This move has many implications and Transport Economics will be changed forever.
The Independent article raises most of the important issues. How will the roads be 'privatised', will the same mistakes be made as in past privatisations? Has PFI ever really worked? Will this scheme bring the investment the roads need?
But there are two issues I need to highlight.
The report suggests the cost of congestion is £7bn a year. I know this was estimated at £15bn in 1990, so this seems far too low a figure. I have asked for information on the source of The Independent's figure, but the difference seems to me to be so massive that it would change the result of any Cost-Benefit Analysis.
The issue that really bothers me about this plan is that it effectively abandons any thought of a national road pricing scheme. Such a scheme, where charges vary according to the time of day and level of congestion and co-ordinated on a national basis, holds the answer to the road problem.
Road pricing will pass on external costs, reduce road use and encourage alternative modes of transport. Such a scheme uses all the principles of charging that economists know can lead to an optimal outcome and a sustainable transport policy.
Can you imagine a road network with a mixture of public and private roads, a variety of tolls and SatNav's that direct traffic down the cheapest route, which will probably be past a school or old peoples home? Let's not even start on what happens when firms and investors walk away from their franchises!
Vital reading for Grecians, but important for everyone.
This is one the most absurd and interesting things I've ever heard in economics. I am struggling to grasp even the concept, to picture such a situation. What I don't understand is what the private owners gain from purchasing such roads?If drivers or any form of transporters realise that they will haveto pay at entry to go through such a road, they would almost certainly re-direct to a different way. Sadly, I feel that once one road is privately bought, within a short frame of time, it will cost normal transporters money... wherever they go. Even in London, congestion charge seems rather unfair to income earners, so to virtually tax on yet another thing would be incredibly unjust.
ReplyDeleteHarry, not sure if you've done Externalities yet, but in the A2 transport module, this is a pretty big thing.
ReplyDeleteWhere do you think roads come from? Out of thin air? Obviously someone has to pay for it - guess who that someone has been for the past 100-odd years in the UK? Why else would there be road tax?
Not only do you cut down on traffic - people are less willing to drive if they have to pay - but you improve the quality of infrastructure. Walk down a back road in London. I know my local high road is of terrible quality - so much so they have to retarmac it every 4 years. That's because government money is spent on it, and due to how the government works, they'll want to spend as little as possible.
However, whereas a private firm will want to make profit, they will keep costs down as low as possible. This may mean higher overheads initially in a better road quality, but they can make that back in fares, provided people are willing to pay the £2 a day to keep their spines intact.
Let's pretend that the doomsayers are wrong, and that only one or two major roads become privatised. What happens? The road quality improves, people pay a little more, thus forcing some of the leisure drivers out of the market. This reduces pollution, and congestion for those who need to drive. They get to drive on a nicer road. People paying for the toll road contributes to GDP. Everybody benefits.
Of course, I really doubt this is the case - it's not that I don't think road privatisation is a bad thing - I just think that it's an awfully delicate practice. Sure, David Cameron has pledged that there will beb "no mass tolling", but are we really going to believe that? The government is dirt poor, the economy isn't in the best position, Britain's transport infrastructure is on its knees, especially with the Olympics coming along. I wouldn't be surprised if the government sold off every square inch of tarmac for some extra cash.