Full speed ahead on road privatisation?

David Cameron will say today that he wants private investors to take on the responsibility for running the nation's roads. Radical stuff...

by Emma Haslett
Last Updated: 28 May 2012
As anyone who has spent a couple of hours stationary on the M25 – or, indeed, tried to make it through London without doing serious damage to their car’s chassis – can tell you, the nation’s road network isn’t in a great state. And according to the Government, there’s nothing left in the coffers to fix it. So David Cameron’s idea to effectively privatise the road network seems reasonable enough: the PM reckons there needs to be an ‘innovative [approach] to the funding of our national roads’. Even motoring groups are impressed. The only problem is, who exactly will take on the challenge of fixing the nation’s pothole-riddled roads?

Apparently, Cameron has been inspired by Margaret Thatcher’s privatisation of the water industry in the early 90s. In fact, he reckons Thatcher’s system could provide a ‘template’ for the privatisation of the roads. ‘Why is it that other infrastructure – for example water – is funded by private sector capital through privately owned, independently regulated utilities, but roads in Britain call on the public finances for funding?’ he’ll ask in a speech today.  

Having promised towards the beginning of its term that it wouldn’t introduce a tax on existing roads, the Government’s idea is that only ‘new capacity’ (new lanes on existing roads and new roads entirely) would be taken on by private investors. In order to avoid the term ‘privatisation’, that’ll be under long leases, rather than bought outright. The investors would get a guaranteed income in the form of a slice of the £6bn raised each year by Vehicle Excise Duty. They’d then have to agree investment plans and targets with a regulator – which insiders apparently refer to as ‘Offroad’. Arf, arf.

The reaction from motoring groups has been reasonably positive, pointing out that something needs to be done about the nation’s ‘chronically underfunded’ road network. Although they did raise questions over what the effect of privatising the roads would be. As Stephen Glaister, exec director of the RAC Foundation, pointed out – ‘more money for roads means less for other sectors’.

Still: the real question is, who would invest? The consensus seems to be that the Chinese government might be interested – although, as Robert Peston points out this morning, Europe has yet to see any of the money that was mooted to help it keep its head above water late last year, so many remain sceptical about that. And anyway, if George Osborne’s preferred model of 100-year leases is adopted, the return to the taxpayer would be rather underwhelming: about £1bn, apparently.

We’ll find out a bit more in the Budget on Wednesday – but the Treasury has been given until the Autumn to iron out all the difficulties with the plans. Although we find it hard to imagine the M25 becoming a pleasant place to be…

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