refurbish the London underground 100 years after much of it was originally constructed. In fact, the PFI contracts with the Tubelines and Metronet consor- tia to modernize London Underground, signed in 2002 and 2003, represent the largest PFI contracts by capital value (HM Treasury, 2003b, p. 19). It is this recent resurgence of private sector involvement in infrastructure that is the subject of the rest of this chapter.
on the roads for six consecutive days each year under the surveyor’s authority.
This system of compulsory labour was not finally abolished until 1835. A similar requirement operated in the United States where the laws requiring highway labour lasted into the twentieth century in some rural areas (Goddard, 1994). In both countries the system proved to be inefficient because the local community had neither the resources nor the motivation to carry out road maintenance effectively. People were put to work, but few of them had any special qualifications, and in parishes where through traffic was growing the condition of the highways probably deteriorated. The demand for better qual- ity roads led to the next development – the turnpikes.
British Turnpikes
Turnpikes have been described by Adrian Smith as ‘the precursors of the modern build, operate and transfer systems’ (Smith, 1999, p. 11). A turnpike is a road partly or wholly paid for by fees collected from travellers at tollgates.
It derives its name from the hinged barrier (spiked spear or English ‘pike’) that was stretched across the road and prevented passage until swung open for toll- payers. Turnpikes comprised both new and reconstructed roads.
Although, as we have noted, tollgates in England were first authorized by law in 1364, the first turnpike was established in 1663. The justices of Hertfordshire, Huntingdon and Cambridge petitioned Parliament for the pass- ing of an Act enabling them to raise funds for the repair and improvement of a section of the Great Northern Road running through the three counties. The Act gave the justices the right to place three tollgates to collect tolls at a spec- ified rate on vehicles and livestock passing on the particular section of road over a period of 21 years, within which time it was expected that the debt would be cleared and the road would revert to being free of charge (Cossons, 1934). It was not until early in the eighteenth century, however, that the customary formula vesting the administration of roads in ad hoc local bodies, and of transferring the cost of maintenance from the public to the users, was firmly established.
One of the first so-called ‘turnpike trusts’ was formed in 1706–7 to improve the section of the London–Holyhead highway between Fornhill and Stony Stratford. Its success led to the passing of hundreds of Acts extending the system to almost all parts of England. By the 1840s there were nearly 1000 Turnpike Acts in force, promoted by town councils, merchants, manufacturers, farmers and landowners, including those responsible for maintaining at least a part of the road in question.
Trustees of the turnpike trusts were given powers to raise capital, usually at 4 or 5 per cent, and to apply this to making a new road (or, more often, to improving an old one) in a particular locality. Actual maintenance and
construction were left to the management of an appointed surveyor, who was usually involved in supervising the operations of a number of turnpikes.
Collection of the tolls was franchised to toll ‘farmers’ who paid a fixed sum to the trust in return for the right to collect tolls on particular gates on the turn- pike (an early example of outsourcing or subcontracting). After 1773, toll farming leases were auctioned, initially to local businessmen and eventually to larger groups which might buy leases to a number of turnpikes.1
Construction techniques were left to the discretion of the local engineer.
One famous road constructor, John Metcalf, the blind engineer of Knaresborough, engineered about 180 miles of turnpike road in the north of England. His method was to dig out the soil, lay bunches of heather on the bed of soft earth, cover these with stone, and dress with a layer of gravel to form a convex rather than a flat surface, so that the rain water ran off to the ditches made at each side. But there were many others, each adapting to variations of sub-soil and local needs (Ashton, 1955, p. 81).
While the turnpike trusts were relatively small undertakings, each concerned with ten or twenty miles of road, it was expedient to attract not only local, but also through traffic, and hence the trustees of each turnpike sought to link up their road with others. For example, by 1765 there was a line of turn- pikes from London to Berwick-on-Tweed, with only a short break in the neighbourhood of Doncaster (Cossons, 1934, p. 12). But since tolls had to be paid every seven or ten miles, long-distance traffic consisted largely of passen- gers and of goods of small bulk and high value.
Under the General Turnpike Act of 1773 an elaborate system of differential tolls was established. Vehicles were classified according to the breadth of their wheels. Rates fell as the breadth rose, and wagons with ‘rollers’ of between 13 and 16 inches in width were exempted from tolls for a year and given prefer- ential treatment thereafter in part because they created fewer ruts in the surface (Cossons, 1934, pp. 20–2). Moreover, not every traveller was subject to tolls.
The mails and the clergy were exempt, as were the construction workers for turnpike maintenance and improvement. The government paid an annual fee in lieu of tolls, as did the residents in the locality of the road. Revenues obtained were used to pay off mortgages incurred by the trusts for extending, resurfacing, straightening and widening the roads.
Despite the general improvements to the highway infrastructure, opposition to the turnpikes was strong. As is the case with tolled motorways today, the turnpikes were seen as a transfer from the poor, who had been able to travel free with their carts and horses before the turnpiking of the road, to the rich, who had the most to gain because they travelled over longer distances and their carriages could now pass more easily on the better roads. Several turn- pike riots took place.
US Turnpikes
It was not until after the War of Revolution that turnpikes were introduced in the United States. The first turnpike road was actually a state enterprise, autho- rized by a Virginia act of 1785. The first to be constructed and operated by a private corporation was the Philadelphia–Lancaster Turnpike, chartered in Pennsylvania in 1792 and completed two years later. Thereafter the movement gathered pace, and by the 1840s a total of nearly 1600 turnpike companies had been chartered. There were also private toll bridges. The early roads were rough and ready by present-day standards, but served the purpose.
Construction would usually begin with felling trees and removing stumps, while swampland was crossed by logs laid side by side (‘corduroy’). The surface of the turnpike was sometimes of earth, but often of broken stone or planks. Estache et al. (2000) claim that ‘in the first half of the nineteenth century, private toll roads outnumbered public roads’ (p. 10).
As in Britain, not everyone paid the tolls. Massachusetts legislation exempted people going to church, those on military duty, and those doing busi- ness within the tollgated town. In New York, toll booths were placed at ten- mile intervals, allowing many locals with short journeys to be free-riders.
Also, ‘shunpikes’, illegal tollgate bypasses, arose which allowed people to avoid the section of the road with the toll booth. Tolls were an annoyance to those travelling and many supported the idea that roads were public utilities and should be free to all.
Free-riders and shunpikes contributed to the low returns on turnpike invest- ments. Dividends and capital returns on turnpike stocks were at best 8 per cent annually, with 3 per cent per annum returns being more common (Levinson, 2002). It has been argued that turnpike ‘subscribers were usually more inter- ested in the possible benefits the new lines of communication would bring them than in the profitability of the investment’ (Durrenberger, 1931, p. 100 cited in Levinson, 2002, p. 25), because the towns and their leading citizens were looking to economic spillovers to their locality from the improved trans- port and communication. Certainly, the economic prosperity of the towns waxed and waned with the success of the turnpikes, which went into sharp decline with the advent, first, of canals, and then the railroads. As the turnpikes declined, the fortunes of the towns on the turnpikes declined, while those on the canals rose. Later, competitive pressures on the turnpikes came from the improved free public parallel roads. By the late nineteenth and early twentieth century, public operation and financing of roads had again become dominant.
When the turnpikes in the United States were chartered it was envisaged that ownership would revert to the states, typically at the end of a 99-year lease. In fact, few lived out their charters, and most were abandoned or decom- missioned by sale with a fair and just price paid to the turnpikes’ owners. In
the early 1900s, the remaining toll roads were acquired by state and local governments as the states established state highway systems. Much the same scenario occurred in the UK. None of the turnpike trusts in the UK succeeded in paying off all their debt within the initial 21-year term, and the trusts were more or less automatically extended (rather like in the Chilean least-present- value-of-revenue tender system for BOT franchises today2). With the arrival of the railways from the late 1820s, the share of intercity transport moving by road declined sharply, and the case for acceding to public demands for the removal of tollroads became more compelling. Toll revenue was replaced by local taxes in Ireland in 1858, tolls were abolished in Scotland from 1865, and turnpike trusts in England were dissolved at a rapid rate. By the late 1880s, most of the British road system had been taken back into public ownership.
The last turnpike toll was collected on 1 November 1895 on the Shrewsbury to Holyhead road.
The London Underground
A similar pattern of enthusiastic growth followed by competitive pressures is evident in the history of the London Underground. Each of the companies engaged in the building of the seven ‘electric tube’ underground lines3 between 1894 and 1907 first had to be chartered by means of a Private Act of Parliament. For this to take place, representation had to be made to a Joint Select Committee of the House of Parliament and the Lords involving expert witnesses (engineers, statisticians, financiers, etc.) set up to adjudicate between the various proposed Bills. Once the Act was passed, capital had to be raised, rights of way negotiated,4 and the construction undertaken (normally over four years). Some of the companies had great difficulties in raising the capital,5and a number of rationalizations eventually saw ownership of the lines concentrated in two hands. The financial difficulties of the compa- nies stemmed from two sources, one technological, the other regulatory. These two factors – technological improvements and regulatory changes – pose threats to any transport infrastructure investment.
When the companies obtained their charters and began construction, petrol- driven buses broke down frequently and could not withstand the rigours of everyday use and constant stopping and starting in heavy traffic. They appeared to pose little potential threat to underground trains. By the time the underground system finally had been put in place in 1907, buses were more reliable. The X-type and improved B-type motor buses introduced in 1909 and 1910 respectively could average 12 mph and, with the advantage of running on public roads, operated at considerable profits while the underground lines were struggling to pay.
Trams provided the other source of competition. While overhead trains
were excluded from the grid formed by the Metropolitan and District lines, a change to the regulatory environment allowed electric trams, some private, others municipal (e.g. London County Council), to operate within the ‘inner circuit’ or ‘circle’. London County Council electric cars were allowed to cross Westminster Bridge and run along the Victoria Embankment for the first time on 15 December 1906.
On both scores, the underground railway lines by the time they were built faced competition from two sources, neither of which had been anticipated in their business forecasts.6 While some of the companies provided steady returns, most of the investors in the public share issues probably breathed a sigh of relief when the underground rail companies were effectively national- ized with compensation when the London Passenger Transport Board, a public corporation, took over operations in July 1933.
From this brief account it would seem that private supply of infrastructure, or at least of transport facilities, has had a chequered history. The ventures made significant contributions to the improvement of transport infrastructure, but the companies themselves (or more correctly, the shareholders) faced seri- ous risks. Their financial viability was vulnerable to competition from new technological advances, and to changes in the rules of the regulatory game.
Thereafter, public provision and financing was dominant for most of the twen- tieth century, but in the last two decades, private financing has returned to the top of the agenda. France is a country that evidences this cycle most clearly.