Moving the Road Sector into the Market Economy

Government urged to introduce voluntary pay-as-you-go system for drivers

 

Summary

  • Transport policies which favour rail over road make little economic sense. Investment in roads typically yields higher financial and social returns than investment in rail.
  • As a result of current policies, Britain’s roads are the most crowded in Europe. Congestion is estimated to impose costs of around £20 billion a year in the UK.
  • The basic problem is that roads are outside the market economy. Road users do not receive the facilities they are prepared to pay for. A shortage of road space does not encourage suppliers to provide additional capacity because investment in roads is constrained by government policy.
  • Market prices, i.e. prices determined by supply and demand, are an essential part of commercialisation. They are needed to help allocate scarce road space and also to signal shortages and thus help investors relieve them.
  • Pricing is an essential part of commercialisation. Some, or all, of the payments associated with road use would be treated as fees paid to road owners for the use of their roads, rather than as sumptuary taxes to the Treasury.
  • Mileage-based tolls could be introduced on a voluntary basis. Drivers who opted for pricing could get rebates for miles driven and exemption from vehicle taxes. Such a voluntary system would test road-users’ reactions and allow firms to test out equipment and billing technology.The current operation of mobile phones shows how a priced road system might work.
  • If voluntary schemes gain public support, a comprehensive pricing system for roads could be established. Road-owning entities would take over the existing roads and run them on a commercial basis. The tolls paid to the owners would be matched by an equivalent cut in Fuel Duty and/or Vehicle Excise Duty. The rights of private investors to provide new road capacity should also be established.
  • If system-wide charging were not possible, private road providers could be allowed to construct tolled express lanes where government roads are congested. ‘Shadow’ toll schemes could also be re-introduced to bring in private finance for new capacity.

Media highlights include Public Service Europe, London's Big Questions, The Telegraph, Sky News, 13 BBC Regional Radio Stations and BBC Radio 5 Live.

To view the press release, click here.

2013, Current Controversies 43

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