Toll roads don’t add up

30 November 2012: The latest evidence from the A14 Study shows that plans for new toll roads should be dropped for good.

The A14 scheme in Cambridgeshire was cancelled in 2010 because of the huge cost of the massive project – more than £1.3 billion by the time it was dropped from the Department for Transport’s programme.

But, as with many destructive schemes, it refused to go away and was resurrected last year as a tester for the Government’s new plan to build roads with private finance.  The Prime Minister and Chancellor were hoping it would perhaps be the first of many new benefit from their bright idea that tolling new capacity could help pay for otherwise unaffordable projects.

An 'A14 Challenge' was launched in December 2011, supposedly with the aim of looking at lots of new ways to solve the traffic problems on the A14. However, it seemed fairly obvious from the start that with the prospect of toll revenue dangling, a road-based ‘solution’ always going to be preferred.

And so it proved, with no fewer than six road packages emerging from the second stage of the A14 Study, published in June.

The next stage of the study - Output 3 from consultants Atkins - was released this week, and it’s a sobering read for enthusiasts of a large new road programme funded through tolls. The FT said the study had "struggled to produce an economically viable option" and that’s a very appropriate description of what happened.

After choosing a favoured road option (almost identical to the previous plan with a long bypass south of Huntingdon),  the study modelled the effect of tolls, starting with a £2 charge for cars and a £4 charge for HGVs – a rate based on the theoretical value of the time saved by drivers using the new road.

The deterrent effect of the charges proved disastrous to the traffic and congestion benefits that had been calculated for an untolled road. The £2 charge was found to push so many vehicles onto alternative routes that the overall congestion benefits for commuters were wiped out completely, and benefits to business drivers cut by 72% to 78%. This left an economic benefit of - at best - just 93p for every pound spent on building the road. (NB: and these figures have already taken the money collected from tolls off the costs.)

For a longer tolled section of road starting at Milton to the east of Cambridge, the road caused more problems than it solved for all road users, to the tune of £663 million in economic damage compared with not building the road at all.

Apparently desperate to find a ‘viable solution’ to the problem, the consultants then went back and remodeled a lower £1/£2 charging regime. This just about broke even, giving a small cost-benefit ratio of around 2 and leaving in place just under half the traffic impact of the untolled road. Champagne was no doubt ordered to celebrate finding something that might just about work to report back to the Government!

So what does this new evidence mean for the A14 and a future national programme of toll roads? Analysts in Cambridgeshire and Whitehall must be very worried by these results as it’s very hard to see how a strong business case could possibly be made to investors without piling in large amounts of public money as a guarantee of profits.

The Government must be particularly worried by the way the effects on local road congestion are so highly sensitive to different charging levels. According to the models, as the toll rate increased from zero to £2 per car, the traffic benefits were eroded by drivers taking alternative routes to the tune of nearly half a billion pounds for every £1 increase in toll. The consultants also admit that the models were also very hard to calibrate with very few examples from UK roads to draw on.

The high degree of uncertainty from this - and the volatility shown by the model - should lead to huge concerns for potential investors. Higher tolls (which are how the operator of the M6 toll has reacted to falling revenues) would seem to be out of the question here. The results of the A14 modelling show that this would simply result in large numbers of vehicles clogging up other local roads and causing more delays than ever.

Other questions include how the running costs deducted from each toll payment are calculated, and whether investor profits were accounted for at all. For the lower toll level the calculation is not explained in the relevant section of the report – although it does say elsewhere that 20% running costs were taken from gross revenue for the £2 toll model and that "Other evidence suggests that minimum transaction costs for some schemes could be as high as £1 per vehicle". It hardly needs saying that any investor would need to think very carefully about operating costs before agreeing to take part in a scheme that was limited to a £1 toll rate.

These results for the A14 – far from being hailed as a 'way being found' for new tolls - ought to lead to this project being cancelled for good in favour of traffic reduction plans and more freight traffic being shifted from HGVs to rail. Let’s hope the DfT uses this evidence to make the right decision.

Table of figures from the study – calculated benefits of ‘Option 7’ with and without a toll from Ellington to Girton

  Economic/traffic benefits to commuters, £m Economic/traffic benefits to businesses and business users, £m Total calculated benefits (also including the cost/benefit of changes to accidents, greenhouse cases and tax revenues), £m Change in benefits vs no toll
No toll £486 £651 £1171 -
£1/£2 toll £147 £380 £537 -54%
£2/£4 toll £-76 £181 £95 -92%

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