The Sunday Times Rothschilds story

I was most suprised to read the Rothschild “road privatisation” story on the front of the Sunday Times business pages today. I will reverting to this story when I have made some enquiries next week.
In the meantime I wish to make clear that I last worked for Rothschilds in 1989 before becoming a government Minister. They did not invite me back after I resigned from the government.
They did not tell me they had picked up the £100 billion road scheme idea. I also noted that one of their variants uses shadow tolls. I have never favoured shadow tolls, as the schemes I have heard of using them seem to me to be expensive ways of the government borrowing money. What we need is transfer of risk to the private sector, direct collection of revenue from customers by the private sector, and full offsetting tax reducitons so motorists are not worse off.


  1. oldrightie
    August 30, 2009

    Glad you quit that nefarious club, John. If you need some work you wish not attributed, let me know!!!

  2. alan jutson
    August 30, 2009

    This sort of news confirms many of your bloggers fears.

    Motoring will become more expensive.

    The suggestion is all Motorways and major trunk roads which means no other option but to Pay.

    I Guarantee VED will not be abolished.

    Pleased that so far the Conservatives have said they are not looking to support this proposal.

    I wait with interest.

    1. Philip Walker
      August 31, 2009

      “Motoring will become more expensive.”

      Quoting the original post, what does “full offsetting tax reductions so motorists are not worse off” mean to you?

      1. alan jutson
        August 31, 2009

        “Full offsetting tax reductions so motorists are no worse off” clearly means what it says.

        And for me that would mean I am no worse off if I carry on with exactly the same milage and usage that I do now.

        But in the real world.

        If its neutral for me, then by default its more expensive for someone else, and possibly less expensive for others, who complete different routes of different milage or who have a different VED rate.

        It will depend upon where you live, how often you use motorways or trunk roads, at what time of the day you use them, how much mileage you do, what your rate of VED is etc etc.

        Two people with the same car, doing the same overall milage, in different areas, at a different times of tha day, on different roads, will have very different costs to each other.

        In other words one size does not fit all.

        Apart from all of that, I simply do not trust Government not to take advantage (we have had 12 years of lies and deception). neither do I trust the franchise not to take advantage (after all they have shareholders to satisfy) Utility Companies spring to mind.

        In addition it makes life more complicated, and if its more complicated, its more inconvenient and more costly.

  3. FaustiesBlog
    August 30, 2009

    I’ve gone off privatisations in a big way. Look at the way we have been ripped off by EDF, who subsidise French consumers at our expense!

    The shadow system sounds like a cozy little deal between banks and government, which should be avoided at all costs.

    If anything, we want to be weaning government off borrowing and get back to a commodity/based currency – not fractional reserve counterfeiting!

    1. Freddy
      August 30, 2009

      Shadow tolls – or flat availability payments – make sense when there is a new road being built, with consequent massive Capex. They really wouldn’t make sense for an already existent road.

  4. StevenL
    August 30, 2009

    Could this be another example of the baby boomer generation screwing their childrens’ generation. Rather than accept they have not saved enough for retirement and got their pensions calculations wrong, they want to sell the roads for £100 billion to fill the black hole?

    Will the money raised will be frittered away on benefits within a few years, simply sustaining the irresponsible breeding habits of the economically inactive? Could selling the roads be an easy way out of delaying welfare reform for a future government?

    Will taxes on car users return in the form of ‘green’ or ‘sin’ taxation? Could the government add a surcharge on road tolls in the future as they do fuel/alcohol/tobacco?

    What kind of return will be buyers want on their £100 billion? If they want 8% from 40,000,000 road users that’s £200 a year each – more than I currently pay in road tax. What are the real numbers?

    Reply: I propose repaying debt with the £100 bn, and a 5% starting return, rising as more users willingly pay to use better roads.

    1. StevenL
      August 30, 2009

      £5 billion a year from road users on top of the cost of maintenance and collecting tolls? I would take some serious persuading that this is a good idea for all sorts of reasons.

      It’s all well and good John Redwood saying that there would be no risk on the taxpayer and full offsetting tax reductions, but I doubt that Treasury mandarins and many other politicans think like that.

    2. Freddy
      August 30, 2009

      “I propose repaying debt with the £100 bn”

      …”and a 5% starting return…”
      What, total return on investment for concessionaires ? Not nearly enough – ten year sterling swaps are at 4% already – as you have pointed out, long-term rates are liable to be heading up in the next year or two. And equity returns will be substantially higher.

      “…rising as more users willingly pay to use better roads…”
      Not a very bankable risk.

      Reply: this is sale of utility equity. Yields on water and energy utilities are usually below 5% today

  5. Mike Stallard
    August 30, 2009

    I read you blog on roads with interest.
    What this one is about, I really have not got a clue. It doesn’t seem to have been reported in the Telegraph – unless I missed it.

    1. alan jutson
      August 30, 2009

      It would seem from my interpretation of reading the article, that what is being proposed/suggested is not a franchise for a limited period, but a complete sale of all motorways and trunk roads to the private sector for ever.

      It may pay some debt, but at what long term cost.

      Or as probably highlighted by Steven L will be frittered away, as we postpone the day that we need to correct our finances.

      If my interpretation is correct this is madness, and why I am against road charging full stop. ITS THE THIN EDGE OF A VERY WIDE WEDGE.

      Selling off the family silver is not the answer John, it will end up us prostituting the army for money, for some dictators use.

      Reply: The proposal is to sell a franchise with people b idding for its length to make it a paying proposition for them and to allow them to spend on increasing the road’s capacity.

      1. Mike Stallard
        August 31, 2009

        Thank you for putting so straight! Now I think I understand your point of view.
        However, other countries do have toll roads. I have used them in Spain,Thailand and Dubai and they are excellent.
        But I take your point about not reducing the tax.
        And finally – the army is already being prostituted in Iraq and many other places – as mercenaries!

      2. StevenL
        August 31, 2009

        It’s not “THE THIN EDGE OF A VERY WIDE WEDGE”, it’s all that’s left to sell.

        On seconf thoughts, have you seen ‘hostel’? I wonder how much we could get for some of our politicans?

  6. Freddy
    August 30, 2009

    Heh. I presume that, some time in the last couple of weeks, either Cameron or Villiers or one of their people said “Hey, John, you know about this finance stuff, what do you think of privatising the roads …”

    Reply: No. But I have sent copies of my thoughts.

  7. the pro from dover
    August 30, 2009

    All complicated ways of raising revenue off transport are dumb and expensive.
    Why Rothschild’s proposal gets any column inches is beyond me. Mind you all governments seem to want to cosy up to management consultancies and merchant bankers.
    Says a lot about starry-eyed Westminster.

    You tax the fuel, and you tax the licence. That’s it.

    If you want to do lots of miles, you basically pay at the pump.
    You force long-distance haulage off the roads and onto rail by building freight-yards on the edge of every major city (by setting incentives or taxation) and you reduce the burden on the roads.

    Stealing the highways and selling them is deceitful thievery.
    At some point you lose the people, and they decide they don’t pay for nuthin’. Tolls, council tax, PAYE, the lot.

    I don’t think Westminster realises that the public doesn’t trust the lawmakers any more. A few years of Major’s mishandling of his cowboys, and a decade of Blair’s ‘trust-me, you won’t feel a thing’ has ended up with Gordo ‘I can’t even be bothered covering up the lies’.

    These are lazy suggestions to raise money for a bankrupt country.

  8. Freddy
    August 30, 2009

    The advantage of privatising the roads for £100bn or whatever is that it actually makes sense: it helps to achieve an aim that you will desperatey need, to plug the hole in the nation’s finances.

    In this respect, it is better than the suggestion to use road tolling to replace VED, which will have very limited benefit despite annoying an awful lot of people.

    1. Freddy
      August 30, 2009

      P.S. I still hate the idea, though. Charging people for something that has always been free is bad psychology.

      1. Lola
        August 31, 2009

        It’s not really ever been ‘free’ – well not since the need to build good trunk routes became vital and apparently according to wikipedia this stared over 2700 years ago, somewhat earlier than I had thought. What I did know was that Thomas Telford’s London to Holyhead road built in about 1800 was arguably the first ‘trunk’ toll road.

        In any event I see absolutely no problem at all in privatising the management of the Motorway and Trunk Road network. As long as other motoring taxes are substantially reduced. And there is sufficient plurality available in the method of toll collection as well as strict rules on the retention of individual travel information.

        In a previous life I worked in Highway Engineering. I worked with the various government agencies involved in roads and I came to the opinion that like all such organisations they suffered endemic producer capture and were wildly inefficient. Clearly there were excellent blokes on their staffs, and these usually moved back into private industry. If they didn’t they made a compact with Devil for the pension.

        Get the State out of as much of lives as possible.

  9. Lola
    August 30, 2009

    No in rinciple criticism from me for raod pricing. I am just very suspicious indeed on freedom and the state knowing too much grounds, plus more tax. We know that the ‘more tax’ bit can be dealt with, so how do we deal with the ‘state knowing too much’ bit? Answer that and you’d have a lot more takers.

  10. Chris H
    August 31, 2009

    Drivers pay enough as it is. If you charge tolls for the main roads, then people will just use narrow cross-country routes and clog up the villages (like where I live, and it’s clogged solid now). Those on fixed incomes will just jack in their cars and buy a bike or a horse. In fact, if we’re heading into an era of austerity, I dont think anyone will have any money to go forking out for road fees. It is a tax on freedom of movement, a real cunning ploy in this overcrowded island.

  11. backofanenvelope
    August 31, 2009

    Well Mr Redwood, maybe you should go back to the drawing board on this one. There doesn’t seem much enthusiasm for your scheme.

  12. Adrian Peirson
    September 2, 2009

    What a Great Wheeze by the Govt ( and the the Shadow Govt ), stuff the country with more people than it can feed or cater for in every sense of the word, then blame them for all the problems, like congestion, pollution, landfill problems etc, so they can be asset stripped some more.
    This is theft, pure and simple, we did not cause any of these problems. Whay are you all considering to agree it.

    All Govt has to do today is come up with some linguistic sleight of mouth about it being necessary to take your wealth from you and you all agree !!!!
    Wake up, you are being robbed.

    NONE of the problems we face in the is country are the fault of the British people.

    We are all being Farmed.

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