Last week, the Adam Smith Institute blogged about the national road pricing proposals. In the midst of his post, Eamonn Butler makes this interesting aside:
All that of course strongly suggests that the roads should be taken out of the politicians’ hands and put into local trusts who could ensure that the money raised was ring-fenced and spent on transport and roads, instead of leaching away into other pet political projects.
In essence, this looks like a suggestion to return to the system that existed in Britain for over two centuries, from the seventeenth century until Victorian times, in which up to a fifth of Britain’s roads were managed by Turnpike Trusts. In his article, “The Rise and Fall of Non-Government Roads in the United Kingdom”, Bruce Benson describes how the Turnpike Trusts worked:
A long series of Acts were passed beginning in 1663 that enabled the establishment of local ad hoc bodies known as “Turnpike Trusts.” It must be emphasized that these turnpike trusts were not government innovations, however. The initiative was at the local level. Members of local parishes who were burdened by the high costs of road maintenance under the parish system began to petition parliament for the right to charge a tax on heavy loads. Indeed, the earliest Trusts were run by local JPs, although later Trusts had independent bodies of trustees.
After about 1700 the process became increasingly standardized. A group of local landowners and/or merchants would accumulate the money necessary to fund a Turnpike Act in parliament and to carry the cost of the trust through its start-up period. Most Turnpike Acts gave legal standing to a Turnpike Trust made up of a number of local landowners, and/or other important parishioners. The Trustees were, by law, unpaid and forbidden to make personal profit from the trust. They were responsible for erecting gates to collect tolls, and for appointing collectors, a surveyor to supervise repairs, and a Clerk and Treasurer to administer the affairs of the trust. The funds collected could only be applied to the road named in the Act. These roads were usually existing highways, although new roads were also built, particularly after 1740, and the extent of roads that were “usable” for heavy traffic expanded significantly once the trusts began to innovate and improve the roads they controlled, as noted below. The Trusts were granted a monopoly power over the road (generally for a period of 21 years), so that the customary right of passage was fundamentally altered: the roads were no longer common pool resources. Most trusts used the money collected to repair and improve roads, but if the tolls were insufficient to cover the up-front costs, the trusts were allowed to borrow money at a rate of interest fixed by the Act.
The system did not last, however. From 1864 onwards, the trusts were shut down, with the last road passing into public hands in 1895. At Transport Blog, we like to think that goods and services, including transport, are produced in better quality and lower cost when in private hands motivated by profit and free from political interference. If a private road system is superior to a public one, then why did the Victorians nationalise it? What went wrong? In a lengthy discussion, Benson proposes a number of reasons:
[T]he structure and characteristics of the trusts created significant principal-agent problems. The Trustees were not allowed to earn a profit. Therefore, even though the trustees had sufficient incentives to invest in the formation of a trust, they generally were not interested in the day to day operation of the road. The toll gates were farmed out, and while trustees were suppose to monitor the gate-keepers and surveyors, their incentives to do so were very weak. After all, their primary income generating activities were elsewhere (their farms or businesses) and these enterprises commanded most of their attention…
[T]he political limitations on trusts also led to significant complaints by shippers and travelers. ... A serious complaint about the turnpike system as it evolved was that there were too many toll booths, requiring too many stops, thereby slowing transportation services unnecessarily. Gregory (1932: 193) suggests, in fact, that this was the most important complaint against the turnpikes: “Road users declared that they would rather pay twice the amount if they could be saved the annoyance of the delay."This problem resulted from the fact that most of the turnpike trusts controlled only short sections of roadway within a parish, so travelers had to pay new tolls each time they left one trust’s road and entered another. While consolidation of small trusts was desirable in order to avoid the problems with excessive stopping and delays (as well as in order to capture various scale economies in management and maintenance), the trusts operated at the prerogative of parliament, and any formal consolidation required parliamentary approval. Political resistance to consolidation (e.g., by local trustees who did not want to lose control of their roads, and probably by competitive modes that did not want competition from more efficient turnpikes, as explained below) was strong, so even though efforts were made to obtain parliamentary approval to combine small trusts into larger organizations ..., parliament did not respond with necessary enabling legislation that might have led to widespread consolidation…
[T]here was significant political opposition to the trusts themselves. Opposition came from those involved in competitive transportation modes such as the river and canal barges and railroads ..., from the trade centers that already had effective transportation connections and feared competition from other centers if their road connections were improved, from some landowners and farmers who feared that better roads would make it easier for their low-wage laborers to be attracted away, from farmers who supplied local markets and feared that improved roads would bring in competition from distant suppliers, from heavy road users who did not want to pay tolls for access even though they wanted the roads to be maintained, and so on. Therefore, in order to gain sufficient support for passage, Turnpike Acts always had to reflect significant political compromise, including long lists of toll-exemptions for some of the powerful individuals and groups who opposed each Act.
So, although we think that applying free-market principles would result in a better road network, the experience of the Turnpike Trusts (not to mention Railtrack) makes me wonder whether it really is possible to remove political interference, at least while governments continue to exist.
Benson’s article also includes some discussion of the economics of roads as well as a history of the provision of roads in Britain from medieval times onwards. It’s worth reading the whole thing.
(By the way, this was written and posted from the 16:16 GNER service from Leuchars to Kings Cross, which has Wi-Fi onboard. The delights of modern travel, eh?)