27 October 2008

Is it Time to Privatise the Operation of the Motorways?

It seems that the bulk of the environmental movement has bought into the idea that socialist economics and its associated public ownership and control is the only way to achieve meaningful change, so suggesting a program of privatisation to them would probably be about as welcome as suggesting a dolphin harpooning holiday. I think that’s a shame, because in many cases, environmental problems are caused by the scarcity of a resource not being reflected by an accurate pricing mechanism, which is something that privatisation can introduce. One area which is ripe for this kind of change is the motorway network.

I could envisage the operation of the motorways being put into private hands using a model similar to railway franchising. The government could take bids for the opportunity to operate the network for, say, three years, with the operator free to set prices as they see fit, but obliged to return the roads in a good state of repair at the end of that time. The potential operators would have to calculate how much to bid based on their estimate of how much revenue they could obtain and the cost of maintenance. The amount of revenue the government would obtain from this would be substantial and would allow a major reduction in other taxes. The existing M6 Toll road was set up along these lines, with the builder of the road given the concession to operate the road for 50 years

The introduction of market economics would create effective road management. If the operator were to set prices too high, people would use other roads or other modes of transport. Set the price is too low and they wouldn't cover their costs and congestion would build. A closed motorway would mean lost revenue for the operator, so they would have a strong incentive to carry out road repairs quickly and at the quietest times. There would also be significant environmental benefits from introducing market-based pricing of long distance car travel.

I generally consider it much fairer and economically sensible for the government to obtain its revenue by charging for the use of common and public assets (oil drilling licences, pollution levies, land rent, etc.) than by arbitrary taxes which don't have any direct relation to the benefit being given (income tax, VAT, etc.). Privatising the operation of the motorways would fit into that model nicely.

I have to admit that instinctively it wouldn't be my prefered option; I still prefer the idea of using fuel duty as a way of charging for road use, because I value the anonymity it provides compared to direct electronic road pricing, but fuel duty suffers from the problem of being subject to so much political pressure to keep it low that it is unlikely ever to be set at the the same level as true market based road pricing. Fuel duty also suffers from the fact that it prices two separate factors, the first being the scarcity value and maintenance costs of road space and the second being the pollution caused by burning fuel. This creates the problems associated with agricultural fuels, which justifiably have a lower duty due to them not reflecting any road use costs, which then creates the potential for a black market in so-called "red diesel." Pricing road use separately from pollution would allow a single tier system of fuel duty to be used.

I'm much more comfortable with the idea of motorway franchising then I am with other road pricing schemes because the privacy issues aren't as severe. Firstly, the charging would be carried out by a private sector organisation, which would have a limited scope to use the data for surveillance purposes, as it would have limited access to data other than what it has collected itself, as opposed to the government, which would be able to cross reference the data with other databases. Secondly, as the charges would only be applied to motorways, it would still allow people to travel anonymously on ordinary roads, so long as other forms of vehicle tracking were not used on those roads.

On balance, I think motorway franchising may be the way forward.

1 comment:

Mark Wadsworth said...

As you say, the M6 toll road 'works', in that it makes money and people are happy to pay to use it, so why not? There doesn't need to be any electronic nonsense going on, you just buy a ticket when you enter and show it when you leave.

suggesting a dolphin harpooning holiday

Again, why not? Think of all the poor little fishes whose lives this would spare!