Monday, 31 July 2017

There is no such thing as a free lunch - Part 2: the motorways

As every foreign motorist familiar with France will know, intercity motorways are certainly no free lunch. In this respect, they are a notable exception (water services being another) to the rule that public services are always provided by the state. The vast majority of the country’s intercity motorways are toll roads, conceded by the state to private companies. Given the general distrust in France of capitalism in general and private companies in particular, the relationship between the French motoring public and the companies is not always a happy one – and politicians do little to make it happier - on the contrary.

The economic case for toll motorways is fairly clear-cut. The infrastructure can either be paid for by the state out of general taxation or it can be paid for by users, or by a mixture of the two. Both models exist in Europe. In France, the toll model seems amply justified inasmuch as not all French taxpayers use the motorways but many foreigners who flock to France’s beaches and ski slopes throughout the year, and who are not French taxpayers, do. Initially, when most of the motorway network was built, the state charged the tolls but between 2002 and 2006, the government of the day decided to privatise the networks in order to raise much needed revenue and recoup its initial costs. After a European-wide call for tenders, the concessions were awarded to a number of companies who purchased the infrastructure for a period of 30, 40 or 50 years, funded it with debt, undertook by contract to maintain and develop it and, in return, collect the tolls. Unlike the SNCF (see my previous post) the concession holders are private companies who have to make enough revenue to pay off their debt, cover their own operating costs and keep their shareholders happy by paying regular dividends.

Given fairly strict regulation of the tolls the companies can charge and the rate at which they can increase them, it is perhaps surprising that the issue has generated so much controversy. Motorists regularly complain about price increases and politicians are often quick to jump to their defence, accusing the concession holders of gouging consumers, conveniently forgetting that they cannot increase tolls more than their regulatory obligations allow. The peak of such demagogy was reached when the former Minister for the Environment, Ségolène Royal, always quick to spot an issue from which to make political capital on the cheap, demanded that motorways should be free of charge at weekends. Various reports, in particular one from the very serious national court of auditors, have concluded that, given the profits made by the concession holders since privatisation, the state sold its motorways at much too low a price. Some politicians have even suggested that they should be taken back into public ownership. In the regular battles of figures that hit the media headlines, nobody, it seems, has ever raised more fundamental issues like whether the state would not be better advised to stick to those tasks that only it can properly fulfil, like security, defence and justice, nor whether the concession holders have not quite simply done a far better job of managing the assets they purchased than the state would ever have done or been able to do.

To any regular user of the motorways between Paris and western France like myself, it is clear that there has been no lack of investment since privatisation. Long stretches of motorway have been upgraded from two to three-lane highways, the roadways are regularly resurfaced and rest areas have been remodelled to make them far more consumer-friendly than they were. Toll technology has been modernised too: badges are now widely available, making it increasingly possible not to stop and queue at tollgates.

And the vehicles have kept coming.  Motorways are the routes of choice for the vast majority when they embark on a long car journey, not to speak of commercial haulage firms. During weekends at holiday time, 24-hour radio stations open their news bulletins with congestion warnings and report regularly on the length of tailbacks.  Despite the additional cost involved, many families eat lunch, dinner or snacks at motorway restaurants and cafés. The attractive picnic areas are always full at meal times. 

Users, it would seem, continue to complain all the way to the tollgates!

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