Should we privatise the roads?

The government is looking into privatising Britain's roads - a good idea to revive the nation's finances? Or just another way to rip off motorists? Emily Hohler reports.

David Cameron's announcement that the government is thinking of privatising our major road network has been met "with a mixture of admiration and outrage", says Philip Johnston in The Daily Telegraph. "The facts are inescapable." The existing network is "decrepit and congested", costing the country around £8bn a year.

Yet, the investment to improve it isn't there. Cameron hopes that the sale of our major roads to the private sector on long leases will unlock investment from pension and sovereign wealth funds. To that end he has ordered a feasibility study. Not that one is needed: "just such a study" was carried out in 2009 by NM Rothschild, which estimated that a sale could "raise £100bn and help revive the nation's battered finances".

The government could invest in our roads more cheaply than the private sector simply by issuing gilts, says Jeremy Warner in The Daily Telegraph. What's proposed is a form of off-balance-sheet finance, not dissimilar to the "derided" Private Finance Initiative (PFI), which "fools no one" as to where the ultimate liability lies. "Already mortgaged to the tune of £40bn through the PFI, Cameron now proposes yet more financial engineering, promising a field day to the lawyers and financiers but a long-term liability to everyone else."

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Cameron's plan is all about providing a "short-term fillip to the Treasury", agrees John Harris in The Guardian. The government hopes our roads' new owners will improve and expand them and they might, but "surely on terms akin to the eye-watering arrangements of PFI deals". It claims tolls will only be charged for new capacity, but this doesn't convince. Tolls often rocket under private owners striving to deliver returns. Aren't there some assets "so central to our wellbeing that they ought to be left well alone"?

Nor is it reassuring to learn that water privatisation is the government's ideal model. It isn't, agrees Jonathan Brown in The Independent. As Jonathan Portes, director of the National Institute of Economic and Social Research, who worked on the water sell-off, notes, "The industry was privatised under an excessively lenient regulatory framework that clearly led to shareholders making very large excess profits at the expense of consumers." Bus and rail privatisations aren't good blueprints either. Railways received £5bn in annual subsidy, fares are 30% higher than elsewhere in Europe, and costs 40% greater.

The proposal amounts to an "additional means of milking motorists", says Ray Massey in the Daily Mail. This would be fine if motorists' taxes were spent on our roads: but around £45bn is raised each year with just £10bn spent on new roads and maintenance.

The system isn't fair and doesn't work, says The Times. "The cost of driving is unrelated to the time travelled or the route taken, [those] who drive a little pay too much and people who drive a lot pay too little." Foreign hauliers don't pay to use our roads, but the compliment isn't always returned. The infusion of private capital and management expertise surely promises more than the "tired old policy" of predict and provide'.

Emily Hohler

Emily has extensive experience in the world of journalism. She has worked on MoneyWeek for more than 20 years as a former assistant editor and writer. Emily has previously worked on titles including The Times as a Deputy Features Editor, Commissioning Editor at The Independent Sunday Review, The Daily Telegraph, and she spent three years at women's lifestyle magazine Marie Claire as a features writer for three years, early on in her career. 

On MoneyWeek, Emily’s coverage includes Brexit and global markets such as Russia and China. Aside from her writing, Emily is a Nutritional Therapist and she runs her own business called Root Branch Nutrition in Oxfordshire, where she offers consultations and workshops on nutrition and health.