CBI call for road network investment

Published on Monday, 08 October 2012 09:12
Posted by Scott Buckler

A new CBI report argues that the UK needs a gear change in investment, performance and efficiency if it is to develop a road network fit for the 21st century

With public finances constrained, the Government must show bold thinking in how to secure new sources of funding to help support economic growth in the long-term, the head of the CBI said today.

Launching Bold Thinking: A model to fund our future roads, John Cridland, the CBI's Director-General, made a call to action from the Government to overcome the funding gaps in our creaking road network. The UK economy is already losing up to £8 billion each year from congestion on the roads, which could potentially rise to £22 billion by 2025. The CBI's recent infrastructure survey also showed that three in four businesses were not confident that transport networks will improve in the next five years.

The CBI is calling for the introduction of a Regulatory Asset Base (RAB) model to secure the private investment necessary to overcome the current funding gaps in the UK's road network. A £10bn shortfall in funding for Highways Agency projects and the prospect of declining motoring tax revenue due to ever-increasing efficiencies in new vehicles makes the current model unsustainable.

A regulated model for the road network would address the problem of long-term funding and one year cycles by taking the road network out of the Government's budget.  Users would have a proportion of their motoring taxes converted to a user charge – controlled by the regulator – to access the strategic road network.  This charge would provide a funding stream for private operators – licenced by the regulator – who would operate regional sections of the network.

But in the long term the charge alone might not be sufficient to leverage the levels of future investment needed to finance bigger capacity projects. Private operators would have to finance such projects through long-term borrowing, which could require additional revenue streams, such as tolling, above a standard charge.  The regulator would continue to cap charges and manage the overall cost burden on drivers.

To achieve this, the Government should examine the most suitable elements of existing RAB models in the UK, which have a track record in attracting private capital, regulating performance and controlling prices.

Similar models have successfully been applied in other sectors and could open up major private sector investment over the long-term – the water industry alone has generated £98bn of private investment since the1980s, with capped charges on customers.

John Cridland, CBI Director-General, said:

"Every day, people up and down the UK lose time and money because of our clogged-up roads – whether you're a business waiting for an urgent delivery, or a commuter stuck in the morning rush-hour. Gridlock is an all too familiar tale of life in the UK, and one that is already costing us £8 billion a year.

"With public spending checked, the case for new funding solutions is even more compelling, and the Government recognises this. Infrastructure matters to business, and delivering upgrades to our networks is one of the highest priorities for the CBI to get the economy moving again.

"It's clear we need a gear change in how we manage and pay for our road network in the 21st century. A lack of investment means we are really struggling to increase road capacity, let alone adequately maintain what we already have."

Source: ©CBI

 

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