Bold Thinking – a model to fund our future roads

Published on Friday, 12 October 2012 11:17
Written by Rhian Kelly

The CBI's message to the Government on infrastructure is clear: UK businesses competing for global capital must be supported by world-class domestic infrastructure

Our new report, Bold Thinking – a model to fund our future roads, sets out a vision to boost private investment in our under-funded roads and secure a 21st century road network for the UK. The economy is already losing up to £8 billion each year from congestion on the roads, and that could rise to £22 billion by 2025. Traffic gridlock is an all-too-familiar sight on our roads, the time has come for a gear change in how we manage and pay for our road network.

With the need to tackle the budget deficit constraining public spending, we need the Government to create the conditions in which the private sector can step in and invest in our road network. Ministers are relying on private sector funding to deliver two-thirds of the National Infrastructure Plan – it is now commonplace for private firms to be involved in energy generation, aviation capacity, water systems and digital networks.

The UK road network is the last piece of infrastructure fully funded and owned by the Government. While the Government can, and should, front-load its short-term investment programme to get spades in the ground as quickly as possible, this is not a long-term solution - Arup has calculated a £10bn shortfall in funding for current Highways Agency projects.

In March this year, the Prime Minister set out his ambition to close this spending hole through innovative funding mechanisms to attract large-scale private investment. To achieve this, we are calling on the Government to introduce a model for the road network with a proven track record for generating significant private investment in utility sectors. The water industry alone has generated £98bn of private investment since the1980s, with capped charges on customers.

The CBI believes that a regulated asset based model for our roads – where an independent, price-setting regulator oversees investment from private operators for stable, capped returns – could deliver the Prime Minister's ambition and put the UK on a firmer competitive footing internationally.

The new independent regulator would be responsible for ensuring the continued operation and quality of the network. It would have the power to issue licences to private operators, who would operate regional sections of an expanded strategic road network, incentivised to improve standards and efficiencies through their licence terms. The regulator would also ensure a fair deal for road users, capping costs and investor returns.

Users would have a proportion of their existing motoring taxes converted to a user charge, controlled by the regulator, to access the expanded strategic road network and provide a revenue stream for investors. This would give users a bigger bang for their existing buck, by ensuring that the money they pay is used more efficiently and stimulates further investment.

There could be scope in the future, once the model was established, for user charges to become more flexible to meet demands for extra capacity – for example, through additional road tolling. But any additional charging should be viewed in the context of efficiency savings for business through better road connectivity and surface quality.

Finally, this model would be informed by a new Highways Forum, comprising key stakeholders from user groups, local authorities and government officials. The Forum would also help the Government to determine the parameters of the strategic road network, ensuring that the network includes key economic routes and links seamlessly with local roads. We believe this is a model that offers a starting template for further discussion and can meet the needs of users and investors, both must be fully understood for any future model to work.

Businesses need to move things quickly, reliably and easily, with minimum impact on their cost margins. They already face yearly motoring tax increases without visible improvements to the network, a move towards a 'user-pays' principle would require significant change. But any user charges would have to be affordable, interoperable and produce a better quality network.

The UK needs a well-funded, efficient, high performing network that supports businesses up and down the country in the essential journeys they make every day, whether that's moving freight, reaching customers or getting their employees to work. Infrastructure matters, so we urgently need to change up a gear to deliver network upgrades and get the economy moving again.

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