenomenal rates of return. Ironically, with traffic and congestion set to worsen the rates of return are going to get even better.
But our hope is that the Chancellor won’t wait until tomorrow, rather that he’ll start banking some of those benefits now and immediately do more to improve the road network.