Motorway intersection
Britain’s transport policy “Railways good, roads bad” is not sustainable, and proves once again that transport is too important to be left to the vicissitudes of politics. The time has come to commercialise road systems, with users paying for what they get, and getting what they are prepared to pay for, subject to planning and other regulations.

How might this be done? GPS units in vehicles can now facilitate the operation of low-cost systems to identify road use charges on all sections of a road network; bill road users appropriately; collect payments at the designated rates; and credit the providers of the roads on which the travel takes place; all without identifying the travellers, or details of their trips. Only the totals of miles travelled at the different rates need to be sent to the billing agencies.

Although a strong believer in the merits of congestion pricing, I am now inclined to support it only where the roads are privately owned, or commercially managed or, at least, if surplus revenues are dedicated to road improvement, as in Stockholm. Otherwise, governments would have a vested interest in excessive congestion. Giving them the power to collect revenues from congestion pricing is like putting alcoholics in charge of pubs and liquor stores. So, the case for congestion pricing strengthens the case for road privatisation.

Might Central London be a suitable place for an experimental commercialised road system? Might a commercial “London Highway Authority” be politically acceptable? The pricing bullet has already been bitten, so the principal change would be to invest surplus revenues in road improvement. “Surplus” revenues are what remain after paying all road costs, including rent for land used for roads.

London ’s congestion pricing methods need to be improved, to reduce collection costs and make the charges relate more closely to congestion costs. Under a commercialised road system, road users would be “buying” road improvement; the local authorities would receive rents and property taxes (out of which they could continue to subsidise public transport); and the Treasury would get corporation and income taxes. Roads would be turned from financial liabilities into financial assets.

A way would also have to be found to ensure that road users taking part in a pilot project get appropriate relief from paying existing road use charges. Maybe a cash grant to those concerned could do this.

Mayor Boris – how about it?

Gabriel Roth

Member of the Advisory Committee

Gabriel Roth, civil engineer, transport economist, and early IEA author, researched the benefits from road improvement in the government's Road Research Laboratory, and the economics of car parking at the Department of Applied Economics in Cambridge. He served on the Ministry of Transport's ‘Panel on Road Pricing’ which reported in 1964. From 1967 to 1986 he was on the staff of the World Bank in Washington, which published his book on the private provision of public services in developing countries. Roth's other publications include Paying for Parking (IEA, 1965); A Self-Financing Road System (IEA, 1966); two other books; and over thirty papers on transport pricing, regulation and privatisation.

14 thoughts on “Road systems should be commercialised”

  1. Posted 12/09/2008 at 10:50 | Permalink

    “governments would have a vested interest in excessive congestion.”

    Can you explain why private firms wouldn’t have such an incentive? If there is loads of competition then Icould understand it but surely the amount of choice in what routes to take on a journey are very often limited. In such circumstances a private supplier would have a virtual monopoly.

    I may be wrong here – I would just like it explained.

  2. Posted 12/09/2008 at 10:50 | Permalink

    “governments would have a vested interest in excessive congestion.”

    Can you explain why private firms wouldn’t have such an incentive? If there is loads of competition then Icould understand it but surely the amount of choice in what routes to take on a journey are very often limited. In such circumstances a private supplier would have a virtual monopoly.

    I may be wrong here – I would just like it explained.

  3. Posted 12/09/2008 at 11:00 | Permalink

    I must say this is a great article i enjoyed reading it keep the good work

  4. Posted 12/09/2008 at 11:00 | Permalink

    I must say this is a great article i enjoyed reading it keep the good work

  5. Posted 12/09/2008 at 11:14 | Permalink

    It would depend on who set the prices. I think what Gabriel had in mind was that, insofar as the road was a monopoly, the prices would be regulated by an independent regulator. For a given price structure (set by the regulator) the private owner would want to get as much traffic through as possible. If the government owned the roads it would have an incentive to keep congestion high, not make any improvements and set high prices (which would be under its control).

  6. Posted 12/09/2008 at 11:14 | Permalink

    It would depend on who set the prices. I think what Gabriel had in mind was that, insofar as the road was a monopoly, the prices would be regulated by an independent regulator. For a given price structure (set by the regulator) the private owner would want to get as much traffic through as possible. If the government owned the roads it would have an incentive to keep congestion high, not make any improvements and set high prices (which would be under its control).

  7. Posted 16/09/2008 at 09:23 | Permalink

    Response to “Not an Economist”.

    Private owners do not have a vested interest in excessive congestion because it would generally reduce their profits. But I also stipulate the existence of a regulator who could intervene when appropriate.

    It is the provider of the local road who is usually a monopolist and I propose that road users would not be charged anything for using their own roads – say roads in their wards.

  8. Posted 16/09/2008 at 09:23 | Permalink

    Response to “Not an Economist”.

    Private owners do not have a vested interest in excessive congestion because it would generally reduce their profits. But I also stipulate the existence of a regulator who could intervene when appropriate.

    It is the provider of the local road who is usually a monopolist and I propose that road users would not be charged anything for using their own roads – say roads in their wards.

  9. Posted 24/09/2008 at 19:28 | Permalink

    I suggest the rising cost of fuel, the oncoming recession are likely to substantially reduce car use and hence congestion (I have noticed less cars on the road).

    I am wary of high tech solutions to huge national issues – such as transport- computer programs rarely deliver what their advocates hope for – they usually come in over budget and late – by then the programs are obsolete. Who then gains other than the computer program providers?

  10. Posted 24/09/2008 at 19:28 | Permalink

    I suggest the rising cost of fuel, the oncoming recession are likely to substantially reduce car use and hence congestion (I have noticed less cars on the road).

    I am wary of high tech solutions to huge national issues – such as transport- computer programs rarely deliver what their advocates hope for – they usually come in over budget and late – by then the programs are obsolete. Who then gains other than the computer program providers?

  11. Posted 27/09/2008 at 21:22 | Permalink

    Geoff

    The speeds of horse-drawn traffic in central London before the invention of the motor car were reported to be as low as speeds in 2002, before the introduction of Ken Livingston’s congestion pricing. So some may doubt whether traffic congestion in modern cities is likely to abate without better road pricing.

    A GPS-based system of road pricing is to be tested in Seoul. If the results turn out to be promising, London could apply tested technology to replace the system it currently uses.

    G.

  12. Posted 27/09/2008 at 21:22 | Permalink

    Geoff

    The speeds of horse-drawn traffic in central London before the invention of the motor car were reported to be as low as speeds in 2002, before the introduction of Ken Livingston’s congestion pricing. So some may doubt whether traffic congestion in modern cities is likely to abate without better road pricing.

    A GPS-based system of road pricing is to be tested in Seoul. If the results turn out to be promising, London could apply tested technology to replace the system it currently uses.

    G.

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