Tuesday, 2 April 2013

UK government proposing new toll road in Wales

Several British newspapers are reporting that the British Government is prepared to back the Welsh Government (which is essentially a devolved regional administration) borrowing money to pay for a project generally called the M4 relief road.  According to Wales Online, while the debt guarantee will be provided, it will up to the Welsh government as to how much of the cost of the £830 million (US$1.26 billion) project it will recover from tolls.

However, given that without additional funding from the British Government (the Welsh Government does not essentially have taxation powers) the project will hit Welsh finances hard, tolls are being promoted for this new road.

The announcement is expected from the forthcoming Comprehensive Spending Review, which will be released in a few months time, and is expected to include support for a wide range of new road projects, most of which will not be tolled.

According to the Independent, the road is a 14 mile, dual carriageway (two lanes each way) road, connecting junctions 23 and 29 of the M4 in Wales, bypassing Newport to the south (and bypassing a regularly congested stretch of motorway, constrained by a tunnel).  A website outlining the details of the issues and the option assessment is here.

The website TunnelTalk published this image of the route, which can be seen in red at the bottom edge of the built up area:

M4 relief road which may be tolled

One interesting dimension is that most of the peak traffic causing congestion has origins/destinations around Newport, so would not be served by the new road directly.  The new road would provide a way for through traffic between Cardiff and the south-west of Wales with England to bypass that congestion (and that traffic may be seen as having a higher net GDP contribution that short car commuter trips, especially with upgrades to the parallel railway expected in coming years).  This may mean that demand for the new road will not primarily come from most users of the existing road.

Comment

This is the first solid evidence of the promotion of tolling by the current government, and may be a portent for a more generous view of using tolls to support new highway construction.

The currently preferred option is not strictly a motorway, but a major highway that would bypass the congested area, yet my view is that if you are to ask people to pay for a road, it ought to be of a high quality, and there may be arguments that it justifies going back to the original £1 billion (£1.52 billion) motorway scheme.   However, it is clear that tolling this road wont pay for it, and is likely to recover less than half of the amortised construction costs.  It would seem foolish to squander that toll revenue on building a better road that may not be necessary.  What the new road will simply have to offer is a consistent high quality experience that is good enough for users to pay for.  Beyond two two-hour peak periods, it is not likely the new road would get much usage.

Some parallels are being drawn to the much criticised M6 toll road.  Criticism that I don't believe is warranted, given taxpayers paid nothing for the road (although they pay fuel tax using it) and government widened some sections of the M6 that was bypassed (because of peak congestion).

What needs to be done for this road is to ensure that it can minimise negative publicity and to get some acceptance of the value of new toll roads.   This is what should be done:

1. Ensure it is built to a high standard, with as consistent a speed as possible throughout. 
2. Forget manual tolls, this should be an electronic free flow toll road.  Meanwhile, take the opportunity to convert both Severn Crossing toll systems to the same.  If DSRC makes sense, let's make it interoperable and easy to get accounts.
3. Ensure design of the occasional user toll payment is easy to understand, and the initial start up period incentivises good behaviour.
4. Set toll rates according to time of day.  Peak and off peak, and put prices in big electronic signs well in advance.
5. Have a one week toll free period at the start, so potential customers get used to it.
6. Offer a discount for using both Severn and the new road.  This will help avoid accusations that Wales is targeted for tolls in ways other parts of the country are not.   

The Severn Crossings are actually key to all of this.  The far eastern end of the proposed new toll road connects with them, and they are toll crossings with tolls ranging from £6.20 for a car to £18.60 for buses and large HGVs.  That's not insignificant. 

The Severn Crossings concession will expire some time after 2017, so the chance should be taken to consider whether to let it return to state ownership permanently, reduce or abolish the tolls, or to privatise it and use the capital from that to reinvest in the network.  The popular line would be to abolish tolls, but then the costs of maintaining the bridges would fall on general government revenue, which includes motoring taxes.  An alternative would be to simply recover those costs and charge the cost of capital of the crossings on toll payers, with higher tolls at peaks, and lower tolls at off peak, or to privatise the crossings with conditions around toll increases, and realise the capital value of the crossings for something else.

Yet another alternative would be to retain the present tolls, but use them to cross subsidise the new M4 relief road, on the basis that almost all users the Severn Crossings will use either the new road or the existing M4 (and so gain from the relieved congestion due to the new route). 

In all cases, this new toll road needs to be thought about strategically, alongside the Severn Crossings and with a mind not only on the financials, but on treating road users as customers.

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