Saturday, 27 August 2011

Shadow Tolls, a secretive drain on public finance

Every time a car uses the Dishforth-Darrington stretch of
the A1, a secretive shadow toll is paid out of public funds.
Every time you drive on particular stretches of British motorway, from the A1 between Darrington and Dishforth to the A50 Stoke to Derby link you will be triggering a secretive payment to corporate interests paid directly out of government funds.

A shadow toll is a neo-conservative economic instrument designed to siphon billions of pounds out of government coffers into the hands of corporate profiteers. The system was first proposed in 1993 by the Tory party in the UK as a method of financing roadbuilding and road widening schemes and remained popular with the neo-conservative New Labour party as the financial design of the schemes allowed chancellor Gordon Brown to these hide billions in public infrastructure costs by excluding shadow tolls and numerous other PFI scams from the national debt calculations.

The shadow toll system is based upon payments made by government to the private sector operator based on the number of vehicles using the road. Several other nations such as Finland, Canada and the Netherlands have experimented with shadow toll programmes, however the UK is still the global leader in the creation of these schemes.

The classic argument in favour of the shadow toll system is that shadow tolling eliminates the need for drivers to pay tolls directly, thus avoiding toll collection costs. This seems sensible until it is considered that the UK road network is largely toll free and that the alternative to shadow tolling shouldn't be considered to be direct tolling, it should be direct government financing of infrastructure development projects, since the government can borrow at much lower rates than the private sector and are not burdened with the additional costs of providing shareholder profits.

There are many criticisms of the shadow tolling system, these include the fact that shadow tolling requires the Government and private sector to agree to the additional infrastructure cost of continuous vehicle counts and the expensive and complicated legal arrangements between the parties mean that transaction costs can be very high.

In the early days of shadow tolling the British National Audit Office found that all of the first four shadow toll projects falsely exaggerated their projected public sector savings and one scheme would certainly have been cheaper to implement through traditional state funding. Despite these early criticisms, the shadow tolling ball was in motion and the UK government carried on rolling out more and more shadow toll projects.

A committee of MPs have recently published a report that admitted that huge numbers of PFI projects (including shadow toll roads) do not represent value to the taxpayer, describing PFI as an "extremely inefficient" method of financing infrastructure projects and made the admission that PFI schemes were pushed through using misleading cost calculations and "perverse" fiscal incentives.

Another criticism is that the maintenance of the UK road network is already financed through direct taxation such as vehicle tax, local council tax and fuel duties. The imposition of lengthy shadow tolling contracts actually reduces the amount of government funds to be spent on the maintenance of the rest of the road network.

Yet another criticism is that shadow tolling actually creates strong disincentives to introduce environmental schemes such as congestion charging, carpooling, car sharing or other schemes to reduce road usage as any state efforts to reduce traffic on shadow toll roads would be seen as deliberate efforts to undermine the corporate interests of the shadoe toll profiteers and trigger costly compensation cases.

The evidence is quite clear that these secretive neoliberal economic alchemy schemes are little more than financially inefficient scams designed use government funds to enrich a tiny corporatist elite and clearly demonstrate the hypocrisy of the neo-conservative corporatists, who despite all their small state bluster, are always more than happy to siphon cash directly out of government coffers.

 If you enjoyed this post, maybe you could buy me a beer? £1 would get me a can of cheap lager whilst £3 would get me a lovely pint of real ale.