HOLES IN THE GROUND

Martin Weyer says that infrastructure

spending for the sake of it is worse than useless: above all we don't need more roads

TWO PYRAMIDS . . . are twice as good as one; but not so two railways from Lon- don to York,' quipped John Maynard Keynes, this autumn's posthumous Come- back Kid. It is a useful sound-bite to set alongside this week's public spending state- ment from Chancellor Lamont, expected to embrace large-scale transport projects like the Jubilee Line extension as a remedy for recession.

What Keynes meant, explained else- where in his otherwise joke-free General Theory of Employment, Interest and Money, is that, 'public works even of doubtful utili- ty may pay for themselves over and over again at a time of severe unemployment'. At the extreme, he suggested, it would be worth paying people to dig holes in the ground or build pyramids. But modern gov- ernments, unlike ancient Egyptians, are constrained in exercising this theory by the need to show that their plans make finan- cial sense.

The new orthodoxy is, of course, that public works — what we now call infras- tructure projects — are better undertaken by private capital. Even if the Transport

department's budget of £7 billion remains uncut, it is still a modest sum by compari- son with what the French or German gov- ernments spend every year on roads and rail, or in relation to what our own Govern- ment spends on, to pick an example, agri- cultural subsidies, which account for four times as much.

Any belated British attempt at a strategy for transport to meet the needs of the com- ing century will rely on the willingness of entrepreneurs to put up a large share of the cash. But entrepreneurs will need more than just ministerial words of encourage- ment. They are more constrained than gov- ernments by what makes financial sense. In road and rail projects the odds are more than usually stacked against risk capital. And a strategy based on building only those schemes which offer the safest finan- cial bet under current rules is unlikely to address logically the great transport prob- lem of this age and the next, that of perpet- ually increasing road congestion. The major obstacle to private participa- tion has always been the attitude of Trea- sury officials. In the early 1980s they laid down that private investment in the sector could only be a substitute for, rather than an addition to, state money; and that, to ensure good value for taxpayers, projects would have to be delivered cheaper than the state might have done so; not easy when the state can always finance itself at a lower cost than any private entrepreneur. Until last year, private road-building schemes were anyway limited to 'estuarial crossings' — big bridges and tunnels rather than roads themselves.

Underlying these rules was an urge to keep control. Road and rail projects come in conveniently large budgetary chunks. For Treasury men, the greatest utility of unbuilt schemes is the ease with which they can be erased from the map to achieve apparent savings. Ministers con- nive in this, since many fewer votes are lost, perhaps even some gained, by can- celling motorways rather than cutting ben- efits or raising taxes. It is convenient not to have too many grand projects outside the public sector.

On the other hand, private-sector involvement offers political advantages of the buck-passing kind. Great feats of civil engineering are attractive at the beginning and the end, but not so in the middle. The current difficulties of the stalled British Library project — with its rusting, collaps- ing 186 miles of shelves — is a vivid exam- ple of a slightly different sort. `Welsh Secretary, Mr David Hunt MBE, and Transport Secretary, Mr John Mac- Gregor OBE, unveiled the foundation stones for the Second Severn Crossing pro- ject . . ' gushed a press release in Septem- ber this year. The bridge is to be privately built by an Anglo-French consortium led by John Laing plc, and you may be sure that if it is late, the technology doesn't work or the costs go out of control, minis- ters will be nowhere to be seen.

Sir Alastair Morton, the embattled chief executive of Eurotunnel, warmed to this theme in his Maitland Lecture to the Insti- tution of Structural Engineers this week: `Provided [the Channel Tunnel] succeeds, I will be able to introduce you to no fewer than three Tory Secretaries of State for Transport who are quite clear, each of them, that he initiated it all.'

Bridge-building or tunnelling technolo- gy, although sometimes unpredictably expensive, is often not the central problem for such projects. The biggest challenge is financial engineering, based on the fore- casting of toll revenues. It is easier if the project links two sides of a stretch of water which travellers already have to pay to cross, like the English Channel; and easier still if the project is allowed to fund itself in part by taking over the toll concession on an existing crossing, as is the case with the Severn and the recently completed Queen Elizabeth II bridge over the Thames from Dartford to Thurrock.

Toll roads are a different proposition, however, because there are almost always alternative routes which are free. Schemes which would have the effect of pushing juggernauts off motorways onto adjacent minor routes to save hauliers' money would be environmentally disastrous, as well as causing havoc with the road- builders' cash-flow.

This opens up new vistas of debate for transport economists. Should the builders of new roads be granted toll concessions on existing, parallel routes which were previously free, assuming that to be legally possible? Is it feasible to introduce elec- tronic road-pricing, based on a gadget in the car which debits tolls to the driver's

We had ours taken into care — saved us a ortune in school fees.' account? Rather than charging drivers at all, should the Government simply pay `shadow tolls' to the entrepreneurs based on actual traffic volume, thus turning a capital project into a risk-free revenue spending item for the Treasury?

The theories have yet to be tested. Examples in continental Europe, where the motorways have been tolled since they were built and generally cater for much longer distances, provide imperfect com- parisons. The first test case will be the 30- mile Birmingham North Relief Road, to be built by Trafalgar House with Italian partners, its success predicated on almost terminal gridlock on the city's existing major roads.

But traffic volume is notoriously difficult to forecast, even without the complications of tolls. Unlike commercial ventures, a road scheme is not a success if it generates more demand than expected, as the M25 (the most crowded 8-mile section of which will cost £144 million to widen to 14 lanes) so amply demonstrates. Prediction is all the more difficult because of the length of the gestation period, averaging 13 years ten for planning, public enquiries and hag- gling over funds, three for building. All these factors make the profits on offer to private investors extremely uncer- tain. The only safe assumption is that the return will be low and will take a long time to arrive. It is self-evident that many pro- jects will only attract investors at all if there is an element of government partici-

pation which turns them into acceptable commercial risks. French autoroutes are efficiently built and run by private compa- nies, but only because they are guaranteed the necessary level of state subsidies. One solution in Britain might be 'negative ten- dering', by which a route concession is awarded competitively to the bidder who asks for the smallest subsidy — the only technique likely to bring private fran- chisees into loss-making regional railways, for instance.

Sir Alastair Morton outlines a different approach, with the fast rail link from Lon- don to the Channel Tunnel in mind. When a project is proposed on the basis of its long-term social importance, he says, the Government has to be prepared to put up the high risk, up-front money. This would steer a project through all the planning wrangles and exceptional costs (such as those associated with buying up a corridor of land across irate suburban London and Kent), to the point at which entrepreneurs can at least have a clear view of its cost and time parameters, and take it on from there.

Morton despairs, however, of British politicians' aptitude for the kind of strate- gic transport planning which this implies, the willingness to lead voters' opinion and to eschew annual chopping and changing. And with all the delicacy of a man who has just dug 96 miles of hole in the ground with no help from Whitehall, he speaks of the Treasury mandarins' cretinous inabili-

ty to learn about financial partnerships between the public purse and world capital markets'. They are, he says, 'burying their heads in the sand and exposing their think- ing parts'. Private investors in transport projects want to see imaginative joint financing deals and, where possible, a streamlined planning process. Many of the potential investors are civil engineering firms which want, more than anything else, to see a continuous pattern of road and rail devel- opment which would allow them to do more than just lurch from one trough in the Government's spending programme to the next. But mention of the Channel Tun- nel rail link brings us back to the question at the beginning: if all these reforms took root, would they give us the transport sys- tem we actually need?

Road congestion is already estimated to cost Britain £15 billion per year "in wasted resources. There is a well-worn statistic that road traffic is predicted to grow by over 140 per cent between 1988 and 2025, by which time most of the country will look like the Paris peripherique in the rush-hour. A very large part of the present transport budget is committed to piecemeal trunk- road improvements, aimed simply at cater- ing for this most unwelcome growth. There is no such thing as an integrated long-term plan aimed at reducing congestion on the roads by developing alternative forms of transport.

If there was such a plan, it would place a higher priority on rail (particularly rail- freight) than on roads. Links like Crossrail, from Aylesbury to Essex via Paddington and Liverpool Street, or the Kings Cross international terminal project, would help decongest the capital rather than helping more vehicles to reach it. Light rail passen- ger transit systems for six crowded cities the size of Leeds could be had for the same price as a scheme to widen the worst parts of the Ml.

But the Conservative Government has been notoriously pro-car and anti-rail, and resolutely devoted to the magical powers of the market-place to decide whether non-road projects are worth doing. Mean- while, the £3.5 billion Channel Tunnel rail link is as far from the starting line as it ever has been, languishing in interminable argument over whose marginal constituen- cies it should bisect on its way into Lon- don.

As a result, Folkestone to London is still served by what Morton calls a 'clapped- out, jerry-built, 19th-century' railway. By 1998, the route will be the missing link in a 300 kilometre-per-hour rail network which will be by far the least stressful means of travel between the major cities of western Europe. To our European neighbours, Morton says, the belief in market forces as a basis for long-term infrastructure invest- ment of this sort is 'a failure of intellect'.

To attract private capital into transport projects simply by loosening the rules and declaring open season would be to lose a vital opportunity. In a better planned world, investment should be drawn towards those projects, which may have `doubtful utility' in financial terms, but which will give us better connections, more efficient journeys, quieter city centres and more fresh air.

Only President Mitterrand has yet taken Keynes's aphorism about stimulating a depressed economy so literally as to build a new pyramid, somewhat ostentatiously in the middle of the Louvre. But 'two rail- ways from London to York', or rather two railways from London to Folkestone, may be, in more ways than one, just what we need.

. . and to finish I'd like the dessert rats.'