By Professor Stephen Glaister, director of the RAC Foundation.
If the Financial Times is to be believed (Wednesday 6th March, p3) the government just lost its resolve on a reform of vital importance to the economic recovery: road infrastructure. Whilst it decides which way to go it should immediately end the delay with getting on with using conventional funding for some crucial schemes such as the improvement of the A14 and A303. And if it looking for other infrastructure improvements that will repay their investment costs many times over there is a long list of other languishing road schemes.
The government has a fixation about achieving economic growth. So would any government at the moment, for the simple reason that the arithmetic dictates that without growth the deficit cannot be eliminated. Vince Cable hinted at such a thing on this morning’s Today programme on Radio 4 just after 8am.
This government has also acknowledged that historic under-spend on capacity and maintenance, growing population and the need to serve economic growth all point towards a need for more resources for infrastructure. The big question is who is going to pay for it?
In March 2012 the Prime Minister outlined this infrastructure problem and specifically mentioned the need for more strategic roads. He pointed out that pension funds and sovereign wealth funds have lots of capital available to invest in long-lived infrastructure like this. He mentioned the analogy with the water industry, which has achieved a massive investment in order to deliver more and better quality water with no burden on the taxpayer. Why not do the same for strategic roads?
There was a snag: the Prime Minister explicitly said he was not considering introducing charging for using existing roads, only new capacity. But there are few opportunities to build self-funding, distinct new roads in Britain. What is needed is better maintenance and capacity enhancement of the existing network: so where was the money going to come from to repay the investors? Water users pay for all the water they use and it is that which funds the industry’s infrastructure.
This fundamental flaw in the argument was quickly spotted and the Prime Minister commissioned the Treasury and the Department for Transport to carry out a “Feasibility Study” into options for correcting it. This duly reported by the end of November.
But it seems that nothing offered found favour: the hoped-for announcement was missing from the 2012 Autumn Statement. There was only a promise that something would be announced before the 2013 Budget (20th March). It is rumoured that there was a section in the Coalition Government’s “half term review” document but that was dropped at the last minute.
Now, apparently, nothing will appear until the summer of 2013 at the earliest.
It is all very difficult. If there is going to be significant private investment there has to be a significant new cash flow to service the debt. There has been speculation in the press that this could come from some form of new charge for access to parts of the system, perhaps similar to a scheme proposed in a think piece by Brian Wadsworth and published by the RAC Foundation. Yet the government knows that with 35 million motorists amongst the electorate it cannot risk creating a perception that a significant proportion will be losers. To avoid this it would probably be necessary to sweeten the pill with an offsetting reduction in one or both of the main road taxes: fuel duty and the tax disc (VED).
In a world where “there is no government money” that is going to be difficult to achieve. But maybe the growth imperative will persuade government to do this.
For motorists that could turn out to be an attractive deal: better, less congested roads and less of the money they pay now being siphoned off the pay for other areas of general government expenditure. But judgement on that must await the detail of a firm proposal.
Whilst this hand-wringing is going on nothing much is happening. Although there have been worthwhile investments in solving “pinch-points” some really urgent, growth-critical schemes continue to languish.
The most important of these is the improvement of the inadequate A14. This road serves the east coast ports (Felixtowe and Harwich) and travels west past Cambridge and Huntingdon towards the industrial heart of the country. It is recognised as being of European significance, part of the Trans European Network. A good scheme for rebuilding it was developed over a decade with much effort and expense. There is considerable support amongst local communities, commerce and industry.
Yet, at the last minute, the Coalition Government cancelled the scheme and gave up planning consents in the 2010 Spending Review on the grounds that it was “unaffordable”. Since then the government has been feeling its way towards re-instating a scheme. First there was a consultation, the “A14 Challenge”. Then, before the response to the consultation was fully complete the government announced a new plan involving three-way funding: central government, local communities and tolls.
The new proposal is on much the same line of route as the abandoned one but is physically more complex and seems likely to cost no less. Raising the required funding from a number of local sources, all financially hard-pressed, is going to take a long time to negotiate. The tolling proposal is controversial with the locals.
The RAC Foundation is not opposed to charging road users, if that is part of a coherent, national-scale package including adjustment to road taxes. But the free-standing proposal for the A14, whilst interesting, in practice looks like a recipe for endless further delay—and it conflicts with both the wider national road funding policy and the new lorry charging scheme which is currently in Parliament.
A piecemeal approach also risks the creation of a postcode lottery. Why should users of this economically strategic piece of road pay extra to drive along it when city bankers in their trophy cars can zoom down to the coast along the A3 and through the new Hindhead Tunnel without extra financial hindrance?
It is now two and a half years since the government cancelled this crucial scheme and began wondering what to put in its place. The hybrid funding scheme it is trying to broker will likely cause more delay. Pending a resolution to its confusion about whether and how to reform national road funding as a whole, it should simply stop prevaricating on the A14 and get going using the conventional exchequer funding method.
There is a broader point. As Vince Cable points out, so long as investments are made in schemes with a good rate of return they will eventually cost less than nothing. Unless the government is confident that it can agree and implement innovative funding mechanisms for roads soon it should stop wasting time and get on with the broader, economically justifiable national roads programme using conventionally funding methods.