Project Title

1
FUNDING THE GAP Making the Beneficiaries
Pay Charles Russell Steer Davies Gleave 4 June
2008
4th June, 2008 Steer Davies Gleave 28-32 Upper
Ground London, SE1 9PD 44 (0)20 7919
8500 www.steerdaviesgleave.com
2
Funding Sources

• .

Government Contribution
Private Investors
Private Lenders
Available Transport Finance
Users
Beneficiaries
Citizens
3
How the Private Sector Contributes

• .

users
Transport Expenditure
Fare and Tolls
Charges
beneficiaries
Transport Funds
Hypothecation
Transport Tax
Government
General Funds
citizens
Other Taxes
Other Expenditure
4
As an asideThe Risks of Hypothecation

• Gordon Brown Budget Statement 2002
• The NHS has always been and will continue to be
  funded in part from NICs. But the Government does
  not support the hypothecation of revenues to the
  NHS or other public services, since it would make
  public services subject to the ups and downs of
  the economic cycle and unpredictable changes in
  revenues. It would not provide what the NHS
  needs a sound long-term and sustainable stream
  of funding.
• Explicit reliance on Transport Tax for Transport
  limits flexibility
• Earmarking (at whatever level of government)
  should follow efficient economics rather than
  short term political needs.

5
Do passengers pay enough

• Fares on the Transit System

6
Do Road Users Pay Enough

• Average Road Toll Rates across USA 0.09 / mile
• ( wide range Garden State Parkway 0.02-0.04
  
• New concessions (eg Chicago Skyway) rising
• to 0.10- 0.15/ mile)
• Common European Toll Levels 0.16-0.20/ mile
• ( M6 Toll, Birmingham, England 0.25/mile)
• (European road tolls attract sales tax and
  drivers pay significant tax on gas and on vehicle
  registration.)
• Much of the European toll road network has been
  substantially financed by the public sector on
  the basis of the tolls raised.
• Can tolls be charged on existing facilities?

7
Are the benefits to non-users properly captured?

• In UK, charge made on new development fair and
  proportionate to the additional costs created by
  the development. This revenue is hypothecated.
• Some attempts made, with new infrastructure, to
  relate to the benefit received (ie distance from
  station).
• Benefits to existing population from new
  infrastructure largely uncaptured.
• Some experience with differential property tax
  (eg versement in Paris) and special levy
  (additional charge on the uniform business rate
  for Crossrail in London).

8
Other Potential Fund Raisers

• Congestion Charge
• London Charge raises more than 200 m pa
• Politically unacceptable across the rest of the
  UK
• Parking Levy seems easier to introduce

9
And so ?

• Transport Funding should come directly from the
  user as well as from government subsidy. Are
  users paying enough?
• Many other residents, employees and employers
  benefit indirectly from the transport system.
  There are devices for raising funds from new
  development but how can we target other
  beneficiaries?
• Transport related charges (eg congestion
  funding/green taxes) can be politically
  acceptable. These funds are far more useful if
  they are not hypothecated.

10
Thank you