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

2. Funding the Gap: Making the Beneficiaries Pay 2 Funding Sources. Available Transport Finance UsersBeneficiariesCitizens Government Contribution Private Investors Private Lenders

3. Funding the Gap: Making the Beneficiaries Pay 3 How the Private Sector Contributes. users beneficiaries citizens Transport Expenditure Transport Tax Government Transport Funds General Funds Fare and Tolls Charges Other TaxesOther Expenditure Hypothecation

4. Funding the Gap: Making the Beneficiaries Pay 4 As an aside The 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. Funding the Gap: Making the Beneficiaries Pay 5 Do passengers pay enough Fares on the Transit System Monthly SeasonBusMetroExpenditure on PT as % Income New York£40.51 2.1% Paris£35.30 2.1% London£51.90£85.303.3%

6. Funding the Gap: Making the Beneficiaries Pay 6 Do Road Users Pay Enough Ι 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.) Ι Much of the European toll road network has been substantially financed by the public sector on the basis of the tolls raised. Ι Can tolls be charged on existing facilities?

7. Funding the Gap: Making the Beneficiaries Pay 7 Are the benefits to non-users properly captured? Ι In UK, charge made on new development – fair and proportionate to the additional costs created by the development. This revenue is hypothecated. Ι Some attempts made, with new infrastructure, to relate to the benefit received (ie distance from station). Ι Benefits to existing population from new infrastructure largely uncaptured. Ι 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. Funding the Gap: Making the Beneficiaries Pay 8 Other Potential Fund Raisers Ι 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. Funding the Gap: Making the Beneficiaries Pay 9 And so ? Ι Transport Funding should come directly from the user as well as from government subsidy. Are users paying enough? Ι 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? Ι Transport related charges (eg congestion funding/green taxes) can be politically acceptable. These funds are far more useful if they are not hypothecated.

10. Funding the Gap: Making the Beneficiaries Pay 10 Thank you