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Innovative Road Finance Plan Unveiled in England

Samuel Staley
April 14, 2010, 10:38am

Our friends at Tollroadsnews.com are reporting on a potentially pathbreaking report by the London-based Social Market Foundation outlining a plan to fund roads through distance-based charging. This may be the first plan to look at the practical outline of how a national system of distance-based road funding might look like as a replacement for current approaches. In England, this means substituting this plan for the registration fees for vehicles.

In essence, an average fee of 16 cents per mile would be assessed throughout the network (in England) of roads of all kinds--local, collector, highway, expressway. The fees would (or could) vary by time of day and level of use. But--and here is the most innovative part in my view--the system would be run by what is in essence a private utility. According to Tollroadsnews:

"Traditional privatization - taking bids from companies for concessions - won't fly politically, the SMF paper argues. It is seen as "selling the family silver" to fund improvident extravagances. To be acceptable it cannot simply be a government selloff.

They propose:

• every citizen should be issued with a free share in the Strategic Roads Network – trunk roads and motorways;

• holding companies, owned by citizens, would be responsible for operating the roads, charging for their use and reinvesting in the network;

• the annual Vehicle Excise Duty or tax of Pd425 ($655) for the first year of a car and Pd235/year ($360) thereafter would be scrapped; and

• citizen owners of the road network who retain their share would receive any profits from their operation

Tollroad operating company shares issued to each citizen would be tradable. Shareholders could expect dividends from continuing to hold an interest in the tollroad companies.

Substitution of [road use charges] or tolls for the annual vehicle excise would overcome the present unfairness of motorists from Europe using British roads for free while not paying the flatrate annual vehicle tax."

This proposal has a lot of merit, and should be considered for the US as we struggle to find a replacement for the increasingly less viable gas tax. This is a comprehensive solution that could even be broken down into several different configuations and utility-based privatizations.

For example, separate holding companies could be created for entire urbanized areas and states, with state holding companies focusing on rural and intercity travel. Holding companies for urbanized areas could create a sufficiently large network of local roads and connectors that the costs could be spread over a wide enough user base to address traffic problems on a systems and network basis. Or perhaps seperate holding comanies could be created for limited access highways (expressways and/or Interstates), urbanized areas, and geographically large urban areas. Lots of different potential configurations exist, and America's unique brand of federalism should (in principle) encourage this kind of experimentation to identify best practices.

Either way, thanks to the Social Market Foundation for putting such an interesting and provocative plan on the table for discussion. The ideas have global merit and should not be limited to England.


Samuel Staley is Research Fellow


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