Roads to riches – or highways to hell?

Plans to use private finance to modernise our road network have delighted potential investors, but motorists are more sceptical

When Margaret Thatcher cut the ribbon on the final section of the M25 in 1986 she had little time for those who thought the new London orbital and its already notorious jams anything but a success.

"Nobody shops at Sainsbury's because of the queues," remarked the grocer's daughter while simultaneously announcing the first of the many upgrades designed to cope with the South East's unstoppable traffic growth.

By the time she left office she had presided over 42 privatisations, and in one of her final acts decided to award the building of what was known as the North Birmingham Relief Road (now the M6 Toll) to a private company.

It was the resurrection of an idea not popular in Britain since the heyday of the turnpike trusts 200 years earlier when venture capitalists were called on to unclog the nation's vital arteries turned into quagmires by the advent of the cartwheel.

But while the cause of Britain's current £7bn annual congestion problem is infinitely more complex, the present Government's solution is surprisingly familiar.

Yesterday David Cameron called on private investors to step in to help improve the "decades-long" degradation of the nation's road network.

Alongside potential tolls which could be introduced when new lanes are added during works such as on the A14 in Cambridge, he urged the private sector – including pension and sovereign wealth funds – to build for a future with a new "Victorian spirit".

His invitation, which comes ahead of the Budget in which there will be little new cash for transport, was immediately welcomed by a group of pension funds with assets of £65bn which pledged to invest in a host of new schemes.

Julia Prescot of Meridiam Infrastructure, which heads the funds' co-operation agreement with the Government, said they would speed up plans by backing the construction phase of projects as well as taking over the day-to-day running of those built with public money – a move which could create thousands of jobs.

But the prospect of privatisating the road network was criticised by Labour, environmentalists and some motoring and transport campaigners despite Mr Cameron's insistence that there would be no "mass tolling" on UK roads.

In a speech in which he also promised a review into plans for a new London airport in the Thames Estuary, the Prime Minister said Britain had been let down by a "failure of nerve" by previous administrations.

He said he would fight "vested interests" to force through improvements to the transport network. Mr Cameron compared his vision for roads to another privatisation – that of water in 1989 under Mrs Thatcher.

According to industry regulator Ofwat the current system has delivered water bills a third lower while encouraging investment to reduce leaks and improve quality. But mounting concern over the profits accrued to the 22 private water companies which last year passed £1bn has left some to reconsider.

Jonathan Portes, director of the National Institute of Economic and Social Research, who worked on the water sell-off as a junior Treasury official in the 1980s, said that while road privatisation could offer economic and environmental benefits, water was "exactly the wrong model" to pursue.

He said: "Consumers ultimately benefited from increased efficiency and from greater capital investment than would otherwise have been (politically) possible. However, at the same time, the industry was privatised under an excessively lenient regulatory framework that clearly led to shareholders making very large excess profits at the expense of consumers."

Stephen Joseph, chief executive of the Campaign For Better Transport, said neither bus nor rail privatisation offered attractive blueprints either.

The Government currently pays £5bn in an annual subsidy to the railways – compared with £1bn before the sell-off under John Major. Fragmentation of the different parts of the network has left fares in the UK 30 per cent higher than elsewhere in Europe while costs were 40 per cent more, he said.

Bus deregulation and subsequent privatisation initially led to a sharp drop in use, particularly outside London with numbers rising again thanks in part to the pensioner concessions.

"I don't think anybody, including the people who ran the buses, feel the way privatisation was done was a brilliant idea," he said. "What is needed is more integration. The danger is you will get bits of the infrastructure that the private sector will think it is able to make money out of," Mr Joseph added.

But Britain's experimentation with private road building continued beyond the opening of the M6 Toll road. Its 27-mile length commands a fee of £5.30, which critics say is too expensive. Today it carries less than half the number of vehicles it was designed for.

Attempts to lure in private capital to help alleviate the £8bn cost of building new roads continued throughout the 1990s. A series of Private Finance Initiatives – known in Whitehall as Design, Build, Finance and Operate agreements – were rolled out on major trunk routes. Although largely invisible to the average motorist, those such as the M40 and A1M – repay private companies for improvements through the "shadow tolls" – payments based on the number of cars using the roads.

Ian Mulheirn, director of the Social Market Foundation, said the question of who owned the roads was secondary to the necessity of reducing congestion. He advocates the abolition of vehicle excise duty and the introduction of a system of privatisation in which each citizen is given a voucher or share.

What was important, he said, was persuading people through smart technology and national road pricing to use the network more efficiently – reducing journeys at busy times and increasing them when the roads were empty. But changing the way the nation's 31 million motorists pay to drive is unlikely to go down well with voters and remains politically explosive.

Institute of Advanced Motorists director of policy and research Neil Greig said: "British drivers simply don't trust the Government to come up with a new way of paying for roads that will not lead to increased costs in the long run. Drivers already pay far more in taxes and duties than they get back in investment in new roads."

THE A14: CAN IT GET WORSE?

The Cambridgeshire traffic report yesterday will have come as no surprise to locals: "Four-vehicle smash on the A14 – long delays." It was just another day on a road that is so bad the Prime Minister appears to have taken a personal interest in easing its congestion.

The A14 in East Anglia is notorious in Cambridgeshire, Northamptonshire and Suffolk for its regular traffic jams and terrible safety record. Now, it has become a symbol of the brave new world of privatisation.

As motorists digested the Government's plan to privatise parts of Britain's road network, a long-standing scheme to improve arguably its worst section was referenced by the Prime Minister as an example of a route that could be improved with funding raised from toll roads.

The A14 links the Port of Felixstowe, in Suffolk, where 40 per cent of the UK's container traffic comes ashore, with the Midlands.

Local campaigners sent a petition to Downing Street last year, complaining of "huge delays on an almost-daily basis" and bigger accidents that "bring most of Cambridgeshire grinding to a halt".

The Government withdrew a £1.2bn scheme to expand the road to four lanes, but has since announced a £130m plan to upgrade sections of the road.

Miles of road in the UK:246,000

Miles of motorway: 2,200

Annual cost of road congestion: £7bn

Money that could theoretically be raised if entire network were privatised: £100bn

Cost of driving 27 miles on the M6 toll road: £5.39

Average annual car mileage in the UK: 8,430

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