George Osborne takes first step on road to privatising Britain's highways

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The Government risks angering trades unions with plans to commercialise the running and repair of Britain's core roads network, a move likely to lead to full privatisation.

The Department for Transport is considering allowing the Highways Agency, which runs the UK's 4,300 miles of motorways and trunk roads, to raise its own cash rather than just rely on the public purse, The Independent on Sunday can reveal.

David Cameron and George Osborne have been pushing for full privatisation for the past year, but cracks in the coalition, as well as a technical concern that this still wouldn't get the agency's liabilities off the Government's balance sheet, have made that option untenable in the short term. Instead, the Highways Agency would be modelled on Network Rail, which raises money in the financial markets and competes for money-spinning advisory work internationally, but is ultimately backed by, and responsible to, the DfT.

Transport Secretary Patrick McLoughlin will announce this option of revamping the Highways Agency in a roads Green Paper this summer. Officials believe the Highways Agency must be commercialised to raise the billions of pounds, over and above its £4bn budget, needed to get Britain's most important roads up to scratch.

Industry sources said that this would be the first step to privatising roads that bear the strain of one-third of all traffic mileage undertaken in the UK.

Although something of a short-term compromise, the news will not be popular among union members. The Public and Commercial Services Union has warned that privatisation would lead to job cuts. It also argued that privatisation and out-sourcing vital repair and maintenance work to profit-making companies does "not make economic sense".

A DfT spokeswoman said: "The future of our road network is a serious and important issue and it is right that we take the time to look at all the options thoroughly in order inform the debate. This will enable us to provide a solution which is in the best interests of motorists and the country as a whole."