Britain’s trunk road and motorway network could be sold to the private sector on long leases, under plans announced on Monday.
David Cameron hopes the move will unlock investment from sovereign wealth and pension funds. He ruled out tolls on existing roads but left open the option of charging on new capacity.
The prime minister chose his words carefully when he flagged the latest attempt by the government to attract private capital into Britain’s congested and underfunded road network
“Let me be clear,” he said. “This is not about mass tolling and as I’ve said, we’re not tolling existing roads.”
The prime minister is acutely aware of the public outcry when Tony Blair flirted with the idea in 2007 of introducing so-called road user charging. He knows he is walking a tightrope as he steps up efforts to get sovereign wealth funds, pension funds and other investors to finance the nation’s trunk roads and motorways.
He posed a question in his speech on Monday, asking why other sectors, such as water, could secure private sector funding, while the roads still depended on the taxpayer to fund them. In fact, he answered his own question by going on to rule out tolling on existing roads, which reduces the incentive for outside investment.
This was spelt out by the government’s own National Infrastructure Plan (NIP) last November, which said: “In the case of the strategic road network, the government has ruled out the introduction of road pricing on existing road capacity” making implemtation of the water industry model “difficult”.
David Lee co-head of infrastructure at Allen & Overy, said: “Making the road network attractive to overseas investors isn’t a slam dunk. They won’t do it just because they invest in the water industry.”
Andrew McNaugton, chief operating officer at Balfour Beatty, the UK’s largest infrastructure and construction company, believes there is a way of bringing private sector expertise to bear on the roads. Balfour Beatty has built and still operates a number of UK roads, including the A50 and A35, under public private partnerships let since the mid-1990s.
Mr McNaugton points to the sale in 2010 of a 30-year concession to run High Speed 1 between London and the Channel tunnel to two Canadian pension funds for £2.1bn, a process that did not involve the transfer of the asset.
He believes this management contract could be applied to the roads with the government paying the private sector to run and maintain them, much like Balfour Beatty already does through contracts with the Highways’ Agency for about a fifth of the strategic road network.
If the Treasury is prepared to forego its opposition to hypothecation and divert part of the vehicle excise duty to provide a guaranteed revenue stream, Mr McNaughton said a solution could be found. “It won’t be easy to resolve all the issues but it is not impossible either.”
The Treasury and transport department have until the autumn to come up with an answer.
Drawing parallels with rail privatisation in the 1990s, Labour said motorists were “in the line of fire for the next phase of the Tories’ ideologically driven rip off culture”.
“Ministers seem to be intent on repeating the mistakes of rail privatisation, which was supposed to lead to cheaper fares and lower costs but has instead given powerful vested interests the chance to rip off passengers while increasing the cost to the taxpayer.
Attempts by the last Conservative government to outsource parts of the country’s transport network have largely backfired. Airport privatisation began in the late 1980s but more recently regulators have demanded the break-up of the London airports.
The railway privatisation of the early 1990s, which led to the creation of Raitrack, ran into problems much more quickly. Similar plans were mooted for the trunk road and motorway network with the creation of the Highways Agency in 1994 but were never pushed through. When Labour came to power it continued the use of another controversial Tory instrument – public private partnerships – to deliver road building schemes.
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