Who Benefits From Selling Off UK Motorways?

Just as the Thatcher/Major Conservative government did with coal, steel, telecoms, water, gas, electricity, bus services and the railways, our next government is considering selling off our Motorways.

Or rather, it is being urged to by an Investment Bank with the connivance of the RAC Foundation.

A radical plan to raise £100 billion by privatising the motorway network has been presented to the three main political parties by NM Rothschild, the influential investment bank.

Rothschild, an architect of several privatisations, made its pitch in the weeks running up to the summer recess on July 21, Whitehall sources said. Bankers told leading politicians that the sale of the roads overseen by the Highways Agency — all motorways and most big trunk roads — could help revive battered public finances.

However, since former privatisations, water prices have gone through the roof, Electricity and Gas now costs almost as much every month as a mortgage whilst bus and train companies now have massive taxpayer funded subsidies while charging far higher prices than ever before and making very nice profits.

And, instead of decreasing because their jobs were privatised, the number employed directly or indirectly by government has now increased to around 60% of all people employed in the UK.

Drivers Alliance says, "If our roads are sold, then the cost will need to be recouped from the users - us the driver. Most companies will want to recover their investment within 20 years and will also need to cover their operating costs, interest payments and healthy annual profits.

"This means we will have to effectively buy the motorways all over again and this will cost us dear.

"If we consider there are 28 Million driver in the UK and the companies who might buy our motorways need to recoup the £85 Billion in 20 years, then with the interest on the loans and the running costs, we will need to pay about £414 each evey year just to pay all over again for our motorways.

Unless the government are going to reduce the level of taxation on motorists by £12 Billion a year and keep tax levels down, this is a very poor deal for the motorist."

If anyone is in any doubt about how a Private Equity Take Overs like this work, they shoud read 'Who Really Ruins Britain' by Robert Peston. Basically vast fortunes are taken out of the deal by individials, leaving the rump of the company to generate enough profit to pay off the interest on the money needed to keep the companies running. It has been argued that this leads to greater efficiencies. The downside is the mess the country is in now from what Private Equity Take Overs and Investment Bankers have already done to it.

The plan is that toll-road companies and infrastructure funds would compete to operate and maintain stretches of the network.

Politicians of all Parties are seeking ways to decrease the need for large tax rises or heavy cuts in public services cause by the recession caused by the current banking crisis. The bank bailouts and a recent collapse in tax revenues has seen public sector debt rise to more than £800 billion, 56.8% of GDP — up from 35.5% just two years ago. Road tolls are unpopular, however. When Labour mooted road pricing two years ago, more than 230,000 signed a petition on the Downing Street decrying the plan . In one version of the scheme, the government would pay for upkeep through a system of “shadow” tolls. A more radical, and less politically palatable, option would be for companies to charge motorists directly through toll booths or electronic card readers. The RAC Foundation, a motorists’ group, advocated privatisation in a report last week.

The Rothschild plan has already won the support of Vince Cable, the Liberal Democrats’ deputy leader and Treasury spokesman.

“This is an attractive, positive idea which could release considerable resources to the public finances and may have real environmental merits,” Cable said. “The scale of it is vast — it makes rail privatisation look like small beer.”

Theresa Villiers, the shadow transport secretary, said the Conservatives had “no plans” to back Rothschild’s proposals: “Rothschilds, like many other banks and consultancies, have approached me and my team on a range of ideas for our transport network, including their ideas for our road infrastructure, but we are not working on any proposals for privatisation of the strategic road network and have no plans to do so.”

Motorway privatisation was considered by John Major’s Conservative administration, which sold British Rail, but was rejected.

A spokesman at the Department for Transport said: “It is not unusual for organisations to suggest ideas to government departments but ultimately all policy is decided by ministers and there are no plans to sell off a stake in the Highways Agency.” Rothschild declined to comment.

The bank was behind many of the key privatisations of the 1980s and 1990s, including British Steel, British Gas and British Coal. It has close links to the Conservatives, having employed several senior Party figures including Lord Lamont, John Redwood and Lord Wakeham. Oliver Letwin, the former shadow chancellor, works there part-time.

In its report, Governance and administration of national and local roads in Great Britain, the RAC Foundation says major roads and motorways run by the Highways Agency (HA) could be sold to a private company, similar to the  way the rail infrastructure has been privatised.

The study, which values Britain's HA-managed roads at £85bn, says methods of payment for road usage under private ownership would include the company being funded by the Treasury through road tax or fuel duty income.

According to the RAC Foundation, this funding model could later be replaced by motorway tolls, or even a road-charging scheme.

Professor Stephen Glaister, director of the RAC Foundation, believes privatisation would lead to greater efficiency in road building and management.

The RAC is, of course, already the subject of a Private Equity Take Over.