Policy Exchange, London, January 2008 (PDF)

Summary

The problem: Road gridlock, policy deadlock

Congestion costs – Annually, road congestion costs the UK over £20 billion. It occurs, to different degrees, on most methods of transport because the way that infrastructure is provided, paid for and allocated does not reflect costs. While fuel tax is actually quite a good proxy for the carbon cost of motoring, it is a poor proxy for congestion; it is paid at the same rate by those travelling on country lanes at 3 o’clock in the afternoon as by those travelling on trunk roads during rush hour. Looking to the future, projections in a government report estimated that if demand is left unchecked, by 2025, 13% of traffic will be subject to start-stop conditions.

Insufficient infrastructure – The UK has just over 7km of motorway per billion passenger kilometres, while the US, Germany and Canada have 16, 19 and 53 km respectively. And yet, last year, four times as much revenue was raised in taxes on private road users as was spent on the road network. Successive governments have failed to invest sufficiently, and in the right kinds of infrastructure, to enable the UK’s transport system to keep pace with growth. Reliance on a centrally planned model of transport governance has left the country and its economy crying out for an injection of investment that simply is not available from the Treasury.

An environmental smokescreen – In the UK, while 14 times more passenger travel is done by car as by rail, at £8 billion, annual government spending on roads is only £1.5 billion more than that on rail. Environmental arguments have been used to lend some legitimacy to governments’ failures to match road supply to demand. However, even using the high estimates of the carbon cost of motoring contained in the Stern Review, these are covered more than four times over by fuel tax. Until an efficient economy-wide carbon tax is imposed, environmental justifications will remain nothing more than a smokescreen.

Policy deadlock – Public opinion is the main barrier to pricing. Having endured decades of special taxation for the benefit of general spending, motorists no longer trust central government to act in their interests. Until this mistrust is overcome, politicians will continue to be fearful of pricing and motorists will go on suffering the painfully obvious inefficiencies of rationing by queuing.

The solution: New infrastructure plus road pricing

Towards better transport provides a very practical, thorough analysis of a solution to the problem of public opinion: to upgrade transport infrastructure now, and then, once real improvements have been made, to introduce the road user charges necessary to cover the costs incurred. This will end the stalemate over how to allocate road space and also bring investment in new infrastructure. The funding gap must be met using PFI – which is found to have had a largely successful track record in the transport sector.

The research finds that very small additional distance-based charges on congested roads would very quickly raise sufficient revenue to fund improvements. For example:

• A six-hour peak time weekday charge of 10 p/km on a six lane motorway priced to run close to capacity could, in a year, raise around £1.5 million per km. This would be enough to cover the funding for widening to eight lanes, or indeed for the construction of a brand new six lane motorway in parallel.
• A charge of 5 p/km for cars and light vans and 10 p/km for goods vehicles on all roads could, in a year, raise over £25 billion; enough to pay for the construction of 1,200 miles of six-lane motorway. In context, this would mean that a doubling in the size of the current motorway network could be paid for in under 2 years.

Apart from road pricing, transport would benefit from further devolution of policy decisions to local government and private operators. With the right regulatory framework – as has been achieved for other large monopolistic infrastructure networks – this would finally make transport competitive and responsive to the needs of travellers.

By combining investment with pricing, and in that order, Britain’s substandard transport infrastructure can be upgraded, thereby improving economic competitiveness and the quality of life of the British public.