Privatising roads would benefit drivers and taxpayers
14 June 2013
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Economic Theory
11 November 2024
Governments do not always support mobility. The Duke of Wellington objected to railways because they would “only encourage the lower classes to move about needlessly”. United States secretary of transportation Ray LaHood seeks “to coerce people out of their cars”. Both men achieved much and merit our respect, but should those who consider that others travel too much really determine transport policy? If road users pay the appropriate costs, why should they be denied roads? Indeed, why should the provision of roads be a government function?
The answer to the last question lies in the history of road tolling. Privately supplied toll roads provided the core road networks in the US and United Kingdom until well into the 19th century. But the inconvenience of having to stop and pay tolls enabled ‘progressives’ at the turn of the 20th century to make the case for ‘free’ roads, paid for out of taxes. This dependence on financing by taxes enables governments worldwide to determine the modes, locations and sizes of transport projects, such as Alaska’s ‘road to nowhere’, Boston’s ‘Big Dig’ and Britain’s wasteful High Speed 2 railway project.
In the UK’s 1909 budget, David Lloyd George introduced a dedicated Road Fund to enable roads to be paid for without road users having to stop to pay tolls. This had significant advantages, but was abolished in 1938, when the fuel tax became a sumptuary tax: a levy on luxuries to benefit general government revenues, with no formal connection to spending on roads. Richard Wellings made the case against this folly in the Institute for Economic Affairs’ 2012 paper, Time to excise fuel duty?
The twist in the history of paying for road use is that modern electronics enable mileage-based tolls to be debited to specific road users, and the revenues credited to specific road providers, without vehicles having to stop, without invading the privacy of road users, and without requiring government financing. One such tolling method has already been successfully demonstrated in Oregon, where those taking part had the option to pay for roads either by fuel taxes or by a new mileage charge.
In the US, the congressionally appointed National Surface Transportation Infrastructure Financing Commission unanimously recommended in 2009 that the country should finance its roads by means of mileage charges instead of by fuel taxes. There has been no such recommendation from any government agency in Britain, though in 2009 the House of Commons transport select committee called for “the government to look for volunteers who would be ready to accept ‘pay-as-you-drive’ charging. In return they would not have to pay vehicle excise duty and could also see their fuel taxes reduced or scrapped.”
Improved road charging methods would enable governments to provide roads on a commercial basis – as telecommunications services were provided commercially in Britain before being privatised by the Thatcher administration – but privatisation could offer road users and taxpayers additional benefits.
Firstly, commercial government services are often underpriced for political reasons, which stultifies their development. Secondly, government-owned enterprises are generally monopolies, so government-owned roads would deprive road users of the benefits of competition. Such benefits will be readily appreciated by those who remember the pre-Thatcher telephone services. Thirdly, private ownership would turn roads from public liabilities to private assets, paying rates and taxes to governments and rents to landowners. These issues are explored in greater depth in the IEA’s new study, Moving the road sector into the market economy, authored by myself.
I first looked professionally at road problems in the 1950s as part of the Road Research Laboratory’s investigation into the costs and benefits of providing the M1 motorway. By the 1960s I realised it would be impossible to tackle road issues, especially those relating to traffic congestion, without improving the way that roads are charged for. The 1980s brought the realisation that the essential problem with roads is not their pricing, but government ownership. This can be compared to the ownership of the food sector by communist governments, which resulted in millions dying from starvation.
Modern readers are doubtless quicker on the uptake than I was, and I hope that the facts and ideas presented in this study will enable them – especially readers in Europe – to see that the condition of traffic on their government-owned roads is not due to some ‘disease of civilisation’ but to government ownership itself, which we now have the means to abolish.
Read the original article on Public Service Europe here.
The answer to the last question lies in the history of road tolling. Privately supplied toll roads provided the core road networks in the US and United Kingdom until well into the 19th century. But the inconvenience of having to stop and pay tolls enabled ‘progressives’ at the turn of the 20th century to make the case for ‘free’ roads, paid for out of taxes. This dependence on financing by taxes enables governments worldwide to determine the modes, locations and sizes of transport projects, such as Alaska’s ‘road to nowhere’, Boston’s ‘Big Dig’ and Britain’s wasteful High Speed 2 railway project.
In the UK’s 1909 budget, David Lloyd George introduced a dedicated Road Fund to enable roads to be paid for without road users having to stop to pay tolls. This had significant advantages, but was abolished in 1938, when the fuel tax became a sumptuary tax: a levy on luxuries to benefit general government revenues, with no formal connection to spending on roads. Richard Wellings made the case against this folly in the Institute for Economic Affairs’ 2012 paper, Time to excise fuel duty?
The twist in the history of paying for road use is that modern electronics enable mileage-based tolls to be debited to specific road users, and the revenues credited to specific road providers, without vehicles having to stop, without invading the privacy of road users, and without requiring government financing. One such tolling method has already been successfully demonstrated in Oregon, where those taking part had the option to pay for roads either by fuel taxes or by a new mileage charge.
In the US, the congressionally appointed National Surface Transportation Infrastructure Financing Commission unanimously recommended in 2009 that the country should finance its roads by means of mileage charges instead of by fuel taxes. There has been no such recommendation from any government agency in Britain, though in 2009 the House of Commons transport select committee called for “the government to look for volunteers who would be ready to accept ‘pay-as-you-drive’ charging. In return they would not have to pay vehicle excise duty and could also see their fuel taxes reduced or scrapped.”
Improved road charging methods would enable governments to provide roads on a commercial basis – as telecommunications services were provided commercially in Britain before being privatised by the Thatcher administration – but privatisation could offer road users and taxpayers additional benefits.
Firstly, commercial government services are often underpriced for political reasons, which stultifies their development. Secondly, government-owned enterprises are generally monopolies, so government-owned roads would deprive road users of the benefits of competition. Such benefits will be readily appreciated by those who remember the pre-Thatcher telephone services. Thirdly, private ownership would turn roads from public liabilities to private assets, paying rates and taxes to governments and rents to landowners. These issues are explored in greater depth in the IEA’s new study, Moving the road sector into the market economy, authored by myself.
I first looked professionally at road problems in the 1950s as part of the Road Research Laboratory’s investigation into the costs and benefits of providing the M1 motorway. By the 1960s I realised it would be impossible to tackle road issues, especially those relating to traffic congestion, without improving the way that roads are charged for. The 1980s brought the realisation that the essential problem with roads is not their pricing, but government ownership. This can be compared to the ownership of the food sector by communist governments, which resulted in millions dying from starvation.
Modern readers are doubtless quicker on the uptake than I was, and I hope that the facts and ideas presented in this study will enable them – especially readers in Europe – to see that the condition of traffic on their government-owned roads is not due to some ‘disease of civilisation’ but to government ownership itself, which we now have the means to abolish.
Read the original article on Public Service Europe here.
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The vast majority of people do not realise that privatising roads is such a viable option, and, until we get the practical explanations widely known, the fact that libertarians and liberals want to privatise roads is going to keep being used as evidence of our alleged quackery by cynical leftists and conservatives. A real demonstration of a privatised road scheme needs to be made as soon as possible, as I really think that the British public will not warm to the idea until they actually see it working.