BRF's middle way on road spending
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BRITISH ROADS are already inferior to those of many Continental countries, complains the British Road Federation, which has issued a new report, Forever Second Rate?
"The Chancellor's intention to cut public borrowing further in his Budget as a sop to foreign exchange markets can only inhibit Britain's future prosperity," said BRF chairman Tony de Boer, launching the report on long-term public expenditure priorities, The balance of economic advantage for Britain now lies with stabilising, instead of cutting, the Public Sector Borrowing Requirement in order to fund an expanded investment programme of capital work, says the report.
The BRF last year issued two reports calling for more investment in roads, suggesting a £20 billion programme at 1982 prices for the 10 years until 1993-94. This compares with identifiable projects totalling £12bn.
In its new report, the BRF says infrastructure investment would help reduce unemployment and is needed for economic, social and environmental reasons.
It argues that borrowing for more capital expenditure must be distinguished from borrowing to finance current expenditure. This, it says, the Government's 1984 Green Paper The Next 10 Years failed to do. Forever Second Rate? is the BRF response to that Green Paper.
The Green Paper projected a further reduction in the Public Sector Borrowing Requirement (PSBR) from 1.25 per cent of gross domestic product (GDP) in 1988-89 to one per cent in 1993-94. The BRF proposes a more gradual decline, so paying for valuable infrastructure (including road projects for the 40 per cent increase in traffic forecast for the year 2000).
The overall objectives of economic policy would not be threatened by increased public sector construction, it argues, adding: • The state would not be diverting real resources from the private sector.
• There is enough spare capacity in the construction industry to ensure that carefully phased in public investment would not create inflationary pressures.
• The additional capital need not be financed by printing money but by borrowing.
• Resulting improvements would aid industry by reducing costs and increasing competitiveness.
Contrary to information fed to the Prime Minister, increased public investment in construction would not lead to more imports than an equivalent reduction in taxation, it says. The trends of the past five years only continue what has been happening over a much longer period. Over the past 25 years, current public expenditure has increased by 21 per cent while public sector investment has decreased by 33 per cent in real terms, says the BRF.
Increased current expenditure is, admittedly, often very difficult to reverse, it says, but increased levels of capital expenditure need not be permanent. After a number of years the expenditure and borrowing to finance it can be scaled down.
Only the motorway network is receiving adequate funds for reconstruction and the more routine maintenance operations. But motorways, however important, comprise less than one per cent of the national road network.
With respect to the other roads, a 1983 House of Commons Transport Committee Report found it "impossible to discount the virtually unanimous view of local highway authorities, professional engineers and road users that there is a real cause for concern about the present condition of the network and that necessary remedial work is being prevented by financial constraints".
The Institution of Civil Engineers survey of the maintenance of minor roads since 1974, found that the rate of resurfacing was so wholly inadequate that it would take 110 years to resurface the rural network as a whole.
The BRF considers that the Government's financial planning must pay heed to the House of Commons Transport Committee recommendation that expenditure on local highways maintenance should be increased by 10 per cent in real terms and the increased rate of expenditure maintained for several years.
The BRF says that less than 30 per cent of the tax revenue from vehicle purchase, ownership and use in Britain is spent on road construction and maintenance. In the EEC road expenditure is, on average, 55 per cent of such motoring taxation. Acceptance by the Government of the BRF recommendations for 1985-1994 would increase the proportion of road-related taxation used for the benefit of road users only to around 39 per cent.
On average, public borrowing only has to increase by £618 million over the fiveyear period; 81,000 new jobs would be created at a cost per job of a little under £8,000. This cost to the Exchequer is substantially higher than that of direct job subsidies — for example, the cost of filling a place on the Community Programme in 1983-84 was E4,300 — but in the case of construction expenditure long-term jobs are being created.