Spectator – Treasury Backs Road Privitisation because ‘because better roads means more car journeys means more fuel duty for the Exchequer.’

Spectator

 it also represents an increasingly rare species: a concession, of sorts, to Vince Cable, who has been pushing for this kind of thinking since the start of the coalition government, including in a pamphlet for CentreForum last year. Cable is keen to deploy new forms of public-private financing elsewhere. But it’s thought that the Treasury wants to test them out on roads first, and not least because better roads means more car journeys means more fuel duty for the Exchequer.

Indeed many US Road Privitisation contracts contain 100 years clauses preventing improvement of public transport and requiring measures to increase congestion of rival parallel routes in order to create a revenue stream.

The Treasury should remember that money spent on unnecessary travel is a dead weight loss to the economy – like land income – it transfers spending power out of consumers pockets to rentiers,  and to oil producing countries rather than spending it on goods which can be taxed or saving it which banks can then use to fund investment and mortgages.  It is the same mad Treasury logic that says gambling is good because we can tax it.  If the Treasury introduced a tax on insurance premiums they would welcome earthquakes and tsunamis.  The Treasury argument is a classic example of Basitats famous broken windows fallacy.  Indeed his contemporary Jules Dupuit a year in 1849 earlier proved that  there is a net loss to the community if public goods such as bridges are charged by monopoly providers.

The Treasury should abolish the inclusion of road tax and petrol revenues in its assessment criteria for transport schemes for that reason.  Several  rail restoration projects, such as the Wealden Line, have been throttled because they would be so successful at getting people off the roads, and relieving congestion as a result, that petrol and road tax revenues would fall giving the schemes a low net present value. As always the Treasury’s policy of doing what it can to prevent genuine growth wins out.

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