Who pays for infrastructure?

[JamieLei]

A line from the bottom of this article caught my attention:

Manuel Cortes, leader of the TSSA rail union said rail passengers had already suffered enough above-inflation fare rises.

"They should not now be expected to face another six years of even higher fares. No-one expects motorists to pay more for new roads or air passengers to pay for new runways." he said.

Owen might have something to say about that! I certainly do believe that motorists should pay more for new roads. In Japan, the costs of running the motorways are completely passed onto the motorist, to the extent that it's almost as expensive in tolls to drive from Osaka to Tokyo, as to take the Shinkansen - and that's not even counting the cost of fuel or running your car.

One of the sources I'm using in my dissertation - Moving Minds: Conservatives and Public Transportation - is a huge advocate of unveiling simply how much road transport is subsidised through highway and road construction. That's not even looking at the amount of land value lost through providing car parking in urban areas, which could be put to much more productive use (how much nicer would our cities be in just 50% of all car parking area was converted into parkland?) - or we could go Japan-style and build on it, capturing the value more directly.

Although the M6 toll is widely considered a failure, the government looks like it's exploring the idea further which is great. Road users certainly should be expected to pay for infrastructure when there's adequate quality public transportation that could be used to complete the journey. Rural areas of course are a different matter and road transport is essential.

Currently it seems that railways are subsidised by about 38% (£4bn taxpayers, £6.5bn farepayers) ([http://www.telegraph.co.uk/comment/tele ... -line.html source]). Any idea what the figures for road might be? - because I scarcely believe that it could be covered out of fuel duty and road tax alone.

[orudge]

I would personally argue that public infrastructure, be it roads, railways or airports, should be paid for out of general taxation, with roads being free at the point of use (fuel duty and vehicle excise duty raking in plenty of money for the treasury), and rail fares set at a level that means people can actually afford to use them. (I would also nationalise the railways!) Airlines pay landing charges and so on to use airports.

Despite considering myself a "conservative", I do believe that public transport should be public, and that having a decent rail and - yes - road, infrastructure, is beneficial to everybody.

The issue of cars in congested city centres is, in my opinion, a very different one to the issue of whether we should be building motorways and so on. Personally, I would suggest high quality park and rides on the outskirts of cities, coupled with reliable and affordable public transport to the places people actually want to go in cities. If people can make the whole journey by train or bus, then that's great, but for some people, it's just not going to be practical - so if you can at least provide a decent park and ride, and if it's not going to cost the motorist more to use the park and ride than it would to pay for parking in the city centre, then I daresay that could be a way of taking cars out of city centres.

Owen might have something to say about that! I certainly do believe that motorists should pay more for new roads. In Japan, the costs of running the motorways are completely passed onto the motorist, to the extent that it's almost as expensive in tolls to drive from Osaka to Tokyo, as to take the Shinkansen - and that's not even counting the cost of fuel or running your car.

Does that include HGVs too? Slapping more tolls on HGVs is just going to increase the price of everything. Ship bulk freight and so on via rail where possible, certainly, but you can't replace all the HGVs on our roads today with trains - particularly since the railways don't serve half the country any more!

[Kevo00]

I'd be concerned that road tolling might pile more pressure on the 'legacy' network, a la the M6 toll, unless the entire motorway system is to be tolled.

Also, I'm not entirely convinced that turning the road system over to the asset farmers is a good idea. It won't just be that tolls have to cover the capital cost of the road over 30-40 years, but no doubt some sort of premium payment to the exchequer, just like Intercity rail already has. I would also suspect the roads would be seen as more of a property holding than a value adding business, and presumably no one needs me to remind them of what happened when that sort of model was tried previously in another part of the transport industry.

Mind you, the private sector might just have the 'can do' attitude required to build some decent roads to replace some of the downright dangerous dual carriageways around here.

[teccuk]

Very large investment funds such as sovereign growth funds (so that's govt.), and some pension funds, (local govt. pension pots tend to be very big... that's kind of govt. too) might be able to afford large infrastructure projects, but in the main the private sector cannot secure the required capital for the up-front investment. Whilst you can sweat transport assets to generate enough revenue to turn an operating profit, generally you won't be able to pay the interest on the colossal loans you needed for construction nor be able to pay much of it back.

So even if ideologically you would like infrastructure to be funded privately, the reality is it generally can't be. The new generation of nuclear power is a good example, only EDF remain the big player (French govt. owned btw) and UK govt. is having to guarantee minimum prices for the energy which are inflated above the market value as it stands.

London airport is another example, i'm sure if a private enterprise was to propose a wholly privately funded airport, gov would jump at it. The big debate is because its going to have to be public money.

I agree with Orudge in any case, but ideology aside, its more or less going to be case that big infra is funded by taxation. What makes it not work is its generally a fudge these days, stupid PFI and psudo-privatisation just makes everything less efficient.

[audigex]

Fuel duty
"Road tax" (Vehicle Excise Duty)
VAT on the car
VAT on parts used for repair/servicing, screenwash, tyres etc
VAT on the work done when fixing the car, washing the car
Tax on insurance
Congestion charges/tolls

Overall, motoring tax accounts for approximately 7% of UK tax income, at approximately £38billion. UK public spending on transport is just under £13billion. That's on ALL transport - including airports, shipping and the heavily subsidised trains. Of that, approximately £4billion goes to the Highways Agency to build/maintain roads, maintain toll crossings and subsidise buses. Approximately the same is spent on the railways through Network Rail and "Other railways"

Or in other words, each year "motorists" pay enough to the government to build and maintain the roads ten times over.... or to pay for all the roads and railways in the country 5 times over, or to pay for all government transport investment 3 times over. And that's not even factoring in the amount of money that railway/air passengers pay in tax a year, nor freight charges etc...

Does that debunk the idea that "nobody asks motorists to pay for new roads" yet?

[Dave]

I'm sorry, but you cannot say that VAT stings motorists only haha.

[doktorhonig]

And VAT is not ring-fenced. If it were, I would demand free internet access for the VAT I paid when buying my computer.

VAT and income tax pay for all the stuff that no one wants to pay for. And this also applies to VAT of car-related things.

[Kevo00]

Fuel duty
"Road tax" (Vehicle Excise Duty)
VAT on the car
VAT on parts used for repair/servicing, screenwash, tyres etc
VAT on the work done when fixing the car, washing the car
Tax on insurance
Congestion charges/tolls

Overall, motoring tax accounts for approximately 7% of UK tax income, at approximately £38billion. UK public spending on transport is just under £13billion. That's on ALL transport - including airports, shipping and the heavily subsidised trains. Of that, approximately £4billion goes to the Highways Agency to build/maintain roads, maintain toll crossings and subsidise buses. Approximately the same is spent on the railways through Network Rail and "Other railways"

Or in other words, each year "motorists" pay enough to the government to build and maintain the roads ten times over.... or to pay for all the roads and railways in the country 5 times over, or to pay for all government transport investment 3 times over. And that's not even factoring in the amount of money that railway/air passengers pay in tax a year, nor freight charges etc...

Does that debunk the idea that "nobody asks motorists to pay for new roads" yet?

Interesting claim. Source?

I do tend to agree that it's about time we started to ring fence tax. If it can be done with the TV license, it can be done with other things too.

[Dave]

Yeah. Let's get VAT back into small businesses!

[orudge]

I'm sorry, but you cannot say that VAT stings motorists only haha.

Of course not, but if motoring didn't exist, there wouldn't be VAT payable on motoring expenses. Besides, I don't think anybody is calling for the VAT on motoring expenses to be ring-fenced for transport improvements - just pointing out that the government gets a chunk both in direct motoring taxes and indirect ones.

[JamieLei]

Yes but it's not exactly a motoring tax per se. If you're not spending it on motoring, you're spending it on something else that will charge VAT. Just like income tax. By your logic, driving a car is taxed through income tax since you need to earn money to be able to drive.

[orudge]

The point is though, even excluding VAT, revenues from motoring are quite significant, and far exceeds that spent on roads and suchlike. (Supposedly revenue from tobacco duty also far exceeds the cost of smoking-related diseases, although I'm not sure if that's actually still the case.) That is not necessarily a bad thing - the government has to get money from somewhere, but it is understandable why motorists feel a bit cheesed off when people suggest they're getting a "free ride" and suchlike.

[audigex]

Dave, I'm not saying that motorists are the only ones stung by VAT - just pointing out that overall, far more money goes into the treasure from motorists than out of it on roads etc.

kev000, I can't find the exact sources I used - but the numbers are all freely available:
This details taxation for a couple of years ago, which isn't going to be far off
http://www.racfoundation.org/assets/rac ... 150512.pdf
And the following shows a breakdown of spending by department 2011-12
http://bit.ly/Z2qAcY

You can probably find a more detailed/recent set of tax figures from the treasury site, if you're really determined.

[Dave]

Far much more money goes out of my paypacket than goes into government schemes to boost retail, to maintain the power grid, and so on and so forth ad nauseum.

VAT's not the issue.

[audigex]

I never said it was... I'm not saying motorists shouldn't be charged VAT, I'm not really saying they shouldn't be charged any of the rest of it (although fuel duty is ridiculous when the tax is 2/3 of the total cost).

I'm just objecting to the idea that the rest of the country is subsidising road infrastructure, and the original statement that "No-one expects motorists to pay more for new roads" - Manuel Cortes, leader of the TSSA rail union. A statement which is patently untrue.