The M6 Toll is a moneyspinner for its offshore owners but unloved by motorists, says Neil Collins. Is it really the best model for road-building without taxpayers’ money?
Drive south down the M6 towards the Midlands and you pass an illuminated sign at junction 15. If you’re lucky, it will display the following message: ‘To J8 for M5, 34 miles, 34 minutes’. A couple of junctions further on, you can’t miss a similar sign with the message: ‘M6 Toll clear’. Ah, you say to yourself, that’s all very fine, but I’m not a boy racer looking to do a ton and get away with it. The earlier sign effectively tells me there’s no point in investing £4.70 to drive what may be the world’s most expensive 27 miles of dual carriageway, because I know there is no jam at the start of the M5.
It would be too much to hope that this is the revenge of the public authorities for the cash cornucopia the M6 Toll has been for its owners, but the recession has taken its toll (sorry) on the value of this piece of road, and that sign at junction 15 will have done a bit more to drive (oh dear) the traffic away.
Yet these twin ribbons of tarmac — originally known as the Birmingham North Relief Road, first dreamed of in 1980 and finally given the go-ahead in 1997 — have been a wonderful moneyspinner. On top of that, the boffins from Reform, the free-market think-tank, put it forward as a splendid example of how private-sector capital can fund infrastructure projects — which, as James Forsyth observed in The Spectator recently, is the only way any such projects are likely to get built under a brutally cash-strapped Cameron government. Of the £900 million (about £20,000 a yard) invested in the M6 Toll, only £18 million was put up by the taxpayer.
When the transport select committee looked at it, they purred like a Roller, concluding that time savings for drivers were around 30 minutes at peak hours and up to 70 minutes on Fridays. The West Midlands Regional Development Agency believes that the new road has increased land values and commercial interest in its area.
An unalloyed triumph, then? Well, up to a point. A pair of rare dissenting voices have been heard in the Financial Times, and they put a rather different gloss on the enterprise. Professor John Kay mused that almost no lorries use the road, even after their toll was cut from £10 to £6, and that despite the right to charge the motorist whatever the traffic will bear, it is not much of a model for future road-building — should there ever be any.
But it was Martin Blaiklock, an infrastructure consultant with an irritating habit of digging into the figures (irritating to those who would rather he didn’t, that is) who came up with a more uncomfortable analysis. The road produces revenues of more than £50 million a year, but despite the low running costs, it has never generated a corporation tax liability since it opened in 2003. Nor is it likely to during the remaining 44 years of the concession held by Midland Expressway Ltd.
In August 2006 the finances of the project were ‘restructured’, using £1 billion of new loans from banks ‘awash with funds (and needing to fuel bonuses)’, as Blaiklock puts it. This was used to pay off the £620 million of senior debt, with enough left over to pay Midland Expressway’s parent company, an arm of the Australian investment bank Macquarie that specialises in infrastructure financing, a nice little dividend of £392 million. Whether this was actually booked as a dividend or a capital gain, there was no tax to pay because the Macquarie company concerned was based in Bermuda.
Perhaps in an effort to repay their debt to society, the Macquarie-men agreed to spend £112 million upgrading the roads feeding the toll. As every Midlands motorist knows, the M54 joins the M6 below the northern end of the new road, necessitating an awkward off-motorway diversion for M54 drivers wanting to join it. Nobody now knows why it was designed this way, when a few minutes with a map would have shown the problem, and there were 12 years between the announcement of Midland Expressway as the winner of the competition to build the road and its opening in December 2003. This, remember, is one of Reform’s examples of how it should be done.
Today, the debt has been restructured again, into a callable loan paying 9 per cent, although Midland Expressway might struggle to keep up the payments. According to Project Finance International magazine, the M6 Toll is now valued in Macquarie’s home currency at A$412 million (£235 million), less than half the A$1.2 billion (£685 million) of last December, and a mere slip-road compared to the peak A$2.1 billion (£1.2 billion) in June 2008.
It’s unlikely that Macquarie will be shedding too many tears. The road is effectively a geared play on the speed (oh dear, again) of recovery in the UK economy. The days when paying the toll could save motorists half an hour are gone; having been through the M5/M6 junction half a dozen times recently, I have only once had to queue for more than a few minutes. The bad congestion is on the M42, beyond the southern end of the toll road.
There is no prospect of any similar project to relieve this overcrowded stretch (a clever upgrade of the hard shoulder, at a fraction of the cost, is a palliative). As the economy recovers, so the M5/M6 jams will return, and the toll-road operators will doubtless be quick to raise their prices in response.
For those who feel that motoring is already expensive enough, there will still be the hope of that illuminated sign at junction 15. For those travelling in the opposite direction, to the north-west on the M40, there is no such guide. They must guess whether the congestion at the top of the M5 makes it worthwhile crawling up the M42 and paying the toll.
I do hope these signs, which often merely display irritating slogans like ‘Think bike’ or ‘Take a break’, or the especially useless ‘Congestion’, can be adapted to carry a shorthand message to indicate whether it’s worth investing at £4.70 a pop. Meanwhile, as Blaiklock puts it: ‘Future users of the M6 Toll road might wish to reflect on who benefits most from using this highway.’
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