Highways set to access private cash

Osborne's reforms could see agency that runs key British roads follow Network Rail model

The £4bn budget Highways Agency is to be allowed to raise money from the City in the Government's first big step towards privatising Britain's roads.

The Chancellor, George Osborne, floated the idea of privatising the agency, which runs 4,300 miles of the country's most important motorways and trunk roads – routes that carry one-third of all the country's traffic, by mileage – last summer. Battles within the coalition, however, mean that this is not an option before the next general election in 2015.

Some ministers and officials are sceptical that private companies can be trusted to run the roads, while others think their greater commercial nous could lead to more investment in the network. There will be a "roads review Green Paper" this summer, which will include the option of modelling the Highways Agency on Network Rail, the body that runs Britain's railway infrastructure. It is a Department for Transport-backed organisation, but has commercial freedom.

One industry source described this as a compromise option for the Highways Agency that would "move it gradually" to full privatisation in the future.

This model would mean that the Highways Agency would be able to raise money for road investment in the bond markets at cheap rates, because it would be underwritten by the state's credit rating. It would also allow the agency to undertake lucrative consultancy work: Network Rail advises countries with creaking railways, such as the US and India.

Network Rail also has what are known as "members", who are nearly all drawn from the public and act like shareholders – they just don't receive a dividend pay-out. This structure, which is used to hold directors to account over issues ranging from safety to finances, could be copied at the Highways Agency.

A transport industry source said: "As pressure increases on the departmental budget with the next round of the spending review, it's certain that the Government will be looking at better value and delivery models from its executive agencies such as the Highway Agency. It is understood that Network Rail is held up as a model which could be applied in this area as it has brought a more commercial approach to delivery."

A DfT spokeswoman said: "We need to think boldly about how we ensure investment continues over the long term. This is why we have been working hard to assess the feasibility of a range of new financing and ownership models for the strategic road network."