Chancellor Philip Hammond earmarked £28.8bn for new and upgraded roads in last week’s budget. It’s a policy with many flaws

 

The budget earmarked almost £30bn for new and upgraded roads

 

So roads, roads and lots more roads. In his budget speech, Philip Hammond did not quite evoke the idea from John Major’s government of “the biggest road building programme since the Romans”, but still managed to boast it was “the largest ever roads investment package”.

With the uncertainties of Brexit, the chancellor had decided to opt largely for spending on time-limited capital projects rather than building recurring expenditure into the base budget. That is a sensible strategy it itself. Landing on roads as the area to spend his capital was not.

So the budget earmarked almost £30bn for new and upgraded roads, £28.8bn in a hypothecated fund from Vehicle Excise Duty receipts, to be spent between 2021 and 2025, a big increase from the £15.2bn figure of 2015.

There is so much wrong with this announcement it is difficult to know where to start. Let us begin with the big picture and the first serious problem.

As the chancellor sat down, a sardonic little literary exchange came into my head.

Scotland Yard detective: “Is there any point to which you would wish to draw my attention?”

Sherlock Holmes: “To the curious incident of the dog in the night-time.”

Detective: “The dog did nothing in the night-time.”

Sherlock Holmes: “That was the curious incident.”

The dog that didn’t bark here was climate change, which did not rate even a token mention. Yet less than a month earlier, a UN report penned by the world’s leading climate scientists had warned there is only a dozen years for global warming to be kept to a maximum increase of 1.5C, beyond which even half a degree will significantly worsen the risks of drought, floods, extreme heat and poverty for hundreds of millions of people.

That report in turn followed a letter from 15,000 scientists which contained a dire “warning to humanity” about the dangers from climate change. If the world doesn’t act soon, there will be catastrophic biodiversity loss and untold amounts of human misery, they wrote.

The UK is of course a signatory to the Paris accord that requires governments to take strong action to cut greenhouse gas emissions. Here in the UK, we have made relatively good progress across the board, with one notable exception: transport. In this sector, carbon emissions are actually increasing.

Tarmac junkies traditionally argue that providing more capacity, or “improving” roads as they prefer to call it, eases congestion and so reduces carbon emissions. They ignore of course the cold evidence that suggests otherwise.

Tarmac junkies traditionally argue that providing more capacity, or “improving” roads as they prefer to call it, eases congestion and so reduces carbon emissions. They ignore of course the cold evidence that suggests otherwise.

The seminal 1994 report by the Standing Advisory Committee on Trunk Road Assessment (SACTRA) proved beyond any doubt that which many people had long suspected, namely that increasing capacity on an existing corridor merely serves to attract extra vehicle traffic that previously did not exist, perhaps diverting it from rail or bus.

You need only look at the Birmingham area which over decades has had more road construction than almost any other part of the country, and where today’s traffic jams are as bad or indeed worse than almost anywhere else.

Or consider Newbury, given a hugely controversial bypass in the 1990s to relieve the town centre, except that it was not long before traffic levels in the town centre were soon back to where they had been, plus of course a whole lot more on the bypass.

For brand new roads making new connections, the induced traffic levels are even greater. In my music business days, I used to use the single carriageway A128 and A414 to cross east-west in the corridor north of London. The journey was sluggish but rarely stationary. Then the M25 opened and suddenly people began making all sorts of journeys they either had not made before, or had made by train. The motorway has since been continually widened, even using the hard shoulder, but yet is frequently at a standstill with tailbacks for miles.

So we will undoubtedly see an increase in the already high carbon emissions and air pollution from road transport as a result of the chancellor’s announcement – a totally irresponsible outcome.

There are of course road schemes –  generally local ones dealing with specific problem locations or stretches of road, where investment is sensible – Patrick McLoughlin as transport secretary had it right when he created the idea of a fund for pinch points. But this budget has given us the coarse bludgeon rather than the delicate rapier.

It is also sensible to maintain the existing network properly, so I suppose we should be grateful for the £500m extra allocated to road maintenance in 2018/19, though it is accepted that this is a mere fraction of what is required to deal with the considerable backlog that has built up.

Perhaps Chris Grayling had a Beatles song in mind when he pushed for this:

“I’m fixing a hole where the rain gets in, to stop my mind from wandering…”

Yet the big money is going on mega-road schemes, incidentally five hundred times more than is going on the paltry tree planting the chancellor announced. Even the £50m he referred to is in fact overwhelmingly to be found though carbon credits. If a tree can be a fig leaf, then here it is.

The second serious problem, which links to the first, is the way in which the carefully constructed methodology for assessing road schemes appears to have been bypassed in this announcement.

Governments of all shades have a poor record when it comes to assessing the value of interventions. The Department for Transport actually has a better story to tell than any other part of government, and certainly miles better than the continual embarrassment that is the Ministry of Defence.

The DfT has long applied a reasonably rigorous cost-benefit analysis to putative schemes, even if the results are sometimes questionable. As I recall, it gave a cost-benefit ratio of less than one to the Jubilee Line extension through Canary Wharf to Stratford, which fortunately went ahead anyway.

Nevertheless, a system has been in place, and this was actually improved and updated by Philip Hammond and me when we were in harness at the DfT from 2010 onwards. A new formula, or business case as Philip preferred to call it, was introduced, and one which gave much greater weight to carbon emissions and to the environment.

It is difficult to believe that the rigorous application of that formula would have produced the £30bn package the former transport secretary announced. Indeed, it bears all the hallmarks of identifying a sum of money first and then finding schemes for it to be spent on afterwards. But then the Treasury has a habit of riding roughshod over other departments, particularly the DfT.

I recall that one year, about two weeks before the budget was due to be delivered, the then chancellor George Osborne rang up the DfT and asked for a list of all local road schemes that were ready to go. The fact that some of them were not favoured by the DfT itself on account of their very low cost-benefit ratio or their environmental downsides was swept aside, and they all duly appeared in the budget shortly afterwards. Government at its worst.

The third serious problem with Hammond’s roads announcement is hypothecation. The direct link between road tax revenue and money spent on roads went out in 1938, and to reinstate the concept will delight petrolheads.

The point is that it is simply not possible to hypothecate every element of government business. Obviously you can never raise through hypothecation the income required to fund the NHS, our schools and colleges, pensions and benefits, and a whole range of other functions, and it is entirely sensible and legitimate to expect some functions to generate a positive income to offset those which necessarily require public funding. This includes road tax.

Moreover, taken to its logical conclusion, hypothecation of road tax income would generate a huge slew of funds which could end up being spent on schemes that were simply not necessary, just because the money was there and had to be spent.

And the slew will be bigger and for longer than it need be, in the light of two other elements of Treasury policy. One is the dwindling support the Treasury is offering to encourage the take-up of electric cars, a transition Philip Hammond was actually hugely enthusiastic about when transport secretary.

According to the Treasury’s own figures published with the budget, the failure to upgrade fuel duty will cost £4.42bn over the next five years

The other is the continual freezing of fuel duty, a terrible policy. According to the Treasury’s own figures published with the budget, the failure to upgrade fuel duty will cost £4.42bn over the next five years, and more in the future unless the basis upon which any future rises after that date are calculated is amended to assume normal inflation rises had occurred.

I do have some sympathy on this one with Philip Hammond. The Treasury was briefing over the summer that some taxes would have to rise and fuel duty was specifically mentioned. Then the prime minister told her party conference that it would be frozen, and the chancellor seems to be in too weak a position, not least because of his strong Remain beliefs, to challenge this. I cannot imagine Gordon Brown putting up with being bounced in this way by Tony Blair, or even Osborne by Cameron.

But not only is the loss of over four billion a significant hole in the public finances (and at quite a critical time) it can only encourage more car journeys, which will cause more congestion to the detriment of bus passengers and car drivers alike.

The chancellor’s budget transport package then, which also allocated hardly anything for rail or bus, will cost a huge amount, worsen carbon emissions and air pollution, cause significant damage to our natural environment, and increase congestion on our roads. As an intelligent former transport secretary, he really ought to know better.

 

About the author:

Norman Baker served as transport minister from May 2010 until October 2013. He was Lib Dem MP for Lewes between 1997 and 2015.

 

This article appears inside the latest issue of Passenger Transport.

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