Posts Tagged ‘pay as you go’

Only one in 16 people believe government would spend the money raised from a new system of motorway charging on the motorway network itself.

As ministers prepare to publish a consultation document on the reform of funding for the roads, a poll for the RAC Foundation reveals just how far trust between the British public and ministers has broken down when it comes to driving taxation.

As part of the so-called feasibility study ordered by the Prime Minister in March 2012, and being undertaken by the Treasury and the Department for Transport, one measure reportedly considered would see drivers paying an access charge, possibly of £100 per year, to use the motorway network.

In exchange all drivers – whether they used motorways or not – would get a reduction in fuel duty and VED.

The poll, by Ipsos MORI, shows that while 39% of adults believe a scheme based on usage would be fair, just 6% would trust ministers to put the money raised through the charge back into the motorways.

The poll of 2,000 British adults also revealed that only one in eight people (13%) would support the scheme if a private sector firm was involved in running the motorways and deciding how money was spent.

Though there are a thousand ways to word a question, the results of this survey seem crystal clear: however you ask them, the British public do not trust ministers when it comes to motoring taxation.

You can understand why. Currently £33 billion is collected in VED and fuel duty revenue alone yet only a third of this is spent improving our crumbling road network. Why should people believe things will be any different under a new way of charging, whether it is an access charge or something different?

The RAC Foundation believes that one day some sort of pay-as-you-go charging scheme will have to be introduced. However this survey demonstrates just how far there is to go in re-establishing a decent relationship between voters and ministers when it comes to motoring matters. A good way to start would be to spend a larger share of the money already being taken from drivers on the road network.


Ipsos MORI interviewed a representative sample of 2,017 members of the British public aged 16-75. Interviews were carried out online between 31 May and 4 June 2013. Data are weighted to be representative of the population.

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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.

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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.

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