17 April: With our government's record of over-stated traffic forecasts, will pension funds be convinced to invest money in new roads?
This week's Local Transport Today contains an incisive comment piece on this by transport policy expert Professor Phil Goodwin, which adds more weight to these recent themes of our work at Campaign for Better Transport.
Following up a letter in the previous edition of the magazine from consultant Keith Buchan, which called for an urgent review of the Department for Transport's traffic forecasts, Prof Goodwin asks whether pension funds should find these forecasts plausible when applied to new tolled or shadow-tolled roads, when they have proved to be consistently wrong over the past 25 years.
The article is accompanied by this startling new diagram, charting the difference between actual traffic in the UK and what the government has predicted in forecasts since 1990 (Prof Goodwin is still looking for copies of the 1984 and 1980 forecasts to take things even further back).
Prof Goodwin says:
"The figure you see above is the result so far, for car traffic, showing successive downwards revision of the forecasts as for 25 years car traffic stubbornly refused to behave according to expectations. The revisions were of the form 'growth later', not 'less growth'."
The implications for the prospect of enticing private investment into UK road-building are just as startling, and set out very clearly in the article:
"...let us do a role-playing game. Suppose you are the investment manager for XYZ Pension Fund, considering whether to invest in the M999 bridge and motorway widening programme, vitally necessary, you are told, because it is already operating to capacity and the traffic will increase by 50% over the next 25 years. Sounds good, you think, and wonder whether to opt for a real charging scheme, taking in the fivers from a million motorists, or a shadow scheme, paid by the Government in relation to future traffic.
So you look at the forecasts, and the forecasting record. Now correct me if you don’t agree with my next step, but I don’t think it is just my subjective judgement: anybody, just anybody, looking at this graph is going to think that there is a downside risk of the long term traffic flows being substantially less than the forecasts, as they have continually been for at least the last quarter of a century. In that case, an income depending on real charged prices is going to be less profitable than an income stream guaranteed by the Government based on the Government’s own forecasts.
So you will ask for a guarantee. But that’s hardly attractive to the Treasury. The downside risk for Government is paying a lot of money, not underpinned by buoyant tax revenue, in respect of traffic flows which under-perform, for a project which for that reason turns out to be a lot less necessary anyway."
You can read the full text of the article on our website here, which is reprinted with permission from Professor Goodwin and LTT: Due diligence, traffic forecasts and pensions