Waiting for the UK government to bring private cash into the roads network is a little bit like waiting for Tian Tian, the female panda at Edinburgh Zoo, to become pregnant. Except it takes longer and is less likely to happen.
As previously posted, there were mutterings before the 2010 general election which brought the current government to power that some kind of privatisation of the entire strategic roads network (motorways and major A-roads), worth over £100 billion (US$159.4bn), was on the cards. Behind the scenes, consultants presented proposals. A study was announced last year, and although finished, it has never been published, a sure sign that ministers wanted it swept under the carpet.
Last week the government published its proposals on turning the Highways Agency, which looks after that strategic roads network, from an agency into a government-owned company that would have operational freedom and the ability to plan and invest long-term. This was greeted by reports, including on BBC Radio 4’s You and Yours, that the reform was a prelude to privatisation or injection of private finance into new road building. They wheeled in the distinguished infrastructure lawyer Jon Hart of Pinsent Masons (disclosure: I know some of his colleagues) to talk about how that might work.
I have read the consultation paper and can’t find any overt or covert reference to trying to make it easier to privately finance new roads or have the private sector take over existing ones. Moreover there are several reasons to think this isn’t on the cards:
1) It isn’t necessary to restructure the Highways Agency to have privately financed roads. In the 1990s and 2000s, the HA successfully procured at least 14 road improvement projects where the private sector provided financing. (The roads were not tolled; the private party was repaid gradually by the HA in regular payments over time, in return for keeping the road in good working order.) The entire M25 orbital motorway around London is currently looked after by a private consortium under such an arrangement.
2) That unpublished study I mentioned above was not published for a reason. Private finance is not a free lunch; it will always look for a good deal that delivers a good return on its investment, which will drive up the cost of new infrastructure one way or another; how else will roads get better? Both road tolls and higher taxes are politically unpalatable.
3) The actual improvement works that government intends to carry out on the roads network over the next eight years don’t all lend themselves naturally to private finance. Many of them (see p.71 here) are either small ‘pinch point’ improvements, where the scale doesn’t justify the associated extra time and transaction costs of private finance, or managed motorways works (installing gantries displaying variable speed limits to improve traffic flow). The latter have to be integrated into the HA’s existing managed motorways system, so entrusting operation to a separate contractor would be tricky.