‘Halfway house’ to regulated UK roads

A paper produced by the Department for Transport may represent a step towards an eventual regulated asset base framework.

In a paper (“Action for Roads”) designed to flag reforms to the UK’s strategic road network, it was announced earlier this week that the Highways Agency will become a publicly owned company with six-year funding certainty for capital projects and maintenance.

The Highways Agency, which is currently an executive agency and part of the Department for Transport, is responsible for the construction and maintenance of the UK’s roads.

In the view of Jonathan Hart, a partner and public-private partnership (PPP) specialist at law firm Pinsent Masons, the new Highways Agency will effectively be a “halfway house to the RAB [Regulated Asset Base] model” that has already been successfully applied in the UK, most notably in the regulated utilities sector.

He explained: “It’s a halfway house because they have set up an arm’s length independent company but without the architecture of a regulator sitting on top and judging the company’s spending plans.”

Asked whether full regulation might eventually be implemented, Hart said: “It wouldn’t be beyond the wit of government to produce a draft bill for an office of road regulation. But that won’t happen before the next general election [in 2015] as it’s too politically explosive to raise the issue of charging end users.”

As mentioned by Hart, the big issue for UK roads is where the necessary funding will come from, and what role the private sector will play in this. In the interests of delaying a difficult debate, the paper provided few clues about the future of user fees.

Consequently, the CBI – the UK business lobbying organisation – described the paper as only a “small step in the right direction”.

“Six-year investment plans and a more independent Highways Agency will give greater funding certainty – but overall these measures fall well short of dealing with the fundamental problems facing our major roads,” said Rhian Kelly, director for business environment at the CBI, in a statement.

She added: “Ministers can’t ignore the current £8 billion (€9.3 billion; $12.1 billion) funding shortfall – it has to be tackled and only private investment can fill the void. We need a radical overhaul in how the UK pays for and manages the road network, instead of relying on ever-tighter public finances.”

Following announcements made in the UK’s spending review in June, the paper gave further details of £28 billion of government investment which was hailed in a government press release as a “trebling of funding for motorways and major A-roads” that will “lead to the biggest ever upgrade of the existing network”.

The “upgrade” includes proposed work on the A14 in the East of England, part of which will be tolled. Tolling is highly controversial in the UK, where the only tolled stretch of motorway – on the M6 – has received much criticism.